Why Phillips' exit from Kenyan market has sparked court battle

Leased medical equipment at the Rift Valley Provincial General Hospital (PGH).[FILE]

The government’s multi-billion medical equipment leasing program is in limbo with the revelation that the health technology firm, Phillips East Africa Limited (PEAL), is exiting the country.

The revelation that the international firm is on its way out of the Kenyan market is detailed in a case filed by the Association of Medical Engineers (AMEK), which claims it will have a ripple effect on Kenyan hospitals, from those in the counties to the national referral hospitals.

In its case, AMEK sued Phillips, Koninklijke Philips N.V., GMED Holdings B.V., the Competition Authority of Kenya, the Health Cabinet Secretary Aden Duale, Philips Radio B.V., the Pharmacy and Poisons Board (PPB), and the Attorney General Dorcas Oduor.

The association also roped in the Council of Governors (CoG) as the interested party.

Its lawyer, Tom Macharia, told the court that the firm wants to allegedly transfer its functions under the National Equipment Service Program (NESP), hence plunging hospitals in the country into uncertainty over maintenance and continuity of the machines.

“Despite the very serious implications of the said exit of the Philips Group from Kenya to a company with no demonstrated track record or OEM (Original Equipment Manufacturer)-level competence in large-scale medical device servicing, the transfer process is shrouded in secrecy and poses an immediate and substantial threat to the continuity of essential health services and the constitutional right to the highest attainable standard of health guaranteed under Articles 43(1)(a) and 46(1)(c) of the Constitution of Kenya,” argued Macharia.

AMEK wants the court to block the poisons board and the competition authority from approval or change of control of PEAL.

At the same time, it wants the court to compel it to continue maintaining all operations in public hospitals in the country until the case is heard and determined.

According to Macharia, any changes would mean that public assets will be placed into new hands without proper public participation or engaging the stakeholders.

“It is just, equitable, and in the public interest that the status quo be preserved pending the hearing and determination of this application to prevent irreversible harm, maintain regulatory integrity, and safeguard the lives dependent on the functioning of the medical devices affected by the proposed acquisition,” he argued.

AMEK’s chairperson, Symon Mbakah, told the court that the Dutch-owned multinational firm is essentially the backbone of the Kenyan health system. He said that their equipment is used for life-saving diagnostics, high-dependency and life-support systems, including radiology, intensive care, and monitoring equipment, in national referral hospitals, the county referral hospitals, and the Ministry of Defence hospitals.

He stated that Phillips Radio B.V. owns the Kenyan subsidiary, but there is no communication on how and why the firm is folding its operations.

Mbakah further stated that sometime in September this year, Phillips announced its decision to divest from the medical equipment business in Kenya and the East Africa region by selling 100 percent of its shares to Koninklijke. He said that the sale would effectively have Phillips out of Kenya.

According to him, Koninklijke is trying to expand its business through an alleged Sh 1.9 billion loan from the International Finance Corporation (IFC). He claimed that this poses a risk to the continuity of the projects already running in the country.

He also claimed that there is an active labour case between the association and GMED Holdings B.V. over alleged forced transfer of labour and alleged unpaid dues.

“The loss or exit of this highly skilled technical team would paralyse medical equipment maintenance and calibration services in national, county, and private hospitals, thereby threatening the right to health under Article 43(1)(a) of the Constitution,” claimed Mbakah.

He urged the court to halt the acquisition process until the association’s issues are addressed.