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Who was swindling global fund money?

By Stephen Kafeero

Details of fake cheques, a Shs 46 billion overpayment, and danger to HIV patients

One person dies every 60 minutes in Uganda of HIV/AIDS related complications, according to estimates by the American-based Centers for Disease Control and Prevention which places annual deaths at 64,000. Some of these deaths could be prevented if more HIV-infected people received anti-retroviral therapy (ARTs). Until recently, only 62 per cent of an estimated 600,000 people needing ARTs have been getting them. Instead of going up, this number is set to shrink dangerously according to the latest ministry of Health stock status.


Ironically, Quality Chemical Industries Ltd (QCIL), a giant US$32 million facility set up to ensure availability of low cost, quality HIV/AIDS and malaria drugs is alleged to be at the centre of the problem. A battery of exchanges marked “Top Secret” between ministry of Health officials, and the government drugs procurement agency, the National Medical Stores (NMS), reveals a fight over inflated costs and doubts about Quality Chemicals ability to manufacture medicines.

Housed in a modern glass and concrete tower on the edge of Kampala city’s industrial area at Luzira, the managers of this joint venture with the Indian generic pharmaceutical manufacturer Cipla Ltd refuse to comment.    But the saga has sucked in President Yoweri Museveni, the Permanent Secretary in the ministry of Health, Asuman Lukwago, the office of the Inspector General of Government IGG), the Solicitor General, the Public Procurement and Disposal of Public Assets Authority (PPDA), the ministry of Finance, the Criminal Investigation & Intelligence Department (CIID), and the courts.  In a series of exchanges The Independent has seen, the IGG, Justice Irene Mulyagonja on November 12 wrote to the ministry of Health demanding an update on efforts to recover an alleged overpayment of US$18 million (Approx. Shs 46 billion) by NMS boss, Moses Kamabare, to QCIL.

“In addition, we urge you to take appropriate action on the concerned NMS officials and inform us of action taken,” Mulyagonja wrote.

Another memo, written by one Ssemoga Mawano, alleges that instead of manufacturing locally, Quality Chemicals imports 74 percent of drugs it supplies.

“This defeated the strategic objectives of affordability, scarcity, industrialization, and markets for raw materials,” Mawano writes to the Inspector General of Government who wants the culprits prosecuted.

It appears that instead of manufacturing medicines, QCIL imports Cipla manufactured drugs, and sells them to the government at higher prices through NMS. The Shs 46 billion supposed to be recovered is allegedly above Cipla’s international prices and the 15 percent mark-up for drugs QCIL sells to the government.

On Feb. 21, the PS, Asuman Lukwago wrote to the General Manager of NMS, Moses Kamabare, demanding urgent action to recover the money.

Instead, On Feb. 28, the NMS boss, Kamabare sent Lukwago a four-page reply that noted first, that he did not understand the Auditor General (AG) report that made the recommendation to mean the money should be recovered. Rather, Kamabare wrote, the AG recommended that “the government of Uganda should consider recovery of the payments”.

Secondly, Kamabare wrote, the AG report was a “recommendation not a directive”.  Thirdly, he said it was addressed to President Yoweri Museveni and its implementation needed the government to study it and take a decision.

Kamabare also escalated the case to the Solicitor General with a request for legal advice. Without disputing that the medicines supplied by QCIL are not of the lowest price, he argued that the relevant section of the agreement between the government and QCIL on pricing is misunderstood.

The relevant section states in part that: “The acceptable prices are those equal to or less than the recommended prices”. Kamabare says this means this section does not mean purchasing from the source offering the lowest price. Rather, he says, any price on a specified range of prices is acceptable as long as it does not exceed the recommended price. The solicitor general is vague but appears to agree with Kamabare. In any case, Kamabare attached the solicitor general’s comment to his four-pager to Lukwago.

In a clincher, Kamabare reminded Lukwago that the agreement to purchase drugs was between the ministry of Health and QCIL.

“NMS is not party to this Memorandum of Understanding,” Kamabare wrote, “we have no legal locus to make a decision on Quality Chemical Industries Ltd in this respect.”

Lukwago was unimpressed. On March 11, he again wrote to Kamabare.

“The chairperson and board of directors of NMS are hereby advised to ensure the expeditious recovery of the $17.8million from Quality Chemical for drugs procured by your entity between December 2009 and October 2010, in compliance with the directive communicated by the IGG,” he commanded.

