Kenya: Origins of 'Mafia House' Cartel and the Shifty Art of Selling Air

(file photo).
20 September 2020

Before Director of Public Prosecutions Noordin Haji goes for the Kenya Medical Supplies Authority's (Kemsa) fat cats - who suffer insatiable greed and would inflate costs at any cost - let me tell you a story.

If he manages to get a conviction, he will have broken a 46-year record.

Before his practising licence was cancelled in "public interest", Dr Nataverbhai Patel, the founder of Anpi Pharma, was a fat cat extraordinaire and the father of medical supplies manipulation at the Ministry of Health.

In the 1970s and 80s, Patel's company, with an obscure address on Nairobi's Kirinyaga Road, was a constant feature in the Ministry of Health tenders for drugs. He also featured prominently in the National Assembly's Public Accounts Committee reports.

If you check the records for the 1977/78 financial year, for instance, Anpi Pharma and its related outfits were awarded tenders for Sh80 million from the ministry's Sh150 million budget for drugs. That was 53 per cent of the budget.

Dr Patel knew his way around the Ministry of Health and at the Central Medical Stores, now known as Kemsa.

At best, Parliament was told in 1979, the firm either undersupplied drugs, or, at worst, it billed without supplying anything.

Emergency procurement

At times, the Central Medical Stores was forced to make emergency procurements and one of Dr Patel's various outfits would be asked to supply.

And that is how Zacharia Bukhala Shimechero, who died in June this year, ended up in jail.

Until 1974, and as the officer in charge of Central Medical Stores, Shimechero would leak quotations to Anpi Pharma or its affiliate companies, for bribes. But in 1974, his luck ran out and he was caught and jailed after he was paid Sh150,000 by Arvind Kumar Patel, a director of Poly Chemists for quotations for laboratory equipment. Poly Chemists was one of the various companies associated with Anpi Pharma.

Shimechero, a former Assistant Commissioner of Police and Commissioner of Squatters at independence, had found himself in the murky world of the 1970s cartels that run the Ministry of Health supply chain.

Cartels never left

It is interesting that a few months ago, Health Cabinet Secretary Mutahi Kagwe told a Covid-19 press briefing that Afya House had its fair share of cartels - meaning they have never left.

When Dr Patel's practising licence was cancelled in April 1989 via Kenya gazette notice No 1911, together with the company, it was hoped that the Central Medical Stores would be cleaned up of cartels.

But they continued to mushroom and mutate.

In Parliament, Dr Elon Wameyo had in 1983 asked the government to ban Anpi Pharma from tendering for various drugs.

"Some of the prices (it) quotes are bogus," he told the House.

Dr Wameyo revealed that during tendering, Anpi Pharma would under-quote to win the tender.

"After winning the tender, he will turn up and say, 'freight charges and cost of materials have gone up. I want to vary the tender'," Dr Wameyo said.

And that is how the ministry kept overshooting its budget on the supplies done by Anpi Pharma.

There was a time in 1983 when Parliament was told that a Central Medical Stores head was being "probed" but only because "he has frustrated the efforts of a small clique of hungry people who want to exploit the state until they make sure that everything is not running smoothly".

It soon emerged that a purchase order issued by Central Medical Stores to a Nairobi company was for drugs that were not supposed to be sold in the country - since they were unfit for human treatment. But the government paid for them.

Fred Omido, the vocal Bahati MP, said: "This is something that was done by people who are paid by the state or by the public to look after their health. We do not know how many people might have died as a result of using this type of drugs."

Nolle prosequi

But even after the arrest of the culprits, who were charged with four counts, Attorney-General Mathew Guy Muli entered a nolle prosequi and did not prosecute the case.

"He was actually protecting those people who have been robbing Central Medical Stores," said Omido.

There have been attempts to right the wrongs in the medical supply chain.

As far back as 1983, some MPs were asking the government to decentralise the procurement of drugs to the district level and with a reason: "There is red tape in those stores and there are also allegations of corruption. Therefore, there is need to put up medical stores almost at the district level, so that there is continuous flow of drugs in hospitals," said Ahmed Khalif, then Wajir West MP.

