- All > Medicine Information and Evidence for Policy > Medicines Policy
- All > Medicine Access and Rational Use > Supply Management
- Keywords > Good Pharmaceutical Procurement
- Keywords > medicine procurement
- Keywords > pooled procurement
- Keywords > procurement - funding sources
- Keywords > procurement - national systems
- Keywords > procurement - procedures & processes
- Keywords > procurement - procurement and distribution functions
- Keywords > procurement cycle - (medicine quantities/prices/quality)
- Keywords > procurement of medicines
- Keywords > Ref. Managing Drug Supply - 3rd edition
(2012; 27 pages)
This chapter focuses primarily on best practices for health systems that manage procurement in-house. An effective procurement process seeks to ensure the availability of the right medicines in the right quantities, at reasonable prices, and at recognized standards of quality. Pharmaceuticals may be acquired through purchase, donation, or manufacture.
The procurement cycle involves the following steps -
- Mobilize procurement team and key players
- Review medicine selections
- Specify quality standards
- Determine quantities needed
- Reconcile needs and funds
- Choose procurement method
- Locate and select suppliers
- Specify contract terms
- Monitor order status
- Receive and check medicines
- Make payment
- Distribute medicines
- Collect consumption information
The major procurement methods used by health systems are open tender, restricted tender, competitive negotiation, and direct procurement, which vary with respect to their effect on price, delivery times, and workload of the procurement office. In recent years, some public-sector procurement systems (particularly in Latin America) have introduced e-procurement (Internet tendering) and more specifically the “reverse auction” approach, although these methods have not been widely used to procure pharmaceuticals. Funding sources (governments and donors) often dictate which procurement method to use. Finally, some developing-country health systems purchase medicines and health commodities directly from international procurement agents, many of which are based in Europe.
Key principles of good pharmaceutical procurement for health systems include -
- Reliable payment and good financial management
- Procurement by generic name
- Clear specification of a recognized pharmaceutical quality standard
- Limitation of procurement to the essential medicines list
- Increasing procurement volume by aggregating demand
- Formal supplier qualification and monitoring
- Competitive procurement
- Monopsony commitment
- Order quantities based on reliable estimate of forecasted actual need
- Transparency and written procedures
- Separation of key functions
- Product quality assurance program
- Annual audit with published results
- Regular reporting of procurement performance indicators
As described in Chapter 8, different systems for managing supply chains for public health systems include the central stores system, autonomous supply agency system, direct delivery system, primary distributor system, private pharmacy system, or often a mix of these systems. All involve pharmaceutical procurement.
Procurement may proceed under different purchasing models - annual purchasing, scheduled purchasing, or perpetual purchasing. Different combinations of these models may be used at different levels of the system or for different medicines.
Effective procurement is a mechanism for managing the buyer-seller relationship to ensure transparent and ethical transactions that result in the buyer receiving the correct goods and the seller receiving timely payment. A collaborative process is needed between the procurement office, with requirements for trained staff and appropriate management systems, and technical and policy committees, which may make final decisions as to which medicines to buy, in what quantities, and from which suppliers.
Key considerations for financial sustainability include reliable access to funds for pharmaceutical purchase and support of the procurement office, access to foreign currency exchange for international procurement, and reliable payment mechanisms.