A black-owned pharmacy group has taken legal action against SA’s biggest medical scheme for public servants, claiming it broke its own tender rules with the awarding of multimillion rand contracts, including one to an inexperienced start-up.
The Government Employees Medical Scheme (GEMS) apparently awarded a contract for courier pharmacy services to a joint venture including start-up and health services group Afrocentric’s subsidiary Pharmacy Direct.
This is the second time GEMS and Afrocentric have come under the spotlight, reports Business Day. Last year, the Council for Medical Schemes (CMS) launched a probe into a R400m vitamin contract the scheme awarded to Afrocentric subsidiary Activo Health.
The findings prompted a more detailed investigation, which has yet to be completed.
GEMS divided its 2023 tender for courier pharmacy services between its long-time service provider Medipost and a joint venture between Marara Pharmacy and Pharmacy Direct.
Medipost, which provides chronic medication to public sector patients and members of various medical schemes, was the sole provider of courier pharmacy services to GEMS – until January.
Kalapeng Pharmacies’ subsidiary Dely Road Courier Pharmacy, which bid but failed to win a share of the tender, launched an application in the Pretoria High Court last month to have the contract awarded to the joint venture declared unlawful, invalid and set aside.
It alleged that it was made in contravention of GEMS’ procurement rules. It named GEMS, Marara, Pharmacy Direct and Medipost as respondents.
Affidavit
In his founding affidavit, Kalapeng CEO Mogologolo Phasha claims GEMS breached the conditions set out in the tender bid documents. It says service providers cannot hold more than two contracts in either its managed care or its administration services categories.
Afrocentric announced in January 2021 that its subsidiary Medscheme had won a five-year managed care contract that included HIV/Aids management and maternity services.
Another of Afrocentric’s subsidiaries, DENIS, provides GEMS with managed care for dentistry.
GEMS also stipulated that the contract would be awarded to service providers with “demonstrable experience”, which Marara Pharmacy did not have, Phasha said.
Since Marara was only registered with the Pharmacy Council on 30 July 2021, it could not have met this requirement, Phasha said. The joint venture was structured with Marara as the majority (70%) partner, he said in papers.
GEMS had more than 2m beneficiaries in 2021, or slightly more than a fifth of the total medical scheme market of 8.95m people.
GEMS principal officer Stan Moloabi said the scheme would oppose the legal challenge.
He declined to disclose the value of the courier contract, but the tender documents show the scheme had 437 000 members registered for chronic medication in September 2021, and more than 211 500 chronic prescriptions were allocated to courier pharmacies.
The average cost of a chronic item was R182.42 and there were on average 2.53 items per script, suggesting courier pharmacies received at least R97.6m per month.
It is unclear whether the average cost of a chronic item includes a dispensing fee.
Moloabi said the scheme has grown significantly over the past few years, and it decided to split the 2023 tender for courier pharmacy services to allow new players to participate in the industry and improve members’ access to health care.
Afrocentric said it would oppose the legal challenge, but declined to comment further.
See more from MedicalBrief archives:
GEMS accused of issuing R600m multivitamins contract irregularly
Ten forensic reports show scope of graft at GEMS
GEMS to claw back over R100m ‘defrauded’ by private doctors and hospitals