In 1983, President Moi decided to decentralise the Central Medical Stores as part of the District Focus for Rural Development policy, which was being implemented under Simeon Nyachae.

The policy, for starters, had been spearheaded by some two Denver University graduates, Harry Mule and Francis Masakhalia, together with Aaron Kandie and Francis Njuguna.

At a time when the government was running out of cash, these decentralisation champions pushed Moi to launch the policy in September 1983.

Large quantities

But the cartels at the Ministry of Health managed to retain the Central Medical Stores in Nairobi - even after branches were opened in all districts.

This central unit in Nairobi, Kenyans were told, was retained to purchase drugs, which could not be ordered in large quantities by the districts. When Amos Kiriro was in charge of Central Medical Stores, he had proposed the computerisation of the entire drugs system. But the proposal was rejected by the ministry and he was thrown out.

In 1986, the ministry finally devolved the procurement of drugs to the districts and this was done through the district tender boards, which were chaired by the District Commissioner.

A new Medical Supplies and Co-ordinating Unit was retained in Nairobi and was responsible for the procurement, storage and distribution to hospitals of items that could not be procured by districts due to the quantities involved. That is how the stores ended up in Industrial Area.

No year passed without a scandal and if you scan Ministry of Health documents, they are full of these.

At one point, a Nairobi company was awarded a Sh9 billion tender to purchase sprays for mosquitoes.

The quantity captured in the records could last for 25 years, but on the ground there was nothing much.

Another scandal was flagged by Orwa Ojode about the procurement of substandard drugs by the Ministry of Health in 1998.

He said: "There is this fluid, which is known as Normal Saline, amd which was ordered by the Ministry of Health. (Today) 186,000 units are being destroyed and yet, Sh45 million has already been paid. That Afya House, which houses the Ministry of Health is known as Mafia House. That House is rotten because non-qualified staff are the people who are managing the ministry."

But even after the Kemsa was established as a state corporation through a legal notice, the bad habits of its predecessors continued to run deep.

Before that Dr Oburu Odinga made an observation about the Central Medical Stores - which is as relevant today as it was then.

"The Central Medical Stores," he said, "is more or less an 'eating house'. Whenever tenders are floated, the pharmacists rush there because they know the price of medicine is going to be inflated. I do not know why for so many years since we got independence the Ministry of Health has been unable to streamline operations of the Central Medical Stores so that drugs can be purchased cheaply and be made available in our hospitals."

Coordinate supply

The idea of turning Kemsa into a parastatal was to help coordinate supply of medicines to health facilities.

In 2004, a parliamentary committee was sent to Kemsa to assess whether any changes had taken place.

The report was damning.

"The Kenya Medical Supplies Authority is in a shambles. We toured that agency. What did we find? We found drug stores full of condoms instead of medical supplies.

"We found condoms that should have been supplied to us over a period of five years were supplied in one year," said Dr Galgallo in 2004. "We cannot store medicines even if we had them because all the stores are full."

It was during the tenure of Peter Anyang Nyong'o that the government decided that the procurement of pharmaceuticals and certain non-pharmaceuticals would be done by Kemsa.

A task force had recommended that Kemsa should be commercially viable for it to operate and perhaps with a good reason.

"We want to make sure that the present 'spaghetti way' of procuring drugs where the ministry, donors and Kemsa are involved in the process is eliminated, so that the donors can put their money in a basket fund managed by Kemsa. From that fund, where the government will also contribute, Kemsa will be in a position to run medical commodities procurement much more effectively," said Prof Nyong'o.

He never thought that this system would give Kemsa barons a chance to run the organisation like a private entity.

And that is why it is not surprising that after the Covid-19 pandemic emerged, the suppliers, both old and young, looked at Kemsa as their cash cow. The pandemic was an opportunity.

If Mr Haji manages to have anyone jailed, it will be a first since 1974. Will he?

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