Vaccine against corruption: corruption risks in healthcare

Corruption equals monopoly
plus discretion minus accountability

Robert Klitgaard

Vaccine against corruption: corruption risks in healthcare. Fight against corruption and combating economic crimes during covid-19 pandemic.

The pandemic of 2020-2021 resulted in an unprecedented socio-economic crisis and posed a serious challenge for the entire world economy. It is the first time that the international community is facing a healthcare challenge affecting every country. The outbreak of a disease affects both developed and developing countries. The measures taken by many governments to address the global Covid-19 epidemic have been characterized by errors and flaws. It is becoming clear that most countries were not prepared for such a pandemic.

The healthcare sector is suffering from constant underfunding, which makes it difficult to provide an adequate and sufficient response to the crisis. Governments are forced to reallocate state budgets to help the healthcare system and to fund social security programs. The huge amount of allocated resources, the speed and mechanisms of their allocation create favorable opportunities for corruption, embezzlement, overpricing of medicinal products and medical supplies, manipulation of procurement processes, etc.

We should also not forget the hindrances caused by corruption in the fight against the Ebola epidemic in West Africa in 2014-2015 or the swine flu H1N1 in 2009.

Of course, medical aspects are important in developing state strategies. However, as evidenced by past and especially by the current crises, the effectiveness of measures to fight a disease largely depends on the observance of the law in the country, the government's commitment to the transparency and accountability principles in allocating funds and making other managerial decisions.

Thus, the fight against corruption and other economic crimes should be considered a priority issue in any crisis, including in the pandemic of SARS-CoV-2 virus and the COVID-19 disease caused by it. It is critical that the existing resources, as well as any additional investments to address the effects of epidemics, are used strategically and effectively ensuring benefits to those who need it most.

According to the 2020 Corruption Perceptions Index, Transparency International identified several key trends of corruption risks and challenges caused by the outbreak of the disease.

1. Corruption and underfunding of major state sectors

Systemic chronic corruption diverts funds from key social sectors, including healthcare, making countries around the world vulnerable and ill-prepared to crises in this area.

A recent international study by the Transparency International Health Initiative obtained evidence of corruption at service points during the pandemic, stressing that it reduced the availability and quality of health services.

2. Violation of human rights and democratic norms

Countries with high level of corruption are more likely to violate human rights and democratic norms in the context of implementing anti-COVID-19 programs. Corrupt regimes use such emergencies to further strengthen their power and expand their spheres of influence.

3. Emergency procurement increasing corruption risks, lack of transparency and control in the state budget allocation system

As a rule, procurement of medicinal products and supplies in healthcare systems is one of the areas most vulnerable to corruption schemes. According to the United Nations Office on Drugs and Crime, about 10-25% of all money spent on procurement worldwide was lost because of corruption before the pandemic. These figures do not take into account the additional funds aimed at fighting COVID-19.

Emergencies and urgent need can be a pretext to simplify the established procurement procedures, deviate from the transparency standards in making decisions on allocation of state budget funds. However, it should be noted that it is transparency that is the key to a fair and effective response to emergencies, since it ensures that resources are provided to the intended beneficiaries in the right quantity and quality at a reasonable price.

In particular, on the basis of the Law of Ukraine "On Amending Certain Legislative Acts of Ukraine to Prevent the Occurrence and Spread of Coronavirus Disease (COVID-19)" dated March 17, 2020, a number of amendments were made to the Law of Ukraine "On Public Procurements". Thus, it was established that the Law of Ukraine "On Public Procurements" did not apply to cases where the procured items were goods, works or services necessary to implement measures aimed at preventing the occurrence and spread, localization and elimination of outbreaks, epidemics and pandemics of the coronavirus disease (COVID-19).

The list of such goods, works or services and the procedure for procurement thereof was approved by a resolution of the Cabinet of Ministers of Ukraine and included some medicinal products, immunobiological drugs, food products, disinfectants, antiseptics, disinfection equipment, medical devices, medical equipment and other goods. These goods and services can be purchased without a standard tender procedure, public customers are granted the right to conclude direct contracts with suppliers.

Those changes were aimed to help hospitals quickly purchase essential goods to fight the coronavirus.

In practice, the lack of adequate state control in procurement has led to the use of such changes with serious abuses and violations.

The conflict between the leadership of the Ministry of Health and the specialized Medical Procurement of Ukraine State Enterprise also did not contribute to the efficiency and speed of the processes.

Thus, despite the exhaustive regulatory list of goods, works and services that may be purchased directly to fight the pandemic, some medical institutions decided to use the allocated funds to purchase, using a simplified procedure, other medicinal products, furniture (Municipal Non-Profit Enterprise "City Clinical Infectious Diseases Hospital" of the Odesa City Council) and even fuel (Municipal Non-Profit Enterprise "Romny Central District Hospital" of the Romny City Council).

In addition, according to the Nashi Hroshi information portal, the difference in prices between the most expensive and cheapest medicinal products reaches 500-700%.

For example, prices for medicinal products with meldonium as the active substance varied from UAH 92.72 to UAH 737.38 per package. Similar facts of overpricing (including purchase at a price several times higher than the market average price) were identified in procurements of hydrogen peroxide, ethyl alcohol, ascorbic acid, ceftriaxone, paracetamol, azithromycin, methotrexate, metronidazole, analgin, etc.

