Tamiflu boondoggle blows up

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A recent government inspection accusing the Ministry of Health and domestic drug manufacturers of massive waste has set off a virulent counter-strike

A patient being treated for bird flu at a hospital in Hanoi. Government inspectors recently raised questions about the Ministry of Health's costly purchase of three million doses of Tamiflu during a 2005-2006 bird flu scare.

A recent government inspection questioned the Ministry of Health's decision to spend hundreds of billions of dong in maintaining a reserve of antiviral drugs to fight the bird flu epidemic in 2005-2006.

The authors of the findings charged that the ministry failed to carefully oversee the purchasing process, and clarify all financial matters related to the plan.

The findings of the investigation have set off a chain of denials and legal threats from drug companies and the former Minister of Health.

According to government inspectors, only 91 cases of influenza A (H5N1) were recorded between 2003 and 2005. Despite this number, in November, 2005, the ministry proposed the reservation of 30 million capsules of Oseltamivir (aka Tamiflu) by June 30, 2006.

Because the reserve was sufficient for three million people, the proposal was deemed excessive, considering Vietnam's recorded number of cases, inspectors said.

The federal government ordered the ministry to reduce the proposed reserve to 20 million capsules.

In 2005, the ministry ordered the capsules from four pharmaceutical companies-namely Phu Yen Medical Equipment and Pharmaceutical (Pymepharco), Cuu Long Pharmaceutical Joint Stock Corporation (Pharimexco), Imexpharm Pharmaceutical Joint Stock Company, and Stada Vietnam Company.

The Vietnamese companies, in turn, ordered raw materials to produce the drugs from overseas suppliers.

By March, 2006 the companies had produced over 9.7 million capsules of Tamiflu. According to inspectors, the drugs expired in February 2008 but, at the ministry's behest, the expiration dates were extended another year.

The rest of the order, meanwhile, was reserved in its raw form - this material also expired in February 2009.

As of March, 2009, 116 cases of bird flu were recorded in Vietnam. Hundreds of billions of dong have been wasted because of the ministry's impractical proposal and passive role in the purchasing process, inspectors concluded.

The ministry also erred when placing orders, they said. The inspectors charged that the panel assigned to the purchasing process failed to negotiate prices when meeting with the manufacturers, and did not report back to the [health] minister before ordering the drugs, as regulations require.

The ministry, meanwhile, violated a rule requiring agencies to seek an assessment from the Ministry of Finance before entering into contracts worth more than VND1 billion (US$51,413), the inspectors stressed.

This allowed the companies to order 2,030 kilograms of raw materials produced by Indian-owned Hetero Labs Limited Company at between $17,500-18,000 per kilogram. The purchasing price far exceeded the prices quoted in the ministry's 2005 proposal - $12,000 per kilogram.

Worse still, after Stada Vietnam, Imexpharm, and Pymepharco received a total reimbursement of $2.8 million from a Hong Kong supplier, the three companies failed to return the funds to the government coffers.

Pharimexco, which received over $3.8 million in reimbursements from Singaporean supplier Mambo Overseas Limited, also failed to report the returns.

Inspectors have asked the trio of drug companies to return the $2.8 million to the state budget. They have also proposed a police investigation into the prices at which the companies bought raw materials and the location of $3.8 million that is allegedly being held by Pharimexco.

More questions

In the meantime, a Thanh Nien investigation revealed a further complication.

Apparently, prior to placing orders with the four Vietnamese manufacturers, the Ministry of Health had already struck a better deal with a German pharmaceutical manufacturer. On November 9, 2005 the ministry announced it had ordered 25 million capsules of Tamiflu from Roche Chemical Establishments Ltd.

According to the announcement, the two parties signed an agreement in which the German-owned company pledged to supply Vietnam with Tamiflu to battle the epidemic - should it ever occur.

Roche also promised to provide technical aid and raw materials, if Vietnamese companies proved capable of producing the anti-viral capsules. The German firm offered the raw materials for 7,000 euros ($8,500) per kilogram and promised to supply 2,500 kilograms of raw materials no later than the end of 2006, Thanh Nien found out.

The Health Ministry later claimed that Roche couldn't provide the materials in time forcing them to strike a deal with the four domestic manufacturers - which, in turn, ordered their raw materials from India at nearly double the price offered by Roche.

According to the Thanh Nien investigation, the Roche materials had a ten-year shelf life - as opposed to the Indian materials which expired in less than two.

In response to a list of questions, a representative from Roche confirmed a meeting with the Ministry of Health in 2005 - but differed on the substance of the exchange.

"Roche offered to supply the active ingredient (API) for local encapsulation at 7,000 euros per kilo, with deliveries spread throughout 2006," wrote spokeswoman Claudia Schmitt in an e-mail. "Our offer to supply API was not taken up."


Former Minister of Health Tran Thi Trung Chien, who oversaw the questionable orders, told the Tuoi Tre newspaper that government inspectors failed to produce "evidence showing that leaders, individuals or agencies under the Ministry of Health and the Ministry of Finance committed corruption and collusion, or violated laws."

Chien indicated that the inspection focused unfairly on the Ministry of Health because the VND562-billion ($28.8 million) project was conducted in cooperation with the ministries of finance, national defense, and foreign affairs as well as several former leaders, Chien said.

She suggested taking into consideration the fact that Tran Quang Trung, deputy chief inspectorate, was one of her subordinates when she was at helm of the health ministry.

Inspectors are "criminalizing an economic matter," by asking for a police investigation into the case, Chien said. The former minister suggested that the government assign agencies like the finance ministry and state auditors to inspect companies' financial matters and report to the Prime Minister.

Asked about the great difference between the ministry's quoted prices of Tamiflu's raw materials and the ones at which the companies bought, Chien said their quoted prices were generally estimated from research conducted via the Internet when the epidemic wasn't at its peak.

The price that the Vietnamese manufacturers paid for raw materials did not exceed the sums paid by other countries, she stressed.

The former minister also said they didn't buy raw materials from Roche because the company wouldn't provide raw materials before August 2006 under their memorandum of understanding, while the government insisted on having drugs on March 1, 2006.

The World Health Organization, Chien said, had forecast that the epidemic would peak between March and April.

While prices of raw materials from the Indian manufacturer were higher than Roche's, related agencies, including the Ministry of Finance, agreed to buy Tamiflu from the companies at $1.75 per capsule, which wasn't higher than other countries, according to Chien.

She told the news source that she had no idea about the reimbursement of over $6 million that the companies received from their suppliers.

Also in an interview with Tuoi Tre, Luong Van Hoa, general director of Pharimexco, said the company "didn't do anything wrong."

According to Hoa, Mambo Overseas Limited agreed to let them pay part of a total of the $9.1 million for raw materials first, and then make deferred payment of over $3.8 million through December 13, 2010 at an annual interest rate of 4 percent.

"The $3.8 million isn't commission that Mambo Overseas Limited Singapore gave us," Hoa said.

Tran Thi Dao, general director of Imexpharm, also said that the $2.8 million that her company and the other two manufacturers received from their Hong Kong supplier was not a commission.

The money, Dao says, was compensation owed to the companies by the Hong Kong supplier who failed to make good on their commitments.

The supplier's output was lower than what they had committed to in their contract, he said.

Agreeing with Dao, Van Dung, director general of Stada Vietnam, said the trio had written to the government, on four separate occasions, regarding the inspectors' suggestion that they return the $2.8 million to the state budget. So far, he said, they had yet to receive a reply.

Dung said they will sue these government inspectors for the proposal if they continue to ignore their response.

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