GOOD PHARMACEUTICAL PROCUREMENT PRACTICES by FOLA TAYO.

OBJECTIVES: 1. Review Procurement Cycle 2. Discuss factors influencing drug prices & total costs briefly 3. Give Overview of Procurement Methods 4. Give Detailed Account of Good Pharmaceutical Procurement Practices 5. Discuss How to Organize & Manage The Procurement System 6. Briefly Consider Financial Sustainability of the System 7. The above in the light of current pharmacy curriculum with. Expected Outcomes: Pharmacy practice teachers are better able to evolve a more appropriate and more systems-friendly curriculum & better able to impart knowledge to meet current & future demands on the pharmacist.

Effective Procurement Process

Should:
Procure the right drugs in the right quantities obtain the lowest possible purchase price Ensure high standards of quality Organize timely delivery to avoid o/s & shortages Ensure supplier reliability (service & quality) Set the purchasing schedule, formulae for order quantities, & safety stock levels to achieve the lowest total cost at each local level of the system Achieve these objectives in the most efficient manner possible.

The Procurement Cycle

Procurement: process of acquiring supplies from Private public suppliers, manufacturers, distributors, agencies (UNICEF, WHO), or bilateral aid programmes Individually or in appropriate combinations.

Factors Influencing Drug Prices & Total Costs.

Points to Note: Govt budgets are limited (financially) Health including Drug budgets no exception Drug procurement costs..a concern to all Procurement costs include: many different components both Visible & Invisible (hidden) Costs. TOTAL COST = VISIBLE + HIDDEN COST

Factors .. Contd (2)

Unit Price Purchasing Models & Total Variable Cost of Purchasing Visible (Contract Price) and Hidden Costs (early expiry, disintegration of medicines, commissions, air freight (late delivery)short packing, losses due to poor packaging.

Procurement Methods
Open Tender Restricted Tender Competitive Tender Direct Procurement Note: Prior to Procurement, there is need for: Selection (based on Essential Medicines List) Quantification (Consumption, Morbidity, Adjusted Consumption model & Service-level Projection of Budget Requirements).

GOOD PHARMACEUTICAL PROCUREMENT PRACTICES.

Procurement by Generic Name:
 Use generic names (International Non-Proprietary name, INN) for fair competition  Specify Quality Standards, not specific brands, for drugs with bioavailability problems.  Note: many of the drugs on our EDL have bioavailability problems! In the next slide, What Teachers Must Do is Shown!

WHAT TEACHERS SHOULD DO!

Present ALL drugs by their Generic names. Emphasize that Decree 43 (1989) Essential Drugs (Medicines) & National Drug Formulary makes it mandatory. Emphasize the NEED to reduce cost via generic purchase. Need to discourage proprietary prescription and dispensing unless generic has BA and/or efficacy problems.

Limit Procurement to Essential Medicines List or Formulary List

 Select Safe, Effective, Cost-effective drugs  When required, use formal approval procedures for procurement of non-listed medicines. Teachers: Emphasize Safety, Effectiveness, Efficacy, Cost, & Quality when presenting Selection. Note that if these are complied with at Selection stage, there will be a smooth flow into procurement and quantification. Bring into focus their knowledge of chemistry, pharmacology, pharmaceutics, etc.

Procurement in Bulk
 Concentrate purchases on limited List to increase quantities, reduce price  Specify divided deliveries. Teachers: Lets build economy of scale into our presentation. Use this to illustrate what is taught in management. Buying in bulk is cheaper (cost, admin, etc) than raising LPOs often (open to corruption, stock-out, low quality, etc).

Formal Supplier Quantification & Monitoring

 Use formal supplier qualification based on medicine quality, service reliability, and financial viability  Approve suppliers before tendering (Prequalification) or after (Postqualification)  Use a formal Monitoring System to Ensure continued supplier qualification.

Contd.
Teachers:  Let students know that the CV and antecedents of supplier is a prerequisite to a rational and successful procurement policy  Suppliers must be screened regularly including surveillance (Monitoring) of their operations  Set up Check-List of Performance  Evaluate suppliers with relevant performance indicators.  Emphasize that a good procurement cycle can be destroyed by an unreliable supplier!

