SOLUTIONSFORCHILDREN

UNICEF IN THE WORLD TODAY

standard 1 UNICEF&SD

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Agenda

Procurement statistics Major commodity areas Drug Procurement Supply Distribution Case Study

SUPPLY DIVISION AT A GLANCE 2002

Total procurement: $541 million

Offshore procurement:$353 million

Regional and local procurement: $188 million

Donations in Kind: $9 million

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SUPPLY DIVISION AT A GLANCE

Top 10 Supplier Countries 2002

101

5447

32 3021 19

141618

(Millions of United States Dollars)

SUPPLY DIVISION AT A GLANCE

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SUPPLY DIVISION AT A GLANCE

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Summary

An effective procurement process should:Procure right drugs in right quantitiesObtain lowest possible purchase priceRecognized standards of qualityTimely deliverySupplier reliability

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Drug procurement

Procurement of pharmaceuticals differ from procurement of other commodities because the effect of receiving and utilizing a substandard/poor quality product can have severe consequences in terms of damage to the consumers health or treatment failure, because the product does not have the intended effect. Therefore a number of precautions need to be taken when buying pharmaceutical products and these should be followed in a systematic manner.

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Strategic objectives for drugStrategic objectives for drugprocurementprocurement

Procure the most cost-effective drugs in the right quantities

Select reliable suppliers complying to GMP Ensure high quality products Ensure timely delivery Achieve the lowest possible total cost

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Principles of Good Pharmaceutical Procurement

Procurement by generic name; Limitation of procurement to the EML/National

List; Procurement in bulk; Formal supplier qualification/monitoring; Competitive procurement; Sole-source commitment;

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Principles of Good Pharmaceutical Procurement

Order quantities based on reliable estimate of actual need;

Reliable payment and good financial management;

Transparency and written procedure; Separation of keys functions; Product quality assurance programme;

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Sourcing

Through direct contacts Special catalogues of manufacturers

in a specific area, eg. drugs Through trade missions in

respective embassies Exhibitions, fairs UN Business Seminars Internet

Important to realize: Regarding sales and

marketing efforts, all UN organizations should be

treated as individual companies, it is not

sufficient to deal with only one of them and expect

the information to be replicated automatically to everyone in the UN family.

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Drug procurement scenariosDrug procurement scenarios

Who are the potential suppliers? Pharmaceutical manufacturers Pharmaceutical wholesalers International drug supply agencies

Where are they situated? Well-regulated countries Less well-regulated countries

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Select reliable suppliers of high quality products

What is the advantage of pre-qualifying suppliers? Elimination of sub-standard suppliers More efficient adjudication process

What should be considered in a pre-qualification? Production standard (GMP) Business viability

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Select reliable suppliers of high quality products

Who and how to pre-qualify? Ask for references Inspection of manufacturers

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Supplier Profile FormStep 3

Supplier interested

Step 2

Supplier Registration Process

Company Data

Financial Data

References

UNICEF interested

Step 1

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Supplier Evaluation

Suppliers are evaluated on their financial soundness, capacity, quality performance, technical capability, ability to service their products in the destination countries.

Preference is to purchase directly from

manufacturers and not from dealers.

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Request information about Request information about manufacturermanufacturer

What is the link between the supplier and the product?

Marketing authorisation holder? Manufacturer? Distributor? What is the regulatory situation in the country of manufacture?

Product currently registered and marketed? Registered but not marketed?Product registered for export only? No registration?

Regulatory situation in other countries? EU/USA Request certificates:

Certificate of Pharmaceutical Product according to WHO Certification Scheme

Statement of Licensing status of Pharmaceutical Product according to WHO certification Scheme

Marketing license Export license

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First things to considerFirst things to consider

Large/small quantities required? Acceptable lead time? National procurement capacity? Financial resources available?

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Questions to ask: Drug selection -

Is there a national list of essential drugs?

Are drugs requested on this list?

If not, why are drugs requested - relevance to the pattern of prevalent diseases?

Procure the most cost-effective drugs in Procure the most cost-effective drugs in the right quantitiesthe right quantities

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Procure the most cost-effective drugs Procure the most cost-effective drugs in the right quantities, cont.in the right quantities, cont.

