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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.
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 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).
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: 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).
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 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).
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