The Cost of SA’s Diabetes Tsunami

Over three million people in South Africa suffer from diabetes and many others reportedly don’t even know they have the disease. Founder of the Centre for Diabetes and Endocrinology, Dr. Larry Distiller, while warning about the rising prevalence aptly said: “the diabetes tsunami is here. And we in South are in trouble.”

It’s not just South Africa in trouble. In many developing and poor nations diabetes rates are rising alarmingly, according to a study published in June by The Lancet, a British medical journal. The study also noted that more people in developing regions are dying of chronic diseases such as diabetes and cancer, than communicable diseases. The pattern, the authors say, is linked to improved economies and more people living longer.

In South Africa, treating the complications of diabetes adds stress to a health system that is exhausted by pandemics including HIV and TB. So, as new and more expensive ways to treat illnesses emerge, buzz words such as ‘smart procurement’ and ‘strategic sourcing’ should mean more in government procurement strategies.

In our on-going examination of pharmaceutical procurements by the Department of Health, it emerged the local subsidiary of French multinational pharmaceutical company, Sanofi-Aventis, will donate 170,000 reusable insulin pens. An insulin pen is a small handheld device used to inject insulin. It contains a prefilled insulin cartridge and needle. For diabetics on insulin, the pen is reportedly an easier and less painful delivery method.

When we first looked at the department’s procurement data for contract HP06-2014SVP – for supply and delivery of small volume parenterals and insulin devices for three years ending February 28, 2017- it seemed abnormal that one hundred and seventy thousand (170,000) pieces of Item No. 84.1 (reusable pen for 3ml insulin cartridges) had an indicated ‘zero’ Rand value for unit price. The deal seemed suspicious – was it a miss-entry or a blank-cheque for a supplier to determine the price? To add to the confusion, the awarded total quantity of insulin pens on the department’s ‘Master Procurement Catalogue’ published in April 2015 was provided as 5.8 million pieces.

We took it up with the director for affordable medicines, Khadija Jamaloodien at the Department of Health, who promised to have the ‘error’ corrected. The department has since published an updated Master Procurement Catalogue dated August 21, 2015, which reflects the correct quantity of the freebie. 

It turns out Sanofi-Aventis South Africa did in deed offer the insulin pens to the government for free, but we had to pester them to get details of their generous act, specifically the rand value of the donation. We found out the wholesale cost of a single pen is R67.00 making the total vale of the donation to be R11.39 million.

The catch for Sanofi could have been the contract to supply 5.8 million 3ml insulin cartridges to be used in the ‘Pens’. But the argument still wouldn't hold, as the department was still going to procure the insulins. In fact, there would have been nothing stopping Sanofi-Aventis from quoting for the re-usable pens had they wanted.

While our team may not be qualified to assess the efficacy of the Insulin Biosynthetic cartridges, which Sanofi has been contracted to supply 5.8 million of at a cost of R 137 million, we can capably compare and contrast the savings to the public due to the donation.

Danish multinational pharmaceutical company Novo Nordisk was contracted to supply 2.9 million of the same type of insulin, but with disposable pens. Novo Nordisk’s version costs R36,26 a dose, the same volume and value Sanofi has charged the department some R22.74 – this is a saving of R13.52 per unit.

Cost effective measures are required to arrest the ‘diabetes tsunami’, and therefore It makes sense that the department didn't place all its eggs in one basket. Below are other suppliers benefiting from this contract.

Two subsidiaries of JSE-listed Adcock Ingram Limited won contracts to supply various items. Supplier Code V2272 (Adcock Ingram Healthcare (Pty) Ltd) has already featured in our previous reports. Adcock Ingram Critical Care (Pty) Ltd (Supplier Code V4222) joined the pharma procurement race through this contract. Adcock Ingram Limited CEO Andrew Gideon Hall and CFO Kevin Burman Wakeford are the only listed directors of the two subsidiaries.

When presenting its audited results for the year ending 30 June 2015, the Board of Adcock Ingram Limited announced final dividend earnings of 81 cents per share. However, the two briefcase outfits that trade with the department of health are not mentioned in the company’s audited financials.

Contract HP06-2014SVP pie share: Who got how much?

In this particular contract, Adcock Ingram Healthcare and Adcock Ingram Critical Care grossed a total of R197 090 651,63. How much of this contributed towards the 81 cents per share paid out to shareholders? The Board and executives have worked to shield shareholders from any potential liabilities of doing business with government.

