Do the Staff of a Disgraced Minister Have Immunity from Lustration?

Do the staff of a disgraced Minister have immunity from lustration?

When the Government Commissioner for Anti-Corruption Policy became interested in the biography of the person appointed 4 June 2014 (year) as head of the State Service for Medicinal Products, Mykhailo Pasichnyk — specifically the part concerning his former activities as a high-ranking civil servant — Minister of Health Oleg Musiy hurried to defend his protégé.

Now (after Musiy’s suspension from duties) such intervention is seen as nothing more than a disservice, because it provokes genuine interest in the past of the person the controversial ex-Minister so zealously set out to protect. Even more so given that powerful regulatory levers over the pharmaceutical market are in this official’s hands.

10 years ago

Is the past of twice-awarded Order "For Merit" recipient Mykhailo Frantsevych Pasichnyk really as spotless as his influential defender claimed? Does it meet the expectations of people who continue to demand a radical renewal of power?

To begin with, before his appointment as Head of the State Service for Medicines, Pasichnyk served as President of the All-Ukrainian Public Association "Pharmacy Professional Association of Ukraine" (founded in 2007), was President of the once-powerful pharmaceutical company "Falbi", but most importantly — in 2003-2006 he already headed the same market-regulating structure he leads now. At that time it was called the State Service for Medicines and Medical Devices (hereinafter — the State Service for Medicines). By the way, even during the years of the "criminal Yanukovych regime" he did not distance himself much from it, holding the post of chief freelance specialist of the Ministry of Health for organization and management of pharmacy (since 2010).

Pasichnyk first entered the state apparatus as head of the State Service for Medicines (appointed by the decree of L. Kuchma on 7 February 2003), when, according to the resolution of the Verkhovna Rada of Ukraine of 28.11.2002 "On the information of the Cabinet of Ministers of Ukraine about the state of affairs in the domestic healthcare system," the Ministry of Health’s performance in ensuring healthcare was recognized as unsatisfactory. Just as today Arseniy Yatsenyuk, at that time Vice Prime Minister Dmytro Tabachnyk called the situation in the sector extremely critical.

But what was critical then might today even deserve a positive assessment. For example, in his first report on the situation in the medical sector, Mykhailo Pasichnyk noted that domestic pharmaceutical production volume in 2002 grew by 6,5% compared to 2001. The pharmaceutical market volume grew by 16,8%, and pharmaceutical imports by 25%.

Then as now, many statements were made about a European vector for domestic medicine, implementing new standards, openness and the need for radical reforms. Viktor Yanukovych was Prime Minister at the time. So it turns out that a civil servant from the Prime Minister Yanukovych era, under Musiy’s patronage, is again taking the chair he occupied 10 years ago. Can this be considered one of the transformations demanded by the Revolution of Dignity?

It is not without reason that Government Commissioner for Anti-Corruption Policy Tetyana Chornovol stated that the appointment of the Head of the State Service for Medicinal Products "was conducted non-transparently," even calling it "backroom": "Behind the back of the Government Commissioner for Anti-Corruption Policy, without prior submission of a biographical note for checking possible corrupt links, a decision was made at a Government meeting to appoint Mykhailo Frantsevych Pasichnyk as Head of the State Service of Ukraine for Medicinal Products," she wrote on her social media page. "Not even a month passed after this backroom appointment when signals began to arrive that Mykhailo Frantsevych may have a conflict of interest. All these facts will be thoroughly studied by the Government Commissioner for Anti-Corruption Policy and forwarded for verification."

For his part, Oleg Musiy defended his protégé and denied information about Mykhailo Pasichnyk’s involvement in corrupt actions, calling the claims about his non-transparent appointment a set-up.

But are, for example, the documents of the Control and Revision Office (KRU) that mention the name Pasichnyk also a set-up? Is there any need to dig deep when this information is on the surface?

There is a crime, there is a court, but no punishment

Let us at least look at the piece "The Doctors’ Case?", published in the weekly "2000" in 04.02.2005 and prepared based on KRU materials regarding the audit of the use of budget funds in 2002-2003 for purchasing medicines, medical devices and equipment for healthcare institutions.

It provides many shocking facts indicating that the team of Minister Andriy Pidayev, which included Pasichnyk, by no means sought to correct the unsatisfactory performance of their predecessors, but proved to be a worthy continuation of corrupt traditions.

For example, it states that MOH officials purchased medicines for state hospitals from "their" firms at prices more than 500% higher than the cost of similar drugs on the market.

Pasichnyk himself was accused of abusing power and official position. One of the functions of the State Service for Medicines, which he headed, was to form the "List of medicinal products and medical devices of domestic and foreign production that may be purchased by healthcare institutions wholly or partially financed from the state or local budgets."

