CO “All-Ukrainian Network of People Living with HIV” Potential Problems in Supply – What Can Be Done? Kyiv, 2008

What Problems? Inappropriate or absent national drug policy Lack of market competition that leads to high prices Quality problems Poor information management that leads to poor forecasting that leads to stock outs or too much stock Fraudulent procurement practices Irrational use of drugs and many others

Where Problems come from? Problems may come from any stage of the supply management cycle. They may come from policies, laws and regulations or They may come from practice

Practical Implications of the Key Decisions Push or Pull Push System is currently used in most of CIS and CE countries Advantages: –Easier quantification and selection decision making process. No need to have skilled procurement staff at local level; –Easier monitoring and control of stock procured and distributed; –In most cases easier control of quality problems, prescription and use practices, which requires less workforce and less sophisticated management information systems

Examples Product selection under the Global Fund grants is done centrally and collegially by the Treatment Working Group taking into account needs of the regional treatment centers. It requires one team of a few people and not 27 teams at every region. Similar function is implemented by the National AIDS Center for the government program Defective batches of goods can be tracked down country-wide and stopped at all regions by one effort of one managing body (Viracept, Duovir case)

Practical Implications of the Key Decisions Push or Pull Disadvantages: –Significant lack of flexibility and inability to efficiently satisfy local needs; –Due to long lead times you have to buy more drugs for doctors to have some choice in prescribing (buffer) that can in the end remain unused if they can’t be returned or exchanged; –Does not stimulate capacity and expertise building at local levels

Examples Hard to satisfy needs of clients of local projects in variety of condoms if centrally you deal with millions of condoms, preferably cheap or donated Hard to fast enough satisfy needs in drugs for emergency, unusual treatment changes or salvage therapy at local treatment centers In ultimate cases doctors are put in a position to prescribe what’s available vs what’s best for the patient

What can be done? Combination of both systems Good reporting system Good Management Information System (MIS) in place – ideally real-time web- based nationwide stock control system Exclude some excessive layers of regulatory control out of the system – for example, distribution orders by MoH for every delivery

Practical Implications of the Key Decisions Centralized vs Decentralized Centralized Advantages: –Similar to Push System – central control and management that requires fewer staff and makes incoming stock more visible –Standard reporting formats and document flow nationwide – easier control and information exchange –Economies of scale and price reduction are possible with a high enough level of centralization –Easier to ensure quality control and quality assurance

Examples Combining orders from different projects we could obtain significant economies of scale and potentially make our markets more attractive to more suppliers (so called pulled procurement) Quality control tests can be performed once at one certified lab on all incoming batches Central procurement body can select quality assured prequalified products from prequalified suppliers

Practical Implications of the Key Decisions Centralized vs Decentralized Disadvantages: –Vulnerability of the whole system to fraudulent practices of the central procurement body –Inappropriate selection of products or suppliers at the central level affects the whole system –Time-consuming, long lead times –Inconvenient for lab reagents or goods, for which sample collection and transportation are required

Examples Selection of unreliable suppliers by a procurement body creates irregularity of supply, which is unacceptable with ARVs Problems with stock outs nationwide if product quality problems are faced (Viracept case, Duovir case)

Practical Implications of the Key Decisions Centralized vs Decentralized Decentralized Advantages: –Flexibility and responsiveness to local needs –Potential quality problems are easier to localize –Builds capacity at local levels

Practical Implications of the Key Decisions Centralized vs Decentralized Decentralized Disadvantages: –Hard to manage. Needs very good MIS and lots of staff –Price variations, at times significant –Impossible economies of scale –Hard to ensure transparency and monitor

What can be done? Combine the two – at local levels use agreements reached at the central level (prime supplier concept), fixed price range and unified quality requirements Examples: –Clinton Foundation agreements –WHO prequalification project

Practical Implications of the Key Decisions Public, Private or NGO Public (and NGOs) practices must be transparent, which makes them highly regulated and sometimes overly regulated Room for corruption NGOs often need to comply with multiple donor requirements Division of functions between public, private and NGO sector within one program creates certain inefficiencies but reduces opportunities for corruption

Practical Implications of the Key Decisions In-house capacity or outsourcing Depends on available capacity. Outsourcing can be a good option and has been used in both GF grants in Ukraine, rather successfully.It could be also a good option for some governments if they lack capacity. Procurement agents used worldwide – IDA, UNICEF Supply Division, WHO AMDS, Missionpharma, etc.

Thank you