Issues of alleged mismanagement, irregularities, and corruption in the procurement of medicine and other medical equipment have come to light following the Auditor General’s special report on procedures taken to avoid the shortage of pharmaceuticals in Government hospitals.

It has been revealed that the lack of proper coordination between the Medical Supplies Division (MSD), the Ministry of Health, the State Pharmaceuticals Corporation (SPC), and the State Pharmaceuticals Manufacturing Corporation (SPMC), the lack of regular monitoring of the progress of orders issued to the SPC, and non-compliance with the procurement schedule have been the main reasons for the prevailing shortage of medicine.

The report also notes that the lack of coordination between these institutions has prevailed for many years and that the institutions have been carrying out their work in isolation; a practice that has contributed to the pharmaceutical shortage in the purchasing of orders issued to the SPC for the years 2019, 2020, 2021, and 2022 by the MSD. 

The report indicates that 81 out of 406 items that were in short supply were identified as vital drugs on 22 April 2022.

The actual expenditure on medical supplies during 2020 and 2021 was Rs. 83,545 million and Rs. 73,638 million, respectively. Accordingly, although the actual quarterly average expenditure on medical supplies in 2020 and 2021 was Rs. 20,886 million and Rs. 18,409 million respectively, as per the information submitted to the audit, the actual expenditure on medical supplies in the first quarter of 2022 was only Rs. 12,454 million.

The report shows 1,146 pharmaceutical items used in hospitals as vital, essential, and non-essential, along with 8,648 surgical items, 3,900 laboratory items, and 44 X-ray items.

Among these, the number of vital and essential medicinal drugs that were out of stock at the MSD and hospitals was 190 and 51 respectively. In addition, 2,724 and 2,156 vital and essential surgical items were out of stock at that time at the MSD and hospitals respectively, as revealed by the report.

Unacceptable delays

Furthermore, the report reveals that the MSD had not taken any steps to monitor the progress of the approximately 13,000 orders of medical supplies for each upcoming year for several years.

Although the MSD had issued orders to the SPC with a supply period of 11 months for 2021 and 2022, the relevant officials had failed to complete the procurement of 27 orders by the date of the report. Orders were issued to the SPC in 2020 for 2021 and in 2021 for 2022 in relation to 11 vital pharmaceutical items and from them, only small quantities of four orders had been received by the MSD.

The report states that none of the other orders had arrived due to procurement issues or delays.

Among the highlighted procurement delays is the procurement of the anti-rabies serum for State hospitals which had been delayed for nearly four years, which was in the limelight last year, the National Audit Office (NAO) reveals.

Stocks of the anti-rabies serum – a vital medicine prescribed for patients exposed to rabies – were out of stock at MSD stores and hospitals for a period of under a month last year. The NAO reveals that the shortages were due to improper planning of annual orders by the MSD and the SPC.

It also reveals that the MSD had cancelled the order made for 2020 seven months after submitting it and that it had not placed orders for 2021 and 2022.

The order issued on 28 March 2018 for 2019 was amended 21 months later on 6 January 2022 and the order was placed with the supplier on 19 January 2022. The letters of credit for the order were opened on 7 April 2022.

The NAO reveals that streptokinase – a vital medicine for heart disease – had been delayed for more than a year despite the order for 2022 being submitted to the SPC in January 2021. The tender had been cancelled twice and recalled due to a lack of suppliers. 

A shortage of the said medicine had been reported in March 2022, by which time the tender had been at the evaluation stage. However, a stock of 250 vaccines, which was sufficient only for three months, had later been purchased for Rs. 559,782 with the assistance of the Asian Development Bank (ADB).

Losses galore

According to the financial statements, the total cost of defective, expired, and damaged medicines that were purchased for sale by the corporation as at 31 December 2022 was Rs. 344.23 million and the total cost of defective, expired, and damaged medicines during the year under review (2023) was Rs. 60.40 million. Out of the total cost of Rs. 32.29 million for defective drugs in 2022 and 2023, Rs. 23.68 million is yet to be recovered by 31 March 2023.

The total loss incurred by the corporation due to expiry and damage of medicines was Rs. 156.50 million in the previous year and the year under review.

