State gifts Kemsa Sh2 billion to buy drugs

The government has injected Sh2 billion into Kemsa to enable it to purchase drugs and reduce supply delays.

The money was allocated in the supplementary budget that MPs passed on Tuesday.

It is part of the Sh3 billion that the current board had requested saying the Kemsa had no cash to buy medical products.

Board Chair Irungu Nyakera on Wednesday said the funds will strictly be used to buy health products and technologies.

“This money is not going to any construction or development, it will be used specifically to pay our suppliers so that we ensure our order fill rate gets to where it is supposed to be,” he said.

Nyakera said the money will increase the fill rate from the current 60 to more than 80 per cent.

Order fill rate is simply the percentage of the total customer orders that have been met.

He spoke at a one-day engagement forum attended by Health CECs and Chief Officers from the 47 counties.

Nyakera said Kemsa was struggling to buy drugs and owes its suppliers Sh2.6 billion.

"On the other hand, counties owe the authority Sh2.8 billion," he said.

Acting CEO Dr Andrew Mulwa urged counties to support the authority to end the cycle of debts.

“We need to have an engagement, so that everyone understands that Kemsa runs a revolving fund, such that whether you pay all your debt today, or pay all your debt, you still have to make an order followed by a delivery meaning that it is a cycle,” he said.

Machakos Health CEC Daniel Yumbya said counties face a funding problem.

“If we had enough funds, we would not owe Kemsa any money. We are able to provide health products and technologies to our facilities because of the credit facilities provided by the authority,” he said.

Kemsa gets 90 per cent of its business from counties.

It buys and stocks certain critical drugs and products such that when counties make orders, it supplies them, giving the counties a 45-day credit period to pay.

Some counties, however, surpass the credit period by months and some by years.

In September, Mulwa told journalists the leading debtors are Nairobi with Sh243 million, Homa Bay (Sh104 million), Busia (Sh82 million), Nakuru (Sh53 million), Trans Nzoia (Sh49 million)and Kisumu (Sh34 million).

The others are Mombasa (Sh13.6 million) and Nyamira (Sh9 million).

“Many times we still supply to counties that owe us money,” Mulwa said.

He said Kemsa is improving the supply period from when the order is placed.

Mulwa said the law that forced counties to only buy drugs from Kemsa, which the courts recently quashed, had made the drug supplier complacent.

“When I was Health CEC in Makueni, Kemsa always delivered on time. I was never worried about the drugs’ availability. But when we were happy and relaxed, Kemsa orders started getting late. Order delivery time, which was between 10-15 days, moved to 45 days,” he said.

Mulwa said they are restoring the supply turnaround.

“I believe in the Kemsa team that was there 2016-18, they can do it again,” he said.

Nyakera said they have restructured the tendering process by cancelling all past tenders and capping the maximum single tender awarded to one supplier at Sh300 million.

“We were issuing very large tenders, we asked the procurement to institute a lotting system so that someone is not coming to win a Sh1 billion tender," he said.

"Sh300m will be the maximum. People are finding their way around it but we want to open up Kemsa to local Kenyans."

Kemsa also announced plans to increase the share of products bought locally.

Nyakera said currently, the authority imports 60 to 80 per cent of all drugs and medical products. He said that is unsustainable.

“The solution is supporting local manufacturers. If you look at the tenders, a huge number is now open for locally manufactured products only. This is something we will go on with,” he said.

He also said Kemsa is engaging manufacturers to eliminate middlemen.

“We are asking why we have to use Njoroge to import goods from China. Why can't Kemsa import directly? It will put some people out of business but it will make drugs cheaper. From next year many drugs will be bought by Kemsa directly at a fraction of the cost,” Nyakera said.

Tharaka Nithi governor Muthomi Njuki supported the recapitalisation of the drugs supplier.

“If we can capitalise Kenya Airways (KQ) every year, why not Kemsa? Between KQ and Kemsa which one is more critical to us as Kenyan people. We are also bailing out sugar millers,” he said.

Njuki also supported the distributors' plan to decentralise warehouses. He said this will lower costs and improve delivery of drugs to counties that are far from Nairobi.