|Operational principles for good pharmaceutical procurement (UNICEF - UNFPA - WB - WHO/EDM, 1999, 32 p.)|
Pharmaceutical procurement is a complex process which involves many steps, agencies, ministries and manufacturers. Existing government policies, rules and regulations for procurement as well as institutional structures are frequently inadequate and sometimes hinder overall efficiency in responding to the modern pharmaceutical market.
Market constraints differ from country to country. Public sector drug procurement must take place in the context of both the local pharmaceutical market and the international market. In many countries public health officials have limited experience in designing an optimal procurement system to fit their market context. An increasing number of countries have moved, or are moving, away from a pharmaceutical procurement and distribution system which is totally operated by the public sector, and are investigating various options for involving the private sector in order to enhance public health. A recent MSH/WHO publication1 explores various models which exist. Each of the models discussed in that book has advantages and disadvantages, and each presents a different challenge to effective procurement management.
1 Management Sciences for Health in collaboration with the World Health Organization, Action Programme on Essential Drugs. Managing drug supply, 2nd ed. Edited by J.D. Quick, J. Rankin, R. Laing, R. OConnor, H.V. Hogerzeil, M.N.G. Dukes and A. Garnett. Hartford, CT: Kumarian Press; 1997.
There are many steps in the procurement process. No matter what model is used to manage the procurement and distribution system, efficient procedures should be in place: to select the most cost-effective essential drugs to treat commonly encountered diseases; to quantify the needs; to pre-select potential suppliers; to manage procurement and delivery; to ensure good product quality; and to monitor the performance of suppliers and the procurement system. Failure in any of these areas leads to lack of access to appropriate drugs and to waste. In many public supply systems, breakdowns regularly occur at multiple points in this process.
If there is an appearance of special influence on the selection of products and suppliers or if the procurement process is not managed in an efficient and transparent manner, interest among suppliers in competing for procurement contracts decreases, leading to fewer choices and higher prices for drugs.
If the procurement system cannot guarantee access to funds at the time they are needed, drug shortages and procurement inefficiencies are inevitable. Government funds for procurement are, in some countries, released irregularly during the financial year. In some countries government regulations specify that funds must be spent in the year for which they are allocated or be returned to the treasury; this compounds the problem. Where this combination exists it compromises procurement planning and execution. Limited or irregular funding which leads to delays in payments worsens procurement problems as suppliers deny credit or insist on advance payments. A degree of financial autonomy for the health system, while providing flexibility, requires proper accountability and efficient management.
External financing of drug procurement for the public sector by international agencies, bilateral donors or development banks can also be a source of problems in some countries. In such cases the donors or banks may have conflicting policies and regulations regarding drug procurement, which in turn may conflict with existing local laws and regulations. In these situations it is extremely difficult to carry out procurement in a timely and efficient manner. Development assistance should be more consistent with the policies of the country. And it is essential that this assistance should reinforce good pharmaceutical procurement practices and aim at sustainability, rather than undermining or delaying the development of such procurement practices. Thus international, multilateral and bilateral agencies may need to review their own procedures, requirements and technical advice in the light of the operational principles presented here.
The recent trend towards decentralizing responsibility for procurement can be positive, in that local authorities should have the strongest interest in maintaining a consistently effective drug supply system. However, without procedures to maintain economically viable procurement quantities, drug prices may increase dramatically. Moreover, without mechanisms to monitor local performance and to ensure adherence to good procurement practice, public health objectives may not be met and scarce funds may be wasted on inappropriate purchases. Contracting out parts of the procurement/distribution function may improve efficiency and reduce costs. But this will only be true if public health systems can properly monitor and manage such contracts. In many countries the necessary experience and information systems for this are lacking. In some countries initial decentralization of drug procurement was followed by pooled procurement by hospitals or cooperatives.
Unbiased market information on product availability, comparative pricing, product quality and supplier performance is difficult to obtain in many countries. Poor access to information is most common in countries where it is most needed in the light of inadequate regulation of the local market. This information deficiency can result in gaps in essential drug availability and in procurement of poor-quality products at unnecessarily high prices. It may also facilitate undue influence on the procurement process by special interest groups.
Even if appropriate policies and procedures are in place, lack of properly trained staff in key positions can doom any procurement system to failure. While effective training programmes can remedy this problem, in many supply systems there is limited access to training in good procurement practices. Also unattractive public sector salaries and lack of career development tend to restrict capacity to attract and retain qualified staff.
Summary of main problems
· inadequate rules, regulations and structures;
· lack of trained procurement staff.