Medical Centers Supplied Products at Prices 2.2 Times Above Customs Value, says PAS

Considering numerous written and verbal inquiries, as well as the public's extensive interest, the Republic of Armenia's Public Services Regulatory Commission has presented information regarding the ongoing monitoring and studies related to the procurement of hemodialysis supplies.

The Public Services Regulatory Commission conducted continuous monitoring and studies in the field of hemodialysis supplies procurement. As a result of the supervisory work, several violations in the procurement procedures for hemodialysis supplies were identified. Consequently, on December 26, 2018, letters were sent to the regional administrations and the Ministry of Health proposing necessary changes in the procurement procedures for hemodialysis supplies aimed at liberalizing the sector.

The need to liberalize the sector stemmed from findings during monitoring that between 2015-2018, hemodialysis equipment and supplies were imported by eight organizations, of which two companies, “Fresen” and “Natali Farm,” accounted for 82.9% of the total imports with shares of 41.7% and 41.2%, respectively. Notably, out of the nine state medical centers operating in Armenia, three centers — “St. Grigor Lusavorich Medical Center,” “Vanadzor Medical Center,” and “Kapan Medical Center” — received hemodialysis supplies from “Fresen” LLC, while the others were supplied by “Natali Farm” LLC.

At the “St. Grigor Lusavorich Medical Center,” the Public Services Regulatory Commission identified several violations of the Law on Procurement during the monitoring of the hemodialysis supplies procurement competition, leading to the following recommendations:

1. For the qualification criterion of “professional experience,” it was recommended to replace the phrase “having supplied hemodialysis supplies” with “supply of medical goods or instruments.”
2. The sentence “the supplier company must have a certificate for the repair of the 4008S devices issued by Fresenius Medical Care” was proposed to be removed, as the competition was declared for the procurement of supplies, not for provision of services. It is also notable that the repair certificate for the said equipment can primarily be possessed by “Fresen” LLC, which de facto serves as the official representative of Fresenius Medical Care.
3. The technical specifications for the required items in the procurement competition were structured in such a way that only “Fresen” LLC, the representative of Fresenius Medical Care, could participate, as several technical specifications were defined specifically for models produced by Fresenius Medical Care — FX-8, F-7HPS, F-8HPS.

The presented recommendations were partially accepted by the medical center, resulting in the participation of other companies in the organized competition, several of which were recognized as winners in various procurement processes. Moreover, “Fresen” LLC offered a lower price compared to previous years, saving approximately 12 million dram, and this was just in the first competitive purchase. It is noteworthy that contrary to widespread misconceptions in society, “Zorashen” LLC was not recognized as a winner in any part of this competition. It should be mentioned that similar recommendations were also presented to “Vanadzor Medical Center,” which were not accepted, resulting in only “Fresen” LLC participating in the competition. Thus, the same products purchased through “St. Grigor Lusavorich Medical Center” were acquired at prices 30% higher compared to the latter.

It is remarkable that compared to the customs values of the products sold by “Fresen” LLC to “St. Grigor Lusavorich Medical Center” and “Vanadzor Medical Center,” it was determined that the customs value of the supplied products worth 1,600,999.0 thousand dram amounted to 722,670.0 thousand dram, indicating that the products were supplied to the medical centers at prices approximately 2.2 times higher than the customs value. As a result, it appears that “Fresen” LLC, which engages solely in the import and sale of hemodialysis equipment and supplies, guarantees super profits by participating in procurement competitions for state needs (funded by the state budget).

Hemodialysis services are also provided in the framework of state orders at other non-state (private) medical centers, some of which are equipped with the same Fresenius Medical Care devices; however, hemodialysis supplies are also sourced from other suppliers.