Guide to Drug Financing Mechanisms
(1998; 64 pages) [French] [Spanish]
Table of Contents
View the documentForeword
View the documentAcknowledgements
Open this folder and view contentsIntroduction
Open this folder and view contentsChapter 1. Selection
Close this folderChapter 2. Procurement
Open this folder and view contentsObjective of procurement
Close this folderProcurement strategies
View the documentBlind confidence
View the documentSystematic distrust
View the documentCooperation
View the documentConstraints on procurement strategies
Open this folder and view contentsOrganization and structures
View the documentProcurement: important points
Open this folder and view contentsChapter 3. Distribution
Open this folder and view contentsChapter 4. Prescribing
Open this folder and view contentsSummary: contributions and limitations of the economic approach
View the documentReferences
View the documentSelected WHO publications of related interest
View the documentBack cover
 

Constraints on procurement strategies

The strategy used may depend on the economic power of the buyer. The buyer’s autonomy is limited if it must depend on certain suppliers. For example, when a public procurement agency is substantially in arrears with its payments, only certain manufacturers will agree to furnish supplies. Or private wholesalers may be owned by certain manufacturers that impose their own strategy. Grants from foreign countries often oblige the beneficiary to buy from designated suppliers in the donor country.

A very small buyer has few options other than blind confidence, although blind confidence in an international supply agency may be justified. A large buyer may use either systematic distrust or cooperation. The strategy of cooperation does not mean that the buyer must be very powerful, as the cost is not important. It does, however, require substantial information and skill, as the rules are less formal than with systematic distrust. Table 8 compares characteristics of each strategy.

Table 8. Characteristics of procurement strategies

Characteristic

Blind confidence

Systematic distrust

Cooperation

Procedure

direct purchase

award of contract mutual agreement open tender

mutual agreement invitation to tender

Number of potential suppliers

very limited

very large

limited

Selection criteria

no choice

price

many

Level of choice

no choice

optimum

many

Duration of agreement

very short

very short

long

Management tools used by purchaser

none complete trust

thorough knowledge of the market continual surveillance of transactions

verification of absence of abuse some trust

Competence required of purchaser

very low

very great

average

Transaction costs

very low

very high

average

Prices

variable

very low

low

Risks

variable

very high

low

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Last updated: May 3, 2013