Pharmaceutical Procurement Demystified

Managing supply chains through the Public Sector

Sangeeta RajaACTafrica

Why care about supply chains?

Over the last decade – health expenditures continue to escalate worldwide.

High-income countries spend 10% of their GDP for health

Middle-income countries average 6 percent of their GDP and

Low income countries, about 5.3% of GDP (Source: WB 2007)

Expenditures for medicines and medical consumables has also increased. (Source: WHO, 2004)

Despite increased spending – little attention is given to supply chains. (Source: DELIVER, 2006)

Source: World Bank 2007

The Burning Question for the Bank

Is the Bank investment in HNP significant?

Does it buy enough medicines and health supplies to make a difference?

Does the Bank’s procurement practices impact the supply chains

Does the Bank invest in supply chains?What are the entry points for the Bank?

Supply Chain management in WB PortfolioThe objective of the ACTafrica review was

to:

establish the level of Bank support in the procurement of health sector goods and its impact on supply chains

determine the extent to which the Bank has had a role in addressing supply chain management through its various products and instruments

Looking within….

Medical equipment, $1.3,

45%Pharmaceuticals,

$1.6, 55%

WB financed procurement of medicines and medical equipment FY99-07 (US $billion)

Source: WB Business Warehouse

Trend by Year

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

1999 2000 2001 2002 2003 2004 2005 2006 2007

US

mill

ions

Medical Equipment Pharmaceuticals

Who is buying what?

0% 20% 40% 60% 80% 100%

SAR

AFR

LAC

EAP

MNA

ECA

% of total EMD/PMP procurement

EMD PMP

Medical Equipment (EMD) versus Pharmaceutical Procurement by Region FY 99 - 07

Source: WB Business Warehouse

Procurement trends that impact supply chains

0

100

200

300

400

500

ECA EAP MNA SAR LCR AFR

Num

ber o

f pha

rmac

eutic

al c

ontra

cts

Number of medicines contracts by Region FY99-07

Procurement Efficiency

Types of pharmaceuticals procuredContract amount

(millions)

Number of

contracts

Average contract amount

% of total PMP procurements

Condoms - 10 + 80+ 80 = 170m condoms (plus 1 sampling & testing consulting svcs contract) 4,585,528 4 1,146,382 32.4

TB drugs, lab TB reagents 2,667,557 8 333,445 18.8ARVs 2,309,766 6 384,961 16.3STI and Opportunistic Infections (OI) drugs 3,041,979 14 422,208 21.5VCT test kits, STD-HIV test kits 1,298,116 4 324,529 9.2Other - accessories & pharma proj consult svcs 256,300 2 128,150 1.8

TOTAL 14,159,245 38 100.0

Table 2: Uganda HIV/AIDS Control Project - pharmaceutical contracts categorized by disease

Uganda HIV/AIDS Control Project, number of repetitive procurements

Procurement lead times

Commodity Bid Posting to Contract Award Date

Condoms 7-9 months

Contraceptives, injectables

7 months

STI drugs 8 months

WB Procurement of key public health commodities

0 100 200 300 400 500 600 700 800 900

Vaccines

Contraceptives

Malaria commodities

Anti-TB drugs

ARVs

HIV Test Kits

$US millions

Trends in procurement of key public health commodities FY 99- 07

0

20

40

60

80

100

120

140

160

180

1999 2000 2001 2002 2003 2004 2005 2006 2007

$US

milli

ons

0

5

10

15

20

25

30

35

2003 2004 2005 2006 2007

$US

mill

ions

05

101520

2530

3540

1999 2000 2001 2002 2003 2004 2005 2006 2007

$US

milli

ons

0

5

10

15

20

25

30

35

40

45

1999 2000 2001 2002 2003 2004 2005 2006 2007

$US

milli

ons

Vaccines

Contraceptives

ARVs

Malaria

Are we diagnosing and mitigating the risks?

33 CPARs conducted from FY99-07 in Africa

Less than 30% conducted a specific assessment of health sector

Only two addressed the impact of procurement processes on healthcare supply chains

Are we addressing the health sector in procurement reforms?

