By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Public Hospitals Authority (PHA) is pressing ahead with efforts to acquire pharmaceutical drugs direct from overseas manufacturers, despite fears it will “wipe out” Bahamian wholesalers, cost taxpayers and “compromise healthcare quality”.

Dr Marvin Smith, the PHA’s supply chain management chief, made clear in a November 3, 2016, e-mail that the Authority remains intent on excluding local wholesale distributors from its latest procurement exercise despite recent backlash.

This was created when Dr Hubert Minnis, the FNM leader, published Dr Smith’s previous October 31 e-mail that first exposed the PHA’s desire to completely cut Bahamian companies out of its plans to finish the tender.

However, Tribune Business can reveal that concerns over the procurement practices of the PHA and its drug buying arm, the Bahamas National Drug Agency (BNDA), are much deeper - and go back further - than Dr Minnis’s e-mail allows for.

And these concerns are being further exacerbated by the PHA’s recent promotion of its new drug warehouse storage facility on Shirley Street, which has raised fears that the Government may be planning to exclude local wholesalers from its National Health Insurance (NHI) supply chain.

Dr Smith’s latest e-mail, which has been obtained by Tribune Business, appears intent on severing the decades-long ties between Bahamian wholesale distributors and their overseas drug manufacturers/suppliers.

“The directive to my office is to contact and receive information for direct procurement from registered and approved manufacturers,” he wrote on November 3.

“I am not authorised to have any discussions as it relates to inclusion of local vendors in this process.”

Effectively telling the manufacturers not to include, or have discussions with, their local Bahamian representatives, Dr Smith then slammed the ‘leaking’ of his previous e-mail to the media via Dr Minnis.

“As professionals, it would be expected that communication from this office to your companies would remain professionally confidential,” he said.

“However, portions of my e-mail was quoted in a local news outlet [The Tribune] today. This is unacceptable, and should not be expected. You are asked to refrain from forwarding any such communication on this matter to parties not contacted by this office. If you are not able to do this due to contractual or other obligations, please advise formally.”

Dr Smith, who is the BNDA’s director and president of the Caribbean Association of Pharmacists, was thus warning manufacturers to keep their local Bahamian distributors ‘in the dark’.

That previous e-mail, obtained by Dr Minnis, alleged that the PHA “did not receive the requisite response” on many of the drugs it previously sought bids on.

“To this end, the PHA is desirous of procuring these items via other methods, including but not limited to direct procurement from manufacturers,” Dr Smith added,

He asked manufacturers to supply prices inclusive of shipping and insurance costs, along with minimum volume amounts and delivery times.

Dr Smith did not return Tribune Business phone calls and e-mail messages seeking comment before press time last night.

One pharmaceutical source, speaking on condition of anonymity, said the PHA’s failure to inform Bahamian companies that it planned to ‘go direct’ - and its continued silence on the issue - as akin to “a slap in the face”.

They added that the PHA seemed reluctant to meet with wholesalers to discuss their concerns, and added: “Traditionally we have been included in the process of bidding for 50 years as wholesalers.

“For the most part, we felt there could be more transparency, but the PHA was doing its best. Yet if they exclude us, that destroys our industry. Since NHI came up, we’ve been very concerned about the plan for procurement of drugs.”

Asked about the PHA’s direct procurement plan, they added: “Nobody’s saying anything to us; it’s almost like a slap in the face. We knew nothing about it until the manufacturers called us all in a tizzy.

“All they [the PHA] had to do is say to us: Guys, this is what we plan to do, and this is why. We could then have explained to them why this was not the best thing to do, and someone could have made an informed decision as to the best interests of the country.

“To be left out of the link without any explanation was hurtful.” However, this is not the first time that the PHA has sought to ‘go direct’ under the Christie administration, having attempted to do this for both drug and medical/surgical supplies several years ago.

Tribune Business understands that concerns surrounding the PHA’s drug procurement processes, known as Minimum Price Contracts or MPCs, have intensified over the past several years.

While no one in the pharmaceutical wholesale industry was willing to speak publicly, likely for fear of losing the PHA’s substantial business, sources speaking to Tribune Business on their behalf said MPC tenders typically used to be issued every 12-18 months.

However, its 15th incarnation, labelled MPC 15, has been running for two-and-a-half years. And the PHA has attempted to release the most recent exercise, MPC 16, three times since mid-2014 - the latest version having been issued in April this year.

Sources told Tribune Business that Bahamian wholesale distributors were concerned that delays in issuing the tenders, and awarding drug supply contracts, had resulted in the PHA using products and suppliers that were not on its approved list.

And they suggested that the MPC 15 exercise had saddled the Bahamian taxpayer with $1.5 million in extra costs as a result of purchasing from higher-priced suppliers.

Tribune Business was told that all approved vendors and drugs have to be included on the PHA’s Online Tender Management System (OTIS), where all bid submissions have to be made.

To be included, pharmaceutical drugs must meet set guidelines, quality and efficacy criteria, while manufacturers have to provide licenses, safety certificates and show they are not just exporters.

Tribune Business was told that the PHA finally awarded what the wholesale industry estimates to be “40-50 per cent” of the MPC 16 tender within the last month. The remaining portion, estimated to include around 760 drug product lines, is what the PHA is now seeking to acquire directly from manufacturers.

“This has been an arduous and dragged out process,” one well-placed source told Tribune Business of MPC 16. “It really demonstrates an overall serious issue with the mechanics of the system.

“It’s been embarrassing for us. It has cast a dark cloud over us, as many manufacturers are considering not participating. It’s bad for the country and bad for the local distributors.”

The source said Bahamian pharmaceutical wholesalers were concerned that Bahamian patients could be denied quality drugs at reasonable prices as a result.

“It may result in product shortages and compromise the quality of healthcare,” they added of the procurement concerns, “plus cause great hardship for local distributors.

“You have out-of-stocks that are not necessary, products purchased that are over-priced, and resources not being used properly.”

Dr Duane Sands, the FNM candidate for Elizabeth, told Tribune Business he was opposed to the PHA’s ‘direct procurement’ strategy because Bahamian wholesalers provided a significant ‘value added’ role.

He added that the PHA’s move also threatened to “wipe out” an industry that generated significant economic activity and employment for many Bahamians, amid suggestions that some medical representatives were already being laid-off.

Dr Sands also suggested that the ‘cost savings’ rationale likely to be cited by the PHA to justify its direct procurement did not hold up, given that the public body would now have to take over the supply chain/logistics functions performed by the wholesalers - thereby incurring the same, or greater, expenses.

“Unfortunately, we’re in a poorly regulated environment locally,” Dr Sands told Tribune Business. “I’m very much with Dr Minnis on this one. It’s a foolish proposal.”

The wholesale pharmaceutical industry is also a high volume/low margin business, with margins ranging from a low of 12 per cent to high of 32 per cent.

Should it be decimated, the Government would also likely lose significant tax revenue in the form of Business Licences and Value-Added Tax (VAT).