Drug expiries and stock write-offs have crippled Central Medical Stores Trust’s (CMST) financial performance in the past four years with substantial consecutive losses totalling K37.7 billion.
CMSTs performance statistics in Ministry of Finance and Economic Affairs’ 2024 Annual Economic Report, including its 2024 audit and its annual report published on its website, which Nation on Sunday analysed, shows the losses have been fluctuating between 2020 and 2024.
The devaluation of the Malawi Kwacha has also been a contributing factor.
For instance in 2020, CMST posted a K7.6 billion loss followed by another K5.3 billion loss in 2021.
Thereafter in 2022, the trust posted a K5.9 billion loss while in the following year, it posted a K10.4 billion loss.
At the end of its fiscal year in March 2024, CMST posted a K8.5 billion loss.
The expiries and stock write-offs—both CMST-owned and third-party stocks—which are at the core of the deteriorating fiscal performance, are mainly a result of slow movement of low orders from customers, in particular district health offices (DHOs).
The report details the percentages of stockouts, outlining how many are from donors and those which are government-owned.
According to the 2024 Annual Economic Report, DHOs have limited budgets coupled with utilisation restrictions. It reads: “Increases in stock expiries and subsequent write-offs are due to uncoordinated donations to public health facilities which adversely affect stock uptake at CMST by customers.”
Worse still, CMST’s liquidity levels declined from a ratio of 1.14:1 in the 2022/23 fiscal year to 1.28:1 as of September 30 2023. It was, however, anticipated that the trust’s liquidity position would improve and was set to close at 1.86:1 as at March 2024.
CMST—established in November 2010 under General Notice Number 125/1968 of the Finance and Audit Act and serving over 700 facilities across Malawi— is mandated to procure, warehouse, sell and distribute medicines to all public and selected private health facilities.
Information published on CMST’s website shows that the public trust, which succeeded Central Medical Stores, procures items at a small markup of 18 percent.
In a written response on Wednesday, CMST board chairperson Josiah Mayani, however, said the major contributing factor to the 2023 and 2024 losses was the devaluation of the Malawi Kwacha.
He said: “The DHOs took very long to pay CMST. Devaluation happened when DHOs had not paid us. As an institution that procures more medicines and medical supplies from international suppliers, any devaluation hits us hard. The solution that the board is advocating is that DHOs must be paying us in good time.”
Mayani said if CMST is paid in good time by DHOs, they will avoid losses due to fluctuating exchange rate, prevent stocouts and expiries.
“The moment we run out of stocks, we depend on donations which most of the time CMST has no control over. As a result, we get supplies with short expiry dates. Some stocks are not even relevant to our local medical issues,” he said.
He further said if CMST is paid on time, it will also assist in negotiating with suppliers to give them goods at better prices, stating that suppliers tend to increase prices because they know that the institution takes long to pay them.
But reacting to the development on Thursday, the Pharmaceutical Society of Malawi (Phasom) said the significant losses are particularly alarming, given the persistent stockouts of essential medicines that Malawians are experiencing, which severely impact healthcare service delivery.
In an email response, Phasom president William Mpute said the society believes that the issues are systemic and require urgent and comprehensive interventions; hence, proposing numerous solutions to mitigate future losses and ensure availability of essential medicines.
He said: “We strongly recommend that the drug budgets for DHOs and other health facilities meticulously aligned with comprehensive quantification reports. These reports, based on epidemiological data and actual consumption, provide a realistic assessment of medicine needs and their associated costs, ensuring that budgets are adequate and prevent premature depletion.
“We also urge the Treasury to ensure timely and consistent payments to CMST. Reliable cash flow will enable CMST to honour its obligations to suppliers promptly, reducing the risk of supply disruptions and associated costs, and ultimately strengthening its operational capacity.”
He said CMST must recruit and adequately staff its operations with more qualified pharmacy professionals, emphasising that such experts are integral to effective inventory management, demand forecasting, stock rotation and overall pharmaceutical supply chain optimisation, all of which are critical in minimising expiries.
“We recommend implementation of a comprehensive, integrated digital system. Crucially, this system should interface with hospitals and other health facilities, providing real-time visibility into CMSTs warehouse inventory,” he said.
“Such a system would empower hospitals to know what medicines are available, facilitating better ordering, reducing unnecessary purchases, and enabling more efficient distribution of nearing expiry stocks across the network, thereby minimising overall expiries.”
Mpute said Phasom believes that implementation of the proposed solutions will not only address the root causes of CMSTs significant financial losses, but also contribute significantly to ensuring a consistent and reliable supply of essential medicines for all Malawians.
CMST anticipates growing its revenue by 20 percent in 2025, according to its 2024 Annual Report.
It reads in part: “CMST planned to grow revenue by 20 percent into 2024-25. In the period under review, revenue grew by four percent from K29.9 billion in 2022-23 to K38.8 billion in 2023-24. With such registered growth, despite challenges in the operating environment, the strategic effort remains to fully achieve the target of 20 percent by 2025.”