Quantification of drug requirements -

How many patients can be treated with requested quantities?

Does this tally with morbidity data or past drug consumption figures?

Can the quantity be used before expiry?

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Procure the most cost-effective drugs in the right quantities, cont.

Questions to be asked: Product specification - Is it a generic or a proprietary

drug?

Patent situation?

Is drug registration requested?

If it is a generics drug - what quality of product are we aiming at supplying? Consider finished product specifications and quality of active ingredient, product stability, therapeutic equivalence.

Product specifications must be clear and detailed in the ITB

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Example of contents of product Example of contents of product specificationspecification

Name (INN) Dosage form Strength per dosage unit Route of administration Number of units/volume/weight per container Type of container, in certain cases specification Acceptable pharmacopoeias references/ standards

Request the following information Finished product specification Active pharmaceutical ingredient specification (DMF/CEP) Stability: what testing has the product been subject to? Label and insert information Therapeutic equivalence

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Procurement Cycle

CollectConsumption

Data

DetermineQuantities

Needed

Review Drug

Selection Reconcile Needs and

Funds

ChooseProcurement

Method

Locate and Select

Suppliers

SpecifyContractTermsMonitor

OrderStatus

Receiveand

Check drugs

Make Payment

DistributeDrugs

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Procurement Methods

Open tender Restricted tender Competitive negotiation Direct procurement

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Special procurement types

Direct Ordering “Contract set up by SD allowing Country Offices to buy internationally”

Long Term Agreement “Not binding frame agreement setting the terms and limits for contracts” Typically 24 month agreements +

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Organization of the national procurement process

Who will prepare invitation to bid (ITB) and handle the commercial aspectsWho decide on

standards for product and production, quantities etc.

Who will adjudicate the bid and take care of quality assurance

Who will take care of delivery and distribution and monitorsupplier performance

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Organization of the national procurement process, cont.

Clear definition (and division) of responsibilities, authorities, procedures for procuring selection of drugs pre-selection of suppliers quantification of needs standard-setting technical adjudication quality assurance distribution

to ensure transparent process

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Supply DivisionOrganisation

BiddingRFQ/RFPContracts - DO/LTA

Contracting

Technical

Quality Assurance

SourcingTechnicalspecificationsWeb catalogueSupplier registrationSupplier evaluationInspections

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Depending on the circumstances, qualified suppliers are either invited to bid or to submit a quotation.

Bid Opening. Bids are opened publicly and suppliers are welcome to attend.

INVITATION TO BID

Product - quality Technical compliance Cost of product Cost of freight and

delivery Timeliness of delivery

VALUE FOR MONEY

Bids or Requests for Proposals are adjudicated based on total cost, which includes:

Successful bidders are then notified.

Quality assessment of supplier’s capability takes place before final award.

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Monitor and maintain qualityMonitor and maintain quality

Pre- and post shipment inspection Analytical drug testing Appropriate storage, distribution, dispensing Reporting system for complaints

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Supply

Drug supply systems need to achieve three main objectives:

a high level of service, as measured by low rates of shortages and stockouts;

efficiency, as measured by having low total costs for a given level of service;

quality, in terms of delivering drugs of satisfactory quality.

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Market mechanisms in public drug supply

Can market mechanisms help to ensure access to essential drugs in the public sector? Market mechanisms have been used to strengthen public drug supply systems. These mechanisms include:

autonomous drug supply agencies; direct delivery contracts; primary distributor systems.

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Organization of the supply system

At least five different methods exist for supplying drugs to governmental and nongovernmental health services:

Central medical stores (CMS): This is a conventional drug supply system, in which drugs are procured and distributed by a centralized government unit. It is possible to decentralize this system by having medical stores at provincial or state level.

Autonomous supply agency: This is an alternative to the CMS system in that drug supply is managed by an autonomous or semi-autonomous drug supply agency.

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Organization of the supply system (cont’d)

Direct delivery system: This is a decentralized, non-CMS approach in which drugs are delivered directly by suppliers to districts and major facilities. The government drug procurement office tenders to establish the supplier and price for each item, but the government does not store or distribute the drugs.

