GEMS faces court action over courier pharmacy contract

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.

At issue is a multimillionrand contract for courier pharmacy services the Government Employees Medical Scheme (GEMS) awarded to a joint venture including an allegedly inexperienced start-up and Afrocentric subsidiary Pharmacy Direct.

This is not the first time a contract between GEMS and health services group Afrocentric has come under the spotlight. Last year, the Council for Medical Schemes launched a probe into a R400m vitamin contract the scheme awarded to Afrocentric subsidiary Activo Health.

The findings of the regulator’s initial probe 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 until January the sole provider of courier pharmacy services to GEMS.

Kalapeng Pharmacies’ subsidiary Dely Road Courier Pharmacy, which bid but failed to win a share of the tender, launched an application in the high court in Pretoria 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 demon

strable experience, which Marara Pharmacy did not have, Phasha said.

Since Marara was only registered with the Pharmacy Council on July 30 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, SA’s biggest restricted medical scheme, covers public servants and their dependants, who enjoy a generous state subsidy. It had more than 2-million beneficiaries in 2021, or slightly more than a fifth of the total medical scheme market of 8.95million people.

GEMS principal officer Stan Moloabi said the scheme will oppose the legal challenge.

“The procurement of courier pharmacy services was executed in full compliance with GEMS‘ procurement processes and audited accordingly before contracting,” he said.

CONTRACT

Moloabi 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 from the bid documents 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.

Business Day’s efforts to obtain comment from Marara Pharmacy were unsuccessful. Marara Investments CEO Elias Monhla, who according to court papers advertised positions at Marara Pharmacy, directed Business Day to Pharmacy Direct MD Gawie Erasmus, who referred queries to Afrocentric.

Afrocentric said it will oppose the legal challenge, but declined to comment further.

437,000 the number of members GEMS has

2021 the year when Marara was registered with the Pharmacy Council