Among the stocks purchased for the medical supplies sector for 2022, 19 items worth Rs. 265.88 million had failed in condition. Although debit notes amounting to Rs. 177.70 million had been issued for 11 items, Rs. 146.61 million from this among had not been recovered from the suppliers.

Long process

As per the Cabinet decision No.AMP/12/1602/509/005-11 dated 13 December 2012 regarding the Action Plan for Drug Procurement, medicines should be purchased with the recommendation of the Formulary Review Committee. According to the provisions set out in Paragraph (1) of the Circular No.02-133/2013 dated 2 September 2013 issued by the Secretary to the Ministry, the Therapeutic Committees of each hospital should hold meetings on a monthly basis.

Accordingly, frequently consumed medicines should be estimated and their annual requirements should be sent to the SPC for procurement from worldwide suppliers and the future annual requirement is estimated by the respective hospital authorities based on the consumption pattern of the medical supplies. The remaining stocks should be sent to the MSD 13 months prior to the month in which the supply is required.

It is the responsibility of the MSD to consolidate the annual requirements sent and identify the total requirement. In the process of procuring the national demand for medical supplies, the MSD should issue orders to the SPC for the procurement of estimated items with a supply period of 11 months as per Paragraph 2 Annexure III of Chapter 5 of the Manual of Management of Drugs.

The MSD as well as State hospitals procure medical supplies from the local market to avoid shortage of supplies in case of delays in stock and the receipts for such orders must be submitted to the SPC and the MSD to recover the additional cost incurred in purchasing medical supplies from the local market from the SPC as per agreements entered.

Govt. under fire

Meanwhile, speaking to The Sunday Morning, Government Medical Officers’ Association (GMOA) Spokesman Dr. Chamil Wijesinghe warned of a healthcare system collapse if the ministry failed to take immediate steps to adjust the medicine supply system.

He said the country’s healthcare system had now come to a point where it could not proceed under the present circumstances.

“There is not only one issue; there are many. There is a shortage of medicinal drugs in hospitals, medical experts are leaving the country, prices of all medicines in the private sector have gone up, and the quality of medicines is questionable. The situation has reached its nadir. 

“The existing shortages have affected the entire healthcare system which, at present, cannot operate any further without proper management of medicine purchases,” Dr. Wijesinghe said.

Sri Lanka imports 85% of its medicines and medical equipment, along with raw materials to manufacture the remaining share of its needs. There are 603 State hospitals, nearly 200 private hospitals of varying sizes, 5,000 private pharmacies, and 1,000 laboratories in Sri Lanka.

As explained by the GMOA Spokesman, the medicine shortage is a result of the mismanagement of existing funds by Health Ministry officials.

“We have funds but they don’t know how to manage them. There is a huge delay in bringing down certain medicines which are supposed to have arrived by now under the Indian credit line. The process involves plenty of corruption and mismanagement, which need to be addressed immediately. The institutions must follow the procedures and no one should be allowed to bring low-quality medicines that have not been approved by the National Medicines Regulatory Authority (NMRA). The supply system should be adjusted and made sustainable,” Dr. Wijesinghe said.

Previously, Sri Lanka has faced periodic medicine shortages, but following the recent economic crisis triggered by the extreme shortage of foreign exchange, the Ministry of Health is currently facing difficulties in importing the necessary medicine, creating a shortage in State-run hospitals and pharmacies and forcing hospitals to limit medical procedures.

Almost all hospitals have now been affected by the medicine shortage and there is concern over prices as well. Many patients were unable to afford medicines due to high prices, Dr. Wijesinghe said, adding that prices should be managed and medicines should be made available at an affordable rate.

Corruption blamed

Meanwhile, Academy of Health Professionals (AHP) President Ravi Kumudesh attributed the shortage of health supplies, including medicines, primarily to corruption.

He stressed that the country had spent a huge sum of money for the procurement of medicines, more than what it used to spend prior to the economic crisis.

“The Health Ministry has received more loans than ever from the Asian Infrastructure Investment Bank, ADB, World Bank, the Indian and Chinese credit lines, various loan assists, and local and foreign donations,” Kumudesh stressed.

He highlighted that emergency purchases, non-competitive purchases, and placing multiple orders for the same requirement had become the latest “mafia” in healthcare, preventing normal supply and undermining local manufacturing processes.