Primary distributor (“prime vendor”) system: Another non-CMS system, in which the government drug procurement office establishes a contract with a single primary distributor ("prime vendor"), as well as separate contracts with drug suppliers. The prime vendor is contracted to manage drug distribution by receiving from suppliers, storing and distributing all drugs to districts and major facilities.

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Organization of the supply system (cont’d)

Fully private supply: In some countries, drugs are provided by private pharmacies in or near government health facilities.

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Different supply systems

Contractingsuppliers

Storage +delivery

Monitoring drugquality

Central medicalstore

X X X

Autonomoussupply agency

X X X andGovernmentbody

Direct deliverysystem

Governmentbody

Suppliers Governmentbody

Prime vendorsystem

Governmentbody

X X andGovernmentbody

Fully privatesupply

X X Governmentbody

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The UNICEF Supply Chain can be as short as one month, as long as one year

(excluding emergency responses)

Where do the Potential Bottlenecks occur along the Supply Chain?

RECEIVEDBY FINAL

BENEFICIARY

PPO/PPA SRQ PO/DEL SUPPLIER

SHIPPINGCLEARINGRECEIVING

WAREHOUSINGDISTRIBUTING

What does theprogramme want?

Incomplete specificationsRushed ordersUnrealistic TADs

Long order processing time Order changes

Missed consolidationsSynchronising the arrival of components

Shipping statusShipping docs

-Early clearance process-Control

Lack of Distribution PlanAppropriate structureClear responsibility & proceduresInventory system & reporting

Supply evaluationInventory/History

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Distribution Cycle

Port Clearing

DrugProcurement

Receiptand

Inspection

InventoryControl

Storage

Requisitionof

SuppliesDelivery

Dispensingto

Patients

ConsumptionReporting

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Distribution systems

Public distribution includes wholesale distribution and retail dispensing by government-managed drug supply and health services as well as distribution through state-owned enterprises (state corporations).

Private distribution includes private for-profit wholesalers and retailers, and not-for-profit essential drugs supply services.

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Distribution

Dispensing clinicians Doctors, clinical officers and nurses in private practice both

prescribe and dispense drugs to their patients in many parts of the world

Clinicians dispense to their patients partly as a service, but also because they have learned that patients are often much more willing to pay for drugs than simply for consultation

In some countries, general practitioners derive 60% of their income from the drugs they dispense. This creates an

obvious and measurable incentive to overprescribe

Warehouse & Logistics Center

UNICEF

Supply Division

Inventory Management/Purchasing

ReceivingPacking

Production ShippingDelivery

Processing

Systems/ProcessSupport

40 Staff Members

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Warehouse & Logistics

Center

Sales Orders/Deliveries

Customer Service Center

Picking/Packing/Shipping

Technical Center

Material Master Maintenance

Contracting Center

Purchase OrdersIssue of Purchase Req.

Goods Receipts /Stock Placement into WH

Quality Assurance Center

Finance

Cycle CountingSettlement of Kits Production

All Centers

Goods receipt

Goods Issue of stock

Inspection of shipmentsProcedures Management

Warehouse Processing

UNICEF

Supply Division

Delivery Creation Warehouse

PickingSales Order Creation

PackingBooking of

Transportation

Printing & sendingshipping docs

Issuing goods

Order processing time: 65 days

2001 target: 45 days

Purchaseorder-----------------MRP

G/R

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UNICEF Warehouse

GR areaGR area

GI areaGI area

Locked Area

Locked Area

Bulk AreaBulk Area

Non-Medical

Area

Non-Medical

Area

Medical Area

Medical Area

Haz.Mat. Area

Haz.Mat. Area

Production

Production

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Consignment Stock (UNHCR / IFRC)

UNICEF

Plant 1100

UNHCR

IFRC

UNHCR

IFRC

WHO Storage of technical files and documents

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Group discussion

You receive a request from the Ministry of Health for purchase of drugs for the national malaria and HIV/AIDS control programmes. You are given a list of 100 drugs requested.

What do you do with this list?

How do you decide what to purchase and where?

How do you ensure that the drugs will imported and distributed smoothly?