Review of Procurement Reform Projects in top 10 African countries conducting the most healthcare procurement – 9 out of 10 did not address any specific procurement reform for the health sector. (Documentation was not available for the last one)

However, there is hope...Strategy/Supply Chain Issues Year

published General Forecasting Procurement

Distribution(inventory

management, logistics information

management, transport and warehousing)

Capacity Building

(specifically in supply chain

management, logistics, and/or procurement)

Includedin results

framework &/or implementation

plan?

How?

Health, Nutrition, and Population Sector Strategy

1997 # 0 ** 0 0 Y Streamline business processes and procurement procedures to HNP

HNP Strategy to Strengthen Health Systems 2007 ** 0 ** # 0 double check pub, not found in online doc

Intensifying Action Against HIV/AIDS in Africa: Responding to a Development Crisis

2000 * 0 # * 0 YBarely: The Task Force, with the Theme Group, will review and revise existing policies and develop new policies where needed to protect the blood supply, facilitate condom distribution by subsidizing costs, ensure adequate supply and accessibility of drugs for STIs and opportunistic infections...

Global HIV/AIDS Program of Action 2005 ** 0 ** # ** Y Continue to support the global partnership on ARV procurement and logistics management capacity building

The World Bank's Commitment to HIV/AIDS in Africa: Our Agenda for Action, 2007-2011

2008 ** 0 ** # ** Y SCM as part of strengthening national systems in health service delivery

Rolling Back Malaria: The World Bank Global Strategy and Booster Program

2005 * # ** * 0 Y In terms of developing procurement guidelines for malaria commodities

Framework for Action: Booster Program for Malaria Control in Africa

2005 ** ** ** ** 0 Y Progress indicator: Percent of health facilities with no supply interruptions of 1 week or more in nationally recommended anti-malaria drugs during the last 3 months

Booster Program for Malaria Control in Africa - Phase II Strategy

2008 ** ** ** 0 ** waiting for revised version

Meeting the Challenge of Africa's Development: A World Bank Group Action Plan (AAP)

2005 # 0 # 0 # Y See p. 46 - In terms of HD operations emphasizing the removal of critical weaknesses in the service delivery chain (e.g. drug delivery and logistics);

Accelerating Development Outcomes in Africa: Progress and Change in the Africa Action Plan (AAP)

2007 # 0 # 0 # Y See p. 32 re: malaria - Focus on financial management, procurement supply chain and M&E

The Business of Health in Africa: Partnering with the Private Sector to Improve People’s Lives, (IFC)

2007 ** # ** ** * N/A There is not an implementation plan since this is not a formal strategy - double check 3rd section once you get the book--The Case for Investing in the Private Health Care Sector in Sub-Saharan Africa

ANNEX 2: World Bank Strategies Addressing Health Sector Supply Chain Issues

NOTES: - Intensifying Action, The Global AIDS Program of Action and the AFA discuss distribution in terms of condoms, and is discussed more so in Intensifying Action. - The AFA addresses capacity building in supply chain management by emphasizing efforts to improve donor coordination and harmonization of procurement practices. - The AAP mentions supply chains once in the context of drug delivery and logistics (p.46), and addresses logistics through addressing improvement facilitation (e.g. reducing customs clearance, cross border and transport and handling processes in terms of time and costs (p.78). While the AAP discusses procurement issues and capacity building in procurement, it is only in broad context and with no specific reference to issues in the health sector. - The AAP Update mentions supply chains and procurement once in the context of malaria, and logisitcs systems for pharmaceuticals. - The 2007 HNP Strategy mentioned distribution of both drugs and bednets on pgs. 26 and 53. The 1997 HNP Strategy mentions improving the supply of essential drugs and consumables.

Key: Strong Inclusion/Discussion: **Adequate Inclusion/Discussion: *Minimal Inclusion/Discussion: #Not Included/Discussed: 0

Strategies

Supply Chains, discussed and identified:HNP Sector StrategyGlobal HIV/AIDS Program of ActionThe World Bank’s Commitment to HIV/AIDS in

Africa: Our Agenda for Action, 2007 – 2011Booster Program for malaria Control in Africa –

Phase II strategy