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Good Pharmaceutical Procurement Practices

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GOOD PHARMACEUTICAL PROCURE- MENT 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.
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Page 1: Good Pharmaceutical Procurement Practices

GOOD PHARMACEUTICAL PROCURE-MENT PRACTICES by ‘FOLA TAYO.

OBJECTIVES:1. Review Procurement Cycle2. Discuss factors influencing drug prices & total costs briefly3. Give Overview of Procurement Methods4. Give Detailed Account of Good Pharmaceutical Procurement

Practices5. Discuss How to Organize & Manage The Procurement System6. Briefly Consider Financial Sustainability of the System7. 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.

Page 2: Good Pharmaceutical Procurement Practices

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.

Page 3: Good Pharmaceutical Procurement Practices

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.

Page 4: Good Pharmaceutical Procurement Practices

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

Page 5: Good Pharmaceutical Procurement Practices

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.

Page 6: Good Pharmaceutical Procurement Practices

Procurement Methods

• Open Tender• Restricted Tender• Competitive Tender• Direct ProcurementNote: Prior to Procurement, there is need for:Selection (based on Essential Medicines List)Quantification (Consumption, Morbidity, AdjustedConsumption model & Service-level Projection of

Budget Requirements).

Page 7: Good Pharmaceutical Procurement Practices

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!

Page 8: Good Pharmaceutical Procurement Practices

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.

Page 9: Good Pharmaceutical Procurement Practices

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.

Page 10: Good Pharmaceutical Procurement Practices

Procurement in Bulk

Concentrate purchases on limited List to increase quantities, reduce price

Specify divided deliveries.

Teachers: Let’s 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).

Page 11: Good Pharmaceutical Procurement Practices

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.

Page 12: Good Pharmaceutical Procurement Practices

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!

Page 13: Good Pharmaceutical Procurement Practices

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.

Page 14: Good Pharmaceutical Procurement Practices

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!!!

Page 15: Good Pharmaceutical Procurement Practices

Sole-Source Commitment

Procure all contracted medicines only from winning suppliers

Do not enter into any separate deals with non-contracted 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).

Page 16: Good Pharmaceutical Procurement Practices

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.

Page 17: Good Pharmaceutical Procurement Practices

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.

Page 18: Good Pharmaceutical Procurement Practices

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.

Page 19: Good Pharmaceutical Procurement Practices

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

Page 20: Good Pharmaceutical Procurement Practices

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.

Page 21: Good Pharmaceutical Procurement Practices

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.

Page 22: Good Pharmaceutical Procurement Practices

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

Page 23: Good Pharmaceutical Procurement Practices

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

Page 24: Good Pharmaceutical Procurement Practices

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

Page 25: Good Pharmaceutical Procurement Practices

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

Page 26: Good Pharmaceutical Procurement Practices

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.

Page 27: Good Pharmaceutical Procurement Practices

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

Page 28: Good Pharmaceutical Procurement Practices

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