The twelve operational principles for good pharmaceutical procurement practices aim to improve pharmaceutical procurement by ministries of health, supply agencies, nongovernmental organizations and other organizations involved in drug supply. When introducing and using these principles, the following should be kept in mind.
The operational principles should be used to develop standard operational procedures
These twelve principles constitute the minimum conditions for a reliable and cost-effective drug procurement system. They should be used as the basis for developing a set of more detailed standard operational procedures, taking into account the specific institutional circumstances and market conditions under which the system must operate.
Standard operational procedures must be actively implemented and monitored
The operational principles and the standard operational procedures must be supported by the national drug policy, regulations and legislation. International agencies and other external organizations which give technical or financial support to the national drug supply system should be asked to support and promote their implementation.
Good drug procurement is only possible within a well-managed drug supply system
Standard operational procedures can improve drug procurement only if they are implemented within a well-managed drug supply agency. This agency may be a classic government central medical store, an autonomous or semi-autonomous supply agency, an independent nongovernmental agency or some other form of supply agency. Critical factors for the performance of drug supply agencies include: qualified senior management; adequate personnel policies; a broad-based board for planning and following up the overall work; proper contract terms between the government and the contractor; and reliable financing and accounting systems.
The right purchasing and inventory control model should be chosen
Procurement can be done through a single annual tender, through a schedule of periodic tenders throughout the year, through a perpetual inventory system in which procurement is initiated as soon as stocks fall below a certain level, or through a combination of such systems. The choice depends on a variety of factors, including the type of drugs used (expensive drugs, short shelf-life, high or low consumption rate), the geographical situation, local production capacity, total consumption and others. The geography is important since more isolated areas tend to purchase less frequently. Local production capacity allows greater flexibility and more frequent deliveries. High-volume items may be purchased more frequently throughout the year. The choice of purchasing and inventory model affects the direct cost of the drug, staff requirements (frequent purchases need more staff time) and inventory costs (less frequent procurement requires more warehouse space).
At a certain stage, an effective computerized system should be introduced to manage inventory control. This should probably be done in phases, with the system developed or backed up by a local company. A well-functioning manual inventory control system can be converted into a computerized one.
Legislation and regulations may need to be adapted
National legislation and regulations provide the necessary legal foundation for procurement procedures, contract enforcement, financial authority, staff accountability and other critical aspects of procurement. Existing legislation and regulations may be fully consistent with the twelve core principles. Often, however, legislative or regulatory changes will be needed.
A common problem is that the general rules for drug procurement by the public sector do not take account of the specialized procurement requirements of buying pharmaceuticals. The challenge may be not only to identify the changes which are needed, but also to convince the relevant legal and financial authorities that pharmaceutical procurement does in fact require a different approach. Some examples of specific requirements are: separation of the key procurement functions, the need for financial audit, mandatory use of generic names, the need for product registration (which should also apply to the public sector but is often ignored) and formal supplier qualification. Other related issues are pricing policies and ethical criteria for drug promotion.
Capacity needs to be built
Pharmaceutical procurement is a specialized professional activity which requires a combination of knowledge, skills and experience. Too often drug supply agencies are staffed by individuals with little or no specific training in pharmaceutical procurement. It is essential, therefore, that staff in key procurement positions be well trained and highly motivated. Training may be organized through national or international courses, through apprenticeships with international supply agencies or supply agencies in other countries, or by enlisting experienced short-term or long-term support from external technical advisers.
International and bilateral agencies should support the national procurement system
Development assistance through loans, grants and other financial mechanisms is intended to contribute to long-term health sector development. External technical assistance is intended to build local capacity and to develop sustainable systems, and should therefore be consistent with the policies of the country.
It is essential that development assistance reinforces good pharmaceutical procurement practices and aims at sustainability, rather than undermining or delaying the national development of such practices. From a development point of view, investing in teaching good procurement practices may be more important than just procuring the drugs. Thus international, multilateral and bilateral agencies may need to review their own procedures, requirements and technical advice in the light of the present document. In the same vein, WHO’s Guidelines for drug donations or their national adaptations should be respected by external agencies.
Procurement in decentralized systems needs special arrangements
Health system functions are increasingly being decentralized to provincial, district or local health services. In the pharmaceutical sector experiences with decentralization have been mixed. Proper drug selection, price reductions from bulk purchasing, quality assurance and accountability may all be threatened in decentralized procurement.
In principle, the twelve core principles for good procurement apply in decentralized systems as well, but they may need to be adapted in practice. For example, separation of key functions may be difficult with limited local staff. Bulk procurement may be possible only if districts and major health units pool their requirements and negotiate one contract. Under a system of direct delivery, drugs are then delivered to and paid for by the district or health unit. Finally, it may be difficult for local authorities to verify the quality of the drugs. Some decentralized systems rely on a list of qualified suppliers provided by national authorities.
To achieve good drug procurement practices in decentralized systems the role of the central government should be made clear. It would usually be its responsibility to guarantee the safety and efficacy of all drugs circulating in the market and in the health system, and to monitor the performance of the decentralized procurement system. In addition, the central government may tender for the prices of the drugs, for direct delivery systems.
Other operational issues
In addition to the above, there are other possibilities for improving procurement performance, which should be considered. These include:
• the use of international drug supply agencies, such as the Equipment for Charity Hospitals Overseas (ECHO) organization, the International Dispensary Association (IDA) and UNICEF. Their services can especially be beneficial when small quantities of a product need to be procured;
• access to information on prices and supply sources. Comparative price information is currently available to countries through the International drug price indicator guide (Management Sciences for Health and World Bank, 1999);
• primary and secondary systems for pre-registration and post-registration of suppliers;
• managing mixed systems of procured and donated drugs, especially in countries where donations form a large part of drug supplies. In such countries an active donor policy, clear indications of drug needs to potential donors and early announcement and registration of drug donations in the pipeline are extremely important in order to derive the maximum benefit from the donations and prevent overlapping donation requests and drug orders.