In a parliamentary inquiry by the Chairman of the Temporary Investigative Commission of the Verkhovna Rada of Ukraine, Serhiy Osyka, addressed to the Prosecutor General of Ukraine on 21 January 2005, it states: "The results of the audits provided to the KRU and the Accounting Chamber of Ukraine indicate terrible multi-million losses of budget funds, their irrational use, which jeopardizes the implementation of centralized State programs to combat tuberculosis, oncological diseases and AIDS…"

Pursuing his own interests, Mr. M.F. Pasichnyk actively lobbied for inclusion in the "List…" of medicinal products from manufacturers whose distributor was the pharmaceutical company "Falbi" (of which he is a co-founder), blocking the inclusion of his competitors’ drugs. For this, he even included representatives of pharmaceutical companies, whose distributor was Falbi, in the working group preparing additions to the "List"…

LLC "Falbi", despite significant violations of supply conditions for medicinal products, almost constantly won tenders at the MOH of Ukraine, indicating the company’s corresponding patronage by an official. Facts such as Falbi supplying medicines with shorter shelf life than specified in tender documentation, failure to meet storage requirements, etc. — all this somehow did not affect the recognition of this pharmaceutical company as the winner of MOH tenders…

Thus, legal analysis of the above facts gives grounds to believe that the actions of high-ranking officials of the Ministry of Health of Ukraine contain signs of a crime under Article 364 (abuse of power or official position) of the Criminal Code of Ukraine."

You may ask what criminal consequences there were, i.e., were there trials, verdicts, punishments?

Yes, trials took place. But the outcomes… had no consequences. For example, Serhiy Osyka points out that "Deputy Minister of Health — Chairman of the Tender Committee Mr. V. Zahorodniy was found by the court guilty of causing damage to the state in the amount of more than one million hryvnias personally. However, for such a 'misdemeanor' he received a fine of 510 hryvnias." That’s our "most humane court in the world."

It is also worth recalling that in March 2004 at a collegium meeting in the Prosecutor General’s Office in the presence of Minister of Health Andriy Pidayev, information was announced about serious abuses detected in the MOH. In particular, that "from the funds allocated by the Government to stimulate domestic producers — 177 million hryvnias — the MOH directed them to financially support foreign companies and their intermediaries."

One of the main tasks of the State Service for Medicines is to ensure state regulation and control over the production, import, export and sale of medicines and medical products.

It must be said that at that time high-ranking MOH officials operated, so to speak, with an open visor, not particularly hiding their financial interests.

For example, to one of the deputy ministers, a co-founder of a pharmaceutical enterprise and a repeated champion in the number of tenders won, then-Prosecutor General Hennadiy Vasylyev asked via the media to heed advice: study the law on combating corruption carefully.

And how could one not recall that Mykhailo Pasichnyk was appointed Head of the State Service for Medicines precisely when his pharmacy network "Falbi" was at the peak of successful commercial activity.

But Mykhailo Frantsevych managed to "honorably" survive all these, to put it mildly, troubles while serving as a civil servant — he left the post of Head of the State Service for Medicines of Ukraine in 2006 with two government awards, after the "new broom" of the Yushchenko administration swept through the "high" offices. Pasichnyk returned to his native company "Falbi", which also "honorably" protected the boss’s rear in those turbulent years.

Why does the government need bankrupt businessmen?

Wikipedia still states that "M.F. Pasichnyk is the founder of the pharmaceutical company 'Falbi' (1994), which today is one of the leading operators of the pharmaceutical market of Ukraine," and that "the company’s retail network includes over 250 pharmacy outlets across Ukraine."

However, the halcyon days when his company could afford, for example, such a charitable gesture on its fifth anniversary in 1999, donating medicines worth 200 thousand hryvnias to the 'Ukraine — For Children' fund, are long gone. And was that even charity? Given that the fund at that time was run by the wife of the sitting President of Ukraine, such generosity raised certain questions. Answers came when the head of the pharmacy network was offered to head the service that controls multi-million flows.

It is known that such relationships between businessmen and charitable foundations have a dark side. We can recall pharmaceutical businessman-oligarch Petro Bahriy, whose structures, since 2007, have dominated state procurement of medicines for the largest state programs. Petro Bahriy participated in the work of the scandalous fund of Kateryna Yushchenko "Ukraine-3000", and Pasichnyk is rumored to be Bahriy’s protégé.

In any case, industry specialists "listed" Pasichnyk among Lyudmyla Kuchma’s favorites. It should be said that the ability to get into high offices and establish important connections with senior officials has never been considered a shameful thing in Ukraine, although such approaches of course sit close to the line where corruption begins.

More interesting is the report of the newspaper "Kommersant" (from 24.12.2013) that the largest Ukrainian wholesaler "Falbi" got into huge debts and was forced to downsize its business. Just last year the company halved its pharmacy network; in Kyiv alone only 3 of its 60 outlets continue to operate.

