Supply Chains Management for Pharmacy Dr James Mwenda Riungu (B.Pharm; MBA; M.SCM) Senior Technical Advisor- Commodity Security at Jhpiego Corporation –an affiliate of John Hopkins University

The problem 6.9 million children under five years of age died in 2011 – nearly 19,000 children each day and almost 800 every hour - due to lack of access to simple and affordable interventions (WHO 2013) 58% of deaths in children under age five are caused by infectious diseases (WHO 2013) Many could be saved by access to already developed drugs and vaccines Availability of essential medicines at public health facilities is often poor (WHO 2013) Health clinics and service delivery points still remain frequently stocked out on drugs and health commodities due to the lack of efficient and effective health supply chains

Challenges at Pharmacy level Stock outs Overstocks Obsolescence Poor quality and/or counterfeit products High cost of products High cost of holding stocks

Some diseases are better funded than others Well funded Underfunded Neglected HIV/AIDS, malaria, TB Repr health care, ess meds River blindness

Medicines flows – variability in quality & price increases down the supply chain Drug Manufacturers Procurement Agents Manufacturers National Representative Distributors Regional Medical Stores/ Regional Hospitals Private Prescribers Sub-wholesalers Importers/ Wholesalers Central Medical Store Second Tier Pharmacies/ Chemists District Medical Stores/ District Hospitals Patients Community Health Worker Health Centers Pharmacies PRIVATE SECTOR PUBLIC SECTOR International National Regional District City/ Large Town Small Town/ Rural Community

What is supply chain? Consists of all parties involved in fulfilling a customer request Includes: manufacturers, suppliers, transporters, warehouses, retailers and customers A supply chain is dynamic and involves the constant flow of information, products and funds between different stages

The 3 basic elements of a supply chain Suppliers (Medical stores, pharma distributors) Customers or Service Delivery Points (Health facility, Pharmacy) Product flow Information flow Financing flow The role of supply chain manager is to manage and optimize these 3 flows

What is the overall objective of health supply chains? “Improving access to quality, safe, cost effective and efficacious health products and technologies”

Definitions If Selection answers the question "Which products are needed to be selected?" Forecasting answers the question "How much do we need to meet demand and serve our customers?” then Supply Planning will answer the questions “How much to procure, when will we receive products, and what is the cost ? and Procurement Planning will answer the question “How will we procure the products, which procurement method will we use and when will we initiate and monitor the purchasing activities?” First ask participants what they think the term “quantification” means”? What do you think of when you hear about “drug quantification” or “quantifying drug requirements” ? Facilitator process responses, clarify as needed. Uncover each bullet one by one and clarify as follows: If Selection answers the question "which drugs are needed?" then Estimation answers the question "how much do we need?" to meet the health needs of the population, to serve our customers. Quantification will answer the question “How much can we procure? ” by comparing the estimation of drug quantities needed against the available financial resources and adjusting the final drug quantities to be procured. While the word "estimation" suggests an approximate calculation which is based on probabilities, "quantification" is generally used in the context of calculating drug requirements with more precision and accuracy including calculating the financial requirements for procurement. For the purposes of our discussion today, we understand “estimation” to mean the same as the term “forecasting” which you have been using for contraceptives in the course.

Quantification is key to improving health commodity security The process of estimating quantities and costs of products required for a specific health program during a specific period and determining when the products should be delivered to ensure uninterrupted supply for the program

Components of Quantification Has 2 parts: Forecasting - estimating quantity required of each product to meet demand for the forecast period Supply planning - adjusting quantities forecasted to determine quantities to procure and time of delivery of the products

Forecasting What does the dictionary say ? forecast : to calculate or predict (some future event or condition) usually as a result of study and analysis of available pertinent data

Supply Planning Supply Planning answers the question: “How much to procure, when will we receive products, and what is the cost ? The purpose of supply planning is to ensure that there are adequate supplies in the program while at the same time not over stocking or running the risk of stock outs.

Steps in Quantification

Poor Quantification affects service delivery

This is what you see when there is no effective forecasting & Supply planning

Suggestions to improve Pharmacy supply chains Development of annual forecasts and supply plans Regular monitoring and review of supply plans Bulk/pooled procurement (economies of scale) Prequalification of suppliers to reduce supply lead time Framework contracts to minimize supply interruptions Shortening of supply pipeline to minimize quality and price variability

Max – Min Inventory Control

Stockout 7 Max 6.5 Desired July Oct Jan Apr 3 Min Overstock Understock Stockout 7 Max Overstock 6.5 Desired July Oct Jan Apr 3 Min Understock Buffer Distrib. Interval Distribution to Facilities Initial Supply CMS Resupply Interval Quarterly Resupply Vendor Shipment Supply Plan Update Initial Forecast & Supply Plan