The Department of Health’s controversial Aids drug tender is under fresh attack, after Cipla filed an application in the Gauteng High Court (Pretoria) last week seeking to scrap the R15.5bn contract, joining a legal challenge launched last year by Hetero SA, the local subsidiary of Indian generic manufacturer Hetero.
Business Day reports that both companies want answers to how the department evaluated bids and divided up contracts for the daily three-in-one pill taken by most of the country’s HIV patients.
Cipla accuses officials of failing to tackle alleged collusive bidding, of botching the allocation of preference points used in scoring rival bids, and of not properly considering local manufacturing. It also alleges the department made mistakes in how it split winning bids, and that it failed to conduct due diligence on the financial position of companies bidding for contracts.
Parliament recently put Health Minister Aaron Motsoaledi in the hot seat when it asked him to account for the fact that two of the companies that won contracts went into business rescue a week after the tender began on 1 December, forcing officials to ask other suppliers to boost their volumes.
Cipla was among several local manufacturers excluded from the contracts to supply monthly and three-monthly packs of pills combining tenofovir, lamivudine and dolutegravir (TLD), despite having previously supplied antiretrovirals to the state.
The R7.25bn TLD contract for monthly packs was split between eight companies, while the R5.38bn TLD contract for three-month packs was split between seven firms.
Aspen, Emcure, Innovata, Barrs, MacLeods, Viatris and Aurobindo won a share of both contracts, while Pharma Dynamics won a share of the monthly pack contract only.
In court documents, Cipla questioned whether Barrs and Innovata, the two firms that went into business rescue, had disclosed to the Health Department that they were related enterprises, both being subsidiaries of Avacare.
The close alignment in their scoring and pricing, coupled with their group relationship, was consistent with co-ordinated bidding, Cipla said in its papers. Given that the department had referred Hetero SA to the competition authorities for alleged price collusion, the fact that it had not done so with Barrs and Innnovata was arbitrary and irrational, it pointed out.
Similar questions were posed in Parliament last Wednesday. The Health Department’s CFO, Phaswa Mamogale, who chaired the tender bid adjudication committee, told MPs that Barrs and Innovata had different directors and were therefore independent.
The Portfolio Committee on Health also challenged the department’s assertion that it is procuring at least 70% of its ARVs from local companies.
It said its assessment of local manufacturing content put the figure at just 30%, and that the five successful bidders were importing the medicines from India rather than making them in South Africa.
Cipla claims the department’s allocation of preference points awarded for historically disadvantaged individuals is materially flawed, as it was awarded only 0.36 points when its own calculations put the figure at 2.5 points.
Rival bids are often so close in price that the HDI points can materially alter a company’s ranking. The tender allocated up to 90 points for price and up to 10 points for HDI.
Investment in local manufacturing
Cipla said it has invested heavily in local manufacturing over the past decade and set aside 40% of the production capacity at its KwaZulu-Natal site for making ARV drugs. It accused the department of failing to properly apply preference for locally manufactured products, contrary to the tender requirements and government policy, which undermined security of supply for antiretroviral medicines.
It called the department’s approach to splitting the TLD contracts irrational – because Cipla, which had a proven track record of supplying these medicines, was completely excluded, yet it has the capacity to supply more than half the three-monthly packs and nearly half the monthly packs of TLD.
Cipla also said the Health Department erred in the splits made between winning bidders, demonstrating its irrationality and undermining the fairness and transparency of the process.
It said the formula set out in the special requirements and conditions of contract document published by the department should have seen Innovata get 13.6% of the monthly TLD, but it was awarded just 11.38%.
The department is also taking flak from Pharmaceuticals Made in South Africa (Pharmisa) which has warned that unless it ensures domestic players are included in its next medicine tenders, the country’s drug manufacturing capacity risks being undermined, reports Business Day.
Bids for two key tenders – one for childhood vaccines and the other for tablets and capsules – are also currently being considered by the department, the paediatric vaccine tender being the second biggest by value after the Aids drug tender.
Under fire
Pharmisa counts Aspen Pharmacare, Adcock Ingram, and Biovac among its members.
“Pharmisa has noted with concern the ongoing erosion of important, life-saving pharmaceutical capacity because of the non-strategic implementation of public pharmaceutical procurement policy,” it said.
“The award of the antiretroviral contract has further exacerbated this concern, as significant capacity has been lost due to many local manufacturers not receiving any award.”
Pharmisa added that failure to implement preferential procurement in a transparent, clear way would further dilute scarce South African capacities, accelerate disinvestment and deter future investors who require policy certainty, clarity and implementation.
The tender for childhood vaccines is due to start in January 2027, while the oral solid dose tender for tablets and capsules will kick off in May.
Business Day article – Cipla challenges Aids drug tender in court (Restricted access)
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Suppliers’ business rescue threatens critical medicines supply
HIV drugs roll-out under threat in court tender row