Enhancing Pharmaceutical Procurement
This presentation discusses the procurement of pharmaceuticals. Pay particular attention to good procurement practices, the effect of hidden procurement costs, the models of regional/country collaboration, and the common procurement challenges.
Learning Objectives
- Recognize the characteristics of a good pharmaceutical
procurement system
- Identify and describe the steps in the procurement cycle
- Discuss regional collaboration for procurement
- Discuss procurement of pharmaceuticals using USAID funds
- Discuss the challenges in the procurement of HIV/AIDS,
TB, and malaria supplies
Objectives of a Good Procurement
Program
- Procure the right drugs in the right quantities at the
lowest possible total cost
- Select reliable suppliers of quality products
- Ensure timely delivery and notification
Operational Principles for Good Procurement
- Efficient and transparent management
- Drug selection and quantification
- Financing and competition
- Supplier selection and
quality assurance
Good Procurement Practices
- Generic name
- Limited to essential medicines list or formulary list
- Bulk purchases
- Formal supplier qualification and monitoring
- Competitive bidding process
- Commitment to a sole source
- Order quantities based on reliable estimate of
actual need
- Reliable payment and good financial management
- Transparency and written procedures
- Separation of key functions
- Product quality assurance program
- Annual audit with published results
- Regular reporting on performance
Impact of Hidden Costs in Procurement
The Procurement Cycle
Procurement Methods
Method | Effect on Price | Lead Time | Work Load |
---|---|---|---|
Open Tender | Usually lowest prices |
Moderate to long | High |
Restricted Tender | Favorable | Moderate to long | High |
Competitive Negotiation | Can be favorable | Short to moderate |
Moderate |
Direct Procurement | Usually highest prices | Short to moderate |
Low |
Defining Regional Collaboration
for Procurement
- Wide variation exists in types of regional
collaboration for procurement
- Spectrum of options ranges from the simple sharing
of information to the actual pooling of resources and
requirements combined with contracting and
purchasing by an agency acting on behalf of the
group of countries
Models of Regional/Country Collaboration
- Information Exchange
- Informed buying
- Coordinated informed buying
- Informed buying
- Pooled Procurement
- Group contracting
- Central contracting
Characteristics of Models
Information Sharing | Pooled Procurement | ||
---|---|---|---|
Informed Buying | Coordinated Informed Buying |
Group Contracting | Central Contracting |
Member countries share information about prices and suppliers | Member countries undertake joint market research, share supplier performance information, and monitor prices | Member countries jointly negotiate prices and select suppliers | Member countries jointly conduct tenders and awards contracts through an organization acting on their behalf |
Member countries agree to purchase from selected suppliers |
|||
Countries conduct procurement individually | Countries conduct procurement individually |
Countries conduct purchasing individually |
Central buying unit manages the purchase on behalf of countries |
Pooled Procurement Initiatives
Name of Initiative | Year | No. of Countries | Status |
---|---|---|---|
FORMED | 1986 | 3 | Defunct |
OECS/PPS | 1986 | 9 | Ongoing |
Gulf Cooperation Council | 1986 | 6 | Ongoing |
Arab Maghreb Union | 1989 | 3 | Inactive |
ACAME | 1996 | 6 | ? |
Pacific Islands | 1999 | 3 | ? |
Advantages of Pooled Procurement
- Reducing drug costs through economies of scale
- Harmonizing drug registration among countries
- Harmonizing standard treatment guidelines (STGs) and essential medicines lists (EMLs)
- Improving quality assurance systems
- Improving supplier performance
Lessons Learned from Pooled
Procurement
- Political will and organizational commitment
- Permanent and autonomous secretariat
- Harmonization and standardization
- Strong procurement systems
- Finances/reliable payment
- Quality assurance
USAID Procurement Requirements
- Pharmaceutical products
- Safety, efficacy, and quality
- "Buy America"
- Protection of U.S. patents
Challenges in Meeting USAID
Procurement Requirements
- Lack of guidance material to assist in what is perceived to be a complex process
- Preferential procurement of U.S. S/O, FDA-
approved products may result in:
- Increased costs and delays
- Reduction in the impact of the program
- Negative effect on the harmonization of
pharmaceutical products within a country
- The approved product may not be the most
appropriate product for that program in the country
context
- Increased costs and delays
- Missing information
- Justification for not procuring a U.S. source of origin
pharmaceutical product
- Information on the capacity of the program to use the product appropriately
- Data to attest to the safety, efficacy, and quality of the product
Options for Meeting Challenges
- Briefing document to provide guidance to cooperating agencies (CAs) and Missions on USAID procurement guidelines and procedures
- Technical assistance to USAID Missions and CAs in preparing requests for approval
- Implementation of Supply Chain Management
System (SCMS)
World Bank Procurement Guidelines
- Principles
- Need for economy and efficiency
- Need to give all eligible bidders opportunity to
compete
- Encourage development of local industries in borrowing country
- Importance of transparency
World Bank Procurement Methods
- International competitive bidding
- National competitive bidding
- Limited international bidding
- International or local shopping
- Direct procurement (sole sourcing)
- Cost-based selection
- Quality-based selection
- Limited budget selection
ARV Registration and Procurement – The Case of Ethiopia
Background
- ART supported by GFATM and the U.S. President's
Emergency Plan for AIDS Relief
- Distinct sites will receive ARV drug support from the Emergency Plan or GFATM
- First-line ARVs for adults have been introduced only for paying patients
- National treatment guidelines were under revision at the time of quantification and procurement
- Drug requirements for 6 months are to be received in two shipments
Registration
- Manufacturers are not interested in registering some drugs in
Ethiopia
- Some manufacturing sites and pack sizes vary from those of registered products
- Full provision of second-line drugs has to be postponed until
national treatment guidelines are endorsed
Quantification
- Uptake of newly introduced pediatric and second-line treatment
unknown
- Intensive collaboration crucial for agreement on drug selection and projection of the capacity for scaling up
Pharmaceutical Donations
- Types
- Solicited
- Unsolicited
- Problems
Issues in Procurement of
ATM Drugs and Supplies
- Quantification of needs
- Chaotic and confused global market situation
- Doha Declaration on the TRIPS Agreement
- Donation programs
- Limited number of sources/suppliers
- High cost of supplies
- Potential for corruption
- Varied and changing treatment regimens
- Variety of formulations
- Quality concerns
- Limited knowledge
- Limited sources of raw materials
Common Procurement Challenges
- Absence of a comprehensive procurement policy
- Inadequate rules, regulations, and structures
- Public sector staff with little experience and training to
respond to market situations
- Government funding that is insufficient and/or released at irregular intervals
- Donor agencies with conflicting procurement regulations
- Fragmented drug procurement at provincial or district level
- Lack of unbiased market information
- Corruption and lack of transparency
Summary
- Characteristics of a good pharmaceutical
procurement system
- Steps in the procurement cycle
- Regional collaboration for procurement
- USAID procurement procedures
- Challenges in the procurement of HIV/AIDS, TB,
and malaria supplies
Source: Michael Gabra, https://learn.saylor.org/pluginfile.php/42679/mod_resource/content/3/BUS300-5.2-Enhancing%20Pharmaceutical%20Procurement%20Session%206-CC-BY-NC.pdf This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License.
Last modified: Wednesday, April 12, 2023, 3:05 PM