According to the publication "Capital", Falbi is the subject of numerous lawsuits: drug suppliers are trying to recover payments for delivered goods. The total amount of claim demands is several million hryvnias.

The Unified State Register of Court Decisions contains several court documents indicating that in 2006 Falbi opened a credit line in Ukreximbank for $40 million.

Falbi itself officially states that the company’s problems are due to the financial crisis — millions were spent on building a warehouse near Kyiv, and when some distributors began to work on a prepayment basis, Falbi could not follow suit because it lacked sufficient working capital.

Yet as late as 2011 Falbi ranked ninth in sales volumes in Ukraine.

What is striking here is not just the financial fiasco of a once-powerful pharmaceutical company, but that the Government decided to entrust leadership of the vital national industry to the head of a bankrupt company. Strange, at least. After all, this puts the State Service for Medicines in an elevated risk zone for misuse of official position and making decisions under external pressure.

Levy on entrepreneurs

Finally, a few words about Mykhailo Pasichnyk’s civic activity. As we have already noted, he also served as President of the All-Ukrainian Public Association "Pharmacy Professional Association of Ukraine," which pursues a rather aggressive policy of recruiting as many members as possible from among pharmaceutical entrepreneurs.

There would be nothing shameful in this strategy if not for one "but." Let us recall Pasichnyk’s past merits, when, having come to the helm of the regulatory body, he supported and refined practices that in pharmaceutical circles were regarded as an additional duty imposed on entrepreneurs.

This refers to holding annual two-day scientific-consultative seminars in all regional centers of Ukraine that pharmacy company managers were expected to attend. They were organized by the State Enterprise 'Ukrainian Research Center of Pharmacy' with participation from the State Service for Medicines.

The cost of such sessions (whose educational value was highly questionable) rose to 540 hryvnias (at the time — about 100 US dollars). Attendance (entrepreneurs also had to pay travel and hotel expenses) could of course be declined, but few dared to anger the State Service for Medicines, which was listed among the organizers of these events. In other words, the well-known Soviet-era voluntarily-compulsory principle applied, and no one wanted to risk unscheduled inspections with corresponding consequences.

Incidentally, the 'need' for such seminars is evidenced by the fact that entrepreneurs managed perfectly well without these conventions for the last few years and did not feel an urgent need for them.

And so, in September of this year market participants again received 'letters of joy' under the pompous title — 'THE MAIN EVENT OF THE YEAR!' They are now invited not to seminars but (take note!) — to scientific-practical conferences.

Among the ultra-topical issues, for example, is "the activity of the State Service of Ukraine for Medicinal Products in ensuring the population with quality, safe, effective and affordable medicines." Really, in the era of a developed Internet, does a pharmacist from a district town need to drop all urgent matters and travel to the regional center to learn about this activity directly from the responsible quality, safety and production officials? Aren’t the State Service’s official website, electronic mailings, or specialized medical periodicals sufficient?

Or is the main reason for renewing these 'scientific-practical tours' around Ukraine that this year the State Service’s budget was cut by 70%, and the financial situation is to be improved at the expense of business entities by using the scheme, tested during Pasichnyk’s first term, of collecting a kind of levy from entrepreneurs?

It is also interesting that the organizers’ appetite for paid consultations has significantly decreased — today an entrepreneur must pay 390 hryvnias to participate in a conference (not 540 as before), but this is only the beginning. At the same time, the question remains why consultation prices were set at 10 years ago when the hryvnia’s position against the dollar was much firmer than it is now?

So we ask: what exactly about Pasichnyk’s candidacy, who became famous in the final years of Kuchma’s presidency, appealed to ex-Minister Musiy so much that he lobbied for his appointment to one of the sector’s key positions? Why, during an expected cleansing of power, allow the pharmaceutical industry to tread the same old, well-worn rakes?

"Guilty of the collapse of the Ministry’s organizational and personnel system…" This verdict on his predecessor Oleg Musiy was issued last week by Acting Minister of Health Vasyl Lazoryshynets at the first briefing in the Cabinet. Let us hope that similar personnel appointments by the suspended Minister, who is remembered mainly for endlessly trumpeting his Maidan achievements when he should have been focused on more acute and painful issues, will not escape the new head of the MOH’s attention.

Or perhaps Mykhailo Pasichnyk is among those chosen and untouchable figures who are not subject to the lustration process? And maybe such is the fate of the Ukrainian Ministry of Health — to remain the main ministry of abuses and corruption, as it was called by both "orange" and "white-and-blue" politicians, which is no secret to either rank-and-file medical industry workers or to patients.

Bohdan KONOVALOV, special for "VZ"