He added: “It’s unfortunate that you choose to justify the prices of QCIL and attempt to impute default by the government on the MOU and allege that it renders government liable to the manufacturer as if you are pleading or working for the company instead of protecting your employer’s rights to acquire the ARVs and ACTS at low prices.”     Meanwhile, beneath this exchange, another battle was raging between Lukwago and Kamabare. In this twist to the case, Lukwago who on the face of it appears to be a whistleblower, is now wanted for prosecution for allegedly attempting to swindle US$ 460,000 (Approx. Shs1.2 billion) from the ministry of Health’s Malaria Control Program account.

Details of the case indicate that Lukwago on December 6, 2012 instructed the central bank, where the Global Fund account is, to transfer the money to a dubious NMS account in a little known bank; the ABC Capital Bank Ltd.   When suspicious central bank officials red-flagged the transfer note, Lukwago admitted to signing the instruction but says he was acting on instructions of NMS managers contained in invoices dated November 19, 2012. NMS officials deny instructing Lukwago to act and, for now, he appears to be in a tight spot.

Lukwago is jointly charged with Ponziano Nyeko, an Assistant Commissioner in the Health Ministry, Alex Gumisiriza, Finance Manager, Global Fund in the Health ministry and Sabiiti Tibaijuka, former police officer.  Lukwago is also separately charged with neglecting his official accounting duties by allegedly failing to ensure the proper expenditure of the ministry’s funds.  According to the charge sheet, he failed to ensure the propriety of the expenditure of the MOH by authorizing Bank of Uganda to credit the fraudulent bank account in the names of National Medical Stores.

AIDS patients suffer

The saga between NMS, Lukwago and Quality Chemicals has sacked in the office of the Inspector General of Government, the Solicitor General, the Public Procurement and Disposal of Public Assets Authority (PPDA), the ministry of Finance, the Criminal Investigation & Intelligence Department (CIID), and the courts. As it rages on, it is now feared that more people could die of HIV/AIDS related complication unless stocks are restored.  The most affected, according to the Ministry of Health report for May, are key drugs for children and AZT which under the agreement are supposed to be supplied by QCIL. The ministry report says the AZT has run out because of sudden rise in Average Monthly Consumption. The report says the stocks are expected to be replenished by July.

For patients with HIV/AIDS symptoms, AZT is prescribed to slow progression of the disease and prolong life by controlling the amount of virus in the blood. Its stock-out could be a death sentence for some patients.

Fluconazole, another anti-fungal drug used to treat infection common among people infected with HIV/AIDS is out of stock at NMS. This, however, is supposed to be supplied by Pfizer and the ministry of Health report recommends that a request be sent immediately.  Margaret Happy, the advocacy manager of the National Forum of People Living with Aids Networks in Uganda says that they have got reports of people not having specific types of ARVs and the HIV test kits in different parts of the country.

When contacted, however, the Public Relations Officer of NMS, Dan Kimosho said he is not aware of the ministry of Health report alleging the stock-outs. He offered a blanket reply and did not address the ARVs stock-outs specifically.

“Those areas that claim they are facing shortage of medicines should make orders to NMS,” he said.

Dr Peter Mugyenyi of the Joint Clinical Research Center meanwhile confirmed what the ministry of Health report indicated that his centres have ARVs. The ministry report recommended that NMS gets some of its stock from other warehouses.

The same report also noted that NMs has stock-outs of HIV testing and disease monitoring supplies like CD4 and blood testing kits. It attributes the stock-out to increased demand for interventions that require testing like Prevention of Mother to Child Transmission, Provider-Initiated Counseling and Testing, and Safe Male Circumcision.   The same report says Artemether and Lumefantrine, two crucial drugs under Artemisinin-based Combination Therapy (ACTs), are at minimum. These are also supposed to be supplied by QCIL. But as the stand-off between QCIL, NMS and the Lukwago persists, it is not clear if drug supplies will not be interrupted. And there is another problem.

Dr Sam Lyomoki, the out-going chairman of the Social Services Committee of Parliament attributes the problem to lack of money.

“Funding to the health sector has remained the same and mainly donor funded,” he said. These donors have in the past cut-off aid to projects implicated in corruption. It remains to be seen how they will react this time.

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