Novo Nordisk and Lundbeck (also Danish) through their local subsidiaries offered various diabetic drugs and devices worth hundreds of millions of rands.

Globally, Novo Nordisk is a heavyweight in the fight against diabetes. In 2002, it founded the World Diabetes Foundation whose aim is to “alleviate human suffering related to diabetes and its complications among those least able to withstand the burden of the disease.”

Most of the suppliers here are already regulars in our pages, having been identified in our previous reports. A few new entrants are listed below.

• Pharma-q (Pty) Ltd: Registered in 1997, the company listed directors are: Haroon Rasheed Aboo Kalla and Nazir Adbul Settar Kalla (both of Centurion); Anthony Lesch of Dainfern; Dheerajmal Bastimal Siroya and Sanjay Bakhtawar Siroya (both of Mumbai, India) and Dilip Surana of Bangalore, India

• Specpharm Holdings (Pty) Ltd: Registered in 2006, the company commenced operations in the subsequent year (2007) when it reportedly acquired the Janssen-Cilag manufacturing and packaging facility in Midrand, Gauteng as part of a BEE deal. Its listed directors are: Pieter Carl Engelbrecht (who also doubles as the company secretary); Linda Lomaard; Eugene Antony Lottering; Thato Leonard Mahlong; Gugulethu Perseverance Nkosi; Muthanyi Robinson Ramaite and Glenda Gail White

• MSD (Pty) Ltd: This is the South African subsidiary of the global Merck & Co.

• Bristol Myers Squibb (Pty) Ltd: This is the subsidiary of the American pharmaceutical company that is often referred to as BMS

• Abbott Laboratories SA (Pty) Ltd: Like BMS above, this is a subsidiary of another American big pharmaceutical company

• B Braun Medical (Pty) Ltd is a subsidiary of the German medical and pharmaceutical device makers

• Becton Dickinson (Pty) Ltd is the local subsidiary of yet another American medical technology company

• Gulf Drug Company (Pty) Ltd was registered in 1984 and identifies its directors as: Ruggero Enrico Carloni, Umar Ismail Mohamed and Louis Marie Joseph Robert Maingard

• Ingelheim Pharmaceuticals (Pty) Ltd is the South African subsidiary of German Boehringer Ingelheim. Registered in 1966, the company lists its directors as Bernd Abramowsky of Parkhurst and Andrew Halliday Eve of Bryanston

• Actor Pharma (Pty) Ltd. Registered in 2008, the company that provides its directors as Daryll Patrick Merescia and Malcom Ryan Blane, commenced operations the following year.

• Bayer (Pty) Ltd is the local subsidiary of the German multinational

• Litha Pharmacare (Pty) Ltd. Registered in 1994, the company is now a wholly-owned South African subsidiary of US pharmaceutical company, Endo International Plc. In May Litha Pharmacare announced it was acquiring part of Aspen Pharmacare’s portfolio for R1.6 billion. The acquisition, sponsored by Investec Bank, is subject to approval by the South African Competition Commission

• Janssen Pharmaceutica (Pty) Ltd. This local subsidiary of Johnson and Johnson is this time Trading/As Janssen-cilag for this particular procurement; the same arm whose Midrand assets had previously been sold to Specpharm Holdings (Pty) Ltd. in a BEE deal. So what exactly did they sell to Specpharm!

• Eli Lilly South Africa (Pty) Ltd: Registered in 1957, this Bryanston based company lists its directors as Nabil Daoud of Beirut, Lebanon, Ann-Marie Bridgett Hosang-Archer and Sharon Naidoo both of Johannesburg

• Pharmaco Distribution (Pty) Ltd. This 1998 company lists its directors as Betty Agustoni, Roberto Carlo Agustoni, and Thomas Christoph Hippele. According to its website, the company’s core purpose is to “effectively support international pharmaceutical manufacturers in the registration, distribution and marketing and sales of products in Africa.” Since most ‘international’ pharma companies are already represented through subsidiaries, whose products would Pharmaco be offering to the department? In this particular contract, Pharmaco will supply 182,600 ampoules (sealed glass bulbs containing solutions for hypodermic injection) of the antipsychotic drug Etomine (Clothiapine) manufactured by Novartis, whose South African subsidiary had its own share of the pie.

Click here for a complete list of Contract HP06-2014SVP distribution