Competitive Procurement
 Use Competitive bidding on all but very small or Emergency purchases to obtain the best prices  In Restrictive tender, only prequalified suppliers should be allowed to compete  In Open tenders, suppliers must be evaluated after submission of bids.

Teachers:
 Apply economic principles to emphasize buying in bulk (see Slide 10)  Inculcate the reasons & How this discourages corruption which is almost in-built in incessant LPOs.  Pharmacists are drug experts hence must show interest in the procurement process & study how to improve on what obtains. Encourage Innovative  They must be conversant with the intricacies of the Tendering process and act as Watchdogs  Bring up the Need for Ethics and the Law here and emphasize Compliance!!!

Sole-Source Commitment
 Procure all contracted medicines only from winning suppliers  Do not enter into any separate deals with noncontracted suppliers. Teachers:
 Bring into focus the issue of complying with contracts (it is a legal issue) as taught in Pharmacy (Business) Law in Management  Emphasize that lack of compliance can lead to Corruption/corrupt practices  Remind them of Anti-graft (EFCC, etc).

Order Quantities Needed on Reliable Estimate of Actual Need

 Develop reliable Consumption records & Morbidity Data  Systematically adjust for past surpluses, shortages, stock-outs  Adjust for expected programme growth and changing disease patterns.

Teachers:
 Teach and bring out the Central role of Record-Keeping and Documentation  Emphasize Medicines Management Information System (MMIS/DMIS)  Give examples of How Information is Key to successful management of any system  Encourage them to use information to develop/improve themselves/systems  Pharmacists are strategically placed, teach them how they can generate data, gather information and how to document such.

Reliable Payment and Good Financial Management.

 Develop Mechanisms for Prompt & reliable payment  This may bring down medicine prices as much as bulk discounts  Financial mechanisms that establish separate medicines account (e.g, DRF) may allow the Procurement Cycle to operate on a separate schedule from the Treasury Cycle.

Teachers:
 Create Awareness that No Good Service can be sustained without Finance  Emphasize the importance of Financial Planning  Sensitize them to Financial Management  Let them appreciate the application of Pharmacy Administration & Management  Highlight need for efficient Financial Management as a tool to reduce medicine price, increase access, make health service more people-friendly and earn respect for the professional  Drug Revolving Fund may be used as an example

Transparency & Written Procedures

 Develop & Follow written Procedures for all Procurement actions  To the Maximum extent possible, make Information on the Tender Process and Results Public. Teachers:
 Teach them to Develop & Use Standard Operating Procedures in all their activities  Link this with Quality Control/Assurance/TQM of the system  Highlight Transparency in the tender process.

Separation of Key Functions

 Separate Key Functions that require different expertise  Functions that involve different Committees, Units, or individuals may include Selection, Quantification, Approval of Suppliers, and Award of Contracts.

Teachers:
 Use this as an example of the Need for SOP in which there is Separation of Functions  Teach them to spell out specific tasks and functions to be performed by which officer  The Need for Time-frame, e.g, Supplier lead-time; How and when to check Quality  Let them avoid overlap of functions because of its negative impact on management

Product Quality Assurance Programme

 Establish & Maintain a formal system for product Quality Assurance  Include Quality Assurance Product Certification, Inspection of shipments, targeted Laboratory Testing, and Reporting of suspect products

Teachers:
 Inculcate in them Discipline as per Quality Assurance  Emphasize that medicines are for human consumption hence Quality is needed  Discuss Sub-Standard medicines & Health hazards  Highlight pharmacist Role as Protector of the Public  Focus also on the Ethical & Legal issues on Quality of Product and service of practitioner

Annual Audit with Published Results.

 Conduct an Annual Audit to Assess Compliance with Procurement procedures, promptness of payment, and related factors  Present results to the appropriate public supervising body. Teachers:
 Emphasis should be on Compliance & Auditing  Highlight the Need for Result Presentation

Regular Reporting on Procurement Performance

 Report Key Procurement Indicators against targets at least annually  Use Key Indicators such as ratio of prices to world market prices, supplier lead times, percent of purchases made through Competitive Tendering, and planned versus actual purchases.

Teachers:
 Teach them How to Formulate Performance Indicators  Emphasize the Need to Apply such Indicators  Give them Exercises on Criteria for Performance and Outcome Indicators  Emphasize Regular Reporting as a Useful Management Tool