Inside Ukraine (IU) Newsletter, February 1, 2004

On Friday, January 30, 2004, The Global Fund to fight AIDS, Tuberculosis and Malaria in Geneva issued a press release in which it said that, because of a failure to perform, Ukraine was being directed to immediately return all remaining monies disbursed to it for AIDS treatment programs.

While the Global Fund made no statement as to how long the direct control of funds by Fund headquarters would last, the announcement brings into question the Ukraine governments ability to effectively and honestly manage funds provided to it by international organizations for AIDS treatment.

However, the suspension of the Ukraine governments control of funds disbursed to it is believed by some to be only the tip of an iceberg of doubt and serious questions in regards to Ukraine's management of its AIDS program.

The Fund announcement, which quoted in part strong letters to Vice Prime Minister Dmytro Tabachnyk and Minister of Health Andriy Pidayev, followed consideration at Fund headquarters of the results of an intensive field investigation in Ukraine led by senior Fund officials.

The announcement only mentioned Ukraine's failure to perform in a timely fashion in regard to AIDS drug procurement. However, the issues under investigation are reported to have been much broader and more troubling issues.

Reliable sources in Ukraine had reported to Western and international authorities allegations that people associated with the Ministry of Health had attempted to skim large sums of money from funds already disbursed. Specifically, there were allegations about the Health Ministry's drug procurement and contracting for treatment services.

The investigation is reported to have at least partially confirmed allegations that there had been a blatant attempt to offer project funds to contract service providers based on very substantial kickbacks. It was, however, questionable drugs procurement practices that led to the Fund's demand for immediate return of monies already disbursed.

Based on their investigation in Ukraine, the Global Fund's level of concern was so high that on January 27 the Global Fund's executive director faxed a letter stating the Fund's concerns to Vice Prime Minister Dmytro Tabachnyk.

This was the first of two letters. The second, to Minister of Health Andriy Pidayev, specifically stated in part, ".the Global Fund hereby temporarily suspends the Grant Agreement........we expect the Ministry of Health to immediately refund all funds dispursed to the Ministry by the Global Fund that were intended to finance procurement of drugs and other health products, plus interest earned on such funds."

The Fund's major immediate complaint was that the Ministry had engaged in procurement of anti-retroviral drugs (ARVs) in a fashion that was not only inefficient but also led to the conclusion that the Ministry may have been engaged in questionable procurement practices.

The Fund was concerned that in spite of boasts that 4,000 AIDS victims would be receiving ARVs, in reality less than five percent of that number were being served. The Fund's letter to Pidayev pointed out that the Fund is making arrangements with Medecins Sans Frontieres (MSF) for emergency supplies of ARVs because of the Ministry's failure to meet its commitments.

Sources also reported that the Ministry staff is engaged in a frantic effort to construct a response to the Global Fund that will spin the story by attempting to place the blame for the problems on the Global Fund itself.

However, these same sources indicate that the greatest worry of many of the mid to top level Ukraine Health Ministry officials is that the Presidential Administration will be so furious about the Ministry's loss of control of the monies that any number of heads are likely to roll.