According to the Prosecutor General's Office, in March 2021 the Zakarpattia Regional Prosecutor's Office filed the charging document against two former officials of the Health Department of the Zakarpattia Regional State Administration for neglect of duty, which caused serious consequences (Part 2 of Article 367 of the Criminal Code), and against two heads of companies for embezzlement of property worth UAH 29.6 million by abuse of office committed by a group of persons upon a preliminary collusion (Part 5 of Article 27, Part 5 of Article 191 of the Criminal Code of Ukraine).

According to the findings of the investigation, officials of the regional state administration and the heads of a private company signed contracts for procurement of respirators and protective suits for employees of medical institutions engaged in fighting COVID-19. They conducted a tender procedure for procurement from one bidder (i.e. from the already selected private firm) at an overstated price. In addition, the expert examination established that the protective means purchased do not meet quality standards. The amount of damage was almost UAH 30 million.

In addition, on February 16, 2021, NABU announced a pre-trial investigation into possible abuses in the procurement of vaccines against COVID-19. The relevant criminal proceeding was initiated at the request of the General Director of Medical Procurement of Ukraine SE.

Ihor Umanskyi, former Minister of Finance and ex-advisor to the head of the Office of the President of Ukraine also criticized the decision of the Government to reallocate over UAH 30 million from the Coronavirus Fund to Ukravtodor for implementation of the "Big Construction" program.

4. Minor corruption at the service provision level

Unofficial payments, illegal prescriptions, favoritism and nepotism on the part of health care professionals thrive during pandemic outbreaks. Such corruption cases can be caused by low salaries, bad working conditions, and contribute to a negative perception of public services by patients, which affects their further behavior when applying for medical care to a medical institution.

Thus, in April this year, the Prosecutor General's Office of Ukraine announced the detention of the head of the pathology department and a doctor of one of Kyiv hospitals when obtaining illegal benefits. Employees of the hospital regularly demanded money from relatives of patients who died from COVID-19 for speeding up the autopsy, storage in refrigerators, washing, dressing and preparation for burial. At the same time, according to regulations of the Ministry of Health of Ukraine, those services were to be provided free of charge.

Some violations can contribute to the further spread of the disease. For example, in April, a scheme of falsifying the results of PCR tests on COVID-19 with recording inaccurate data into the "Act at Home" application was discovered under the procedural guidance of the Dniprovskyi District Prosecutor's Office of Kyiv. Such a "service" was offered to citizens of Ukraine who returned from abroad to evade the mandatory 14-day self-isolation.

There are also many cases of opportunistic behavior in various forms: from the sale of low-quality and counterfeit products, overpricing, illegal sale of drugs and medical products to theft of available materials.

In particular, in April 2020, law enforcement officers discovered and stopped illegal disposal of hazardous medical waste from hospitals in Kyiv. A pre-trial investigation was launched into violations of sanitary rules and regulations on the prevention of infectious diseases and mass poisoning, as well as misappropriation, embezzlement or seizure of property through abuse of office (Article 325 and Article 191 of the Criminal Code of Ukraine). The investigation established that a company specializing in the disposal of hazardous waste, including medical and biological waste, instead of disposing of medical waste in specially designated areas, brought it to illegal and regular landfills for solid waste in the Kyiv region. That medical waste contained syringes, medical masks, gowns and other waste from medical institutions in Kyiv, including hospitals treating patients with COVID-19.

In September 2020, the Kharkiv Regional Prosecutor's Office provided procedural guidance in respect of three men who set up illegal production kits for collection of biological materials, transportation, and PCR testing for COVID-19 and other viral infections. Counterfeit goods manufactured without the necessary permits were then sold to public healthcare institutions and pharmacy chains through controlled individual entrepreneurs. About 850 thousand sets for the total amount of almost UAH 24 million were sold in 2020 through such individual entrepreneurs on the website.

And last month, under the procedural guidance of the Kyiv Podilskyi District Prosecutor's Office, an international criminal group was found out. They organized a fraudulent scheme on the Internet to misappropriate foreign citizens' money under the guise of supplying Pfizer vaccine against COVID-19 to other countries.

U4 Anti-Corruption Resource Center, another well-known anti-corruption organization, offers the following measures to minimize corruption during the pandemic, based on the results of its research:

  • inclusion of representatives of anti-corruption and anti-fraud services (agencies, organizations) in the national committee or working group for planning measures aimed at fighting the pandemic;
  • identification and assessment of corruption risks in the framework of situational analysis;
  • provision of public control and awareness, as well as transparency of decisions in planning and implementing crisis response measures, including using online platforms (such as the Ukrainian service for monitoring public procurement for budget funds allocated to fight Covid-19;
  • analysis and assessment of the results of measures taken to further adjust the government programs aimed at combating corruption.

In the condition of depletion of resources, the need for preventing corruption in the public and private sectors is becoming increasingly important. Inefficient management of public finance and poor control over its use are not new problems for Ukrainian society. But the pandemic makes these risks particularly relevant. Thus, the misuse of funds aimed at fighting COVID-19 can bring to nought all government efforts to fight COVID. Procurement of goods, works or services at prices that are absurdly several times higher than the market prices, as well as misuse of allocated funds undermines public trust in the leadership of the state. In turn, such distrust increases the likelihood of mass refusal of vaccination, which will jeopardize its effectiveness as a whole.

At the same time, increasing the transparency of public spending, strengthening the institutions of oversight of procurement procedures can pave the way for a fairer, more inclusive society and prepare our country for global crises to come.

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