1. SOLUTIONS FOR CHILDREN UNICEF IN THE WORLD TODAY
standard 1 UNICEF&SD

2. Agenda Procurement statistics Major commodity areas Drug Procurement
Supply
Distribution
Case Study

3. SUPPLY DIVISION AT A GLANCE 2002
Total procurement: $541 million
Offshore procurement:$353 million
Regional and local procurement: $188 million
Donations in Kind: $9 million

4. SUPPLY DIVISION AT A GLANCE

5. SUPPLY DIVISION AT A GLANCE

6. SUPPLY DIVISION AT A GLANCE

7. Summary An effective procurement process should:
Procure right drugs in right quantities
Obtain lowest possible purchase price
Recognized standards of quality
Timely delivery
Supplier reliability
Procure the right drugs in the right quantities.
Obtain lowest possible purchase price
Ensure that all drugs procured meet recognized standards of quality
Arrange timely delivery to avoid shortages and stock-outs
Ensure supplier reliability with respect to service and quality

8. Drug procurement
Procurement of pharmaceuticals differ from procurement of other commodities because the effect of receiving and utilizing a substandard/poor quality product can have severe consequences in terms of damage to the consumers health or treatment failure, because the product does not have the intended effect. Therefore a number of precautions need to be taken when buying pharmaceutical products and these should be followed in a systematic manner.

9. Strategic objectives for drug procurement
Procure the most cost-effective drugs in the right quantities
Select reliable suppliers complying to GMP
Ensure high quality products
Ensure timely delivery
Achieve the lowest possible total cost

10. Principles of Good Pharmaceutical Procurement
Procurement by generic name;
Limitation of procurement to the EML/National List;
Procurement in bulk;
Formal supplier qualification/monitoring;
Competitive procurement;
Sole-source commitment;
Generic name: INN for fair competition
EDL: a limited rug list or formulary, defining which drugs will be purchased, is one of the most effective ways to control procurement costs. It simplifies other supply management activities and reduces inventory holding costs as well.
Procurement in bulk: larger procurement volume makes favorable prices and contract terms more likely. Pooling of procurement volume from many facilities, restriction of the drug list, and elimination of duplication within therapeutic categories lead to higher volumes for single items. In addition, the commitment to award single contract for the entire volume of each item raises supplies’ interest in bidding and provides an incentive for them to offer competitive prices.
Supplier qualification/monitoring: based on drug quality, service and financial reliability. Approve suppliers before tendering (prequa.) or after (post). Use a formal monitoring system to ensure continued supplier qualification. By first eliminating substandard suppliers from the tender process, prequalification ensures that the lowest tenderer is qualified and thus expedites adjudication.
Competitive procurement: there are 4 main methods for purchasing drugs, restricted&open tenders, competitive negotiations, and direct purchase from single source.
Sole source: must be monitored and enforced.

11. Principles of Good Pharmaceutical Procurement
Order quantities based on reliable estimate of actual need;
Reliable payment and good financial management;
Transparency and written procedure;
Separation of keys functions;
Product quality assurance programme;
Order quantities…:accurate estimates of drug requirements are needed to avoid stockouts of some drugs and overstocks others. The most accurate way to quantify pharmaceutical needs is to start with accurate past consumption data from all units being supplied. These data should be tempered by known or expected changes in morbidity patterns, seasonal factors, service levels, prescribing patterns and patient attendance. Unfortunately, in many countries, consumption data are incomplete or do not reflect real need because the supply pipeline has never been full.
Reliable:prompt, reliable payment can have as great an influence on bringing down drug prices as bulk discounts. Efficient financial management systems are especially important if funds are limited and procurement priorities must be set.
Transparency: appearance and reality of fairness are essential to attract the best suppliers and the best prices. This can be achieved by maintaining transparent tender procedures should be followed throughout the tender, and formal, explicit criteria should be used to make procurement decisions. Information on the tender process and results should be public, to the extent permitted by law.
Separation: discussed in detail in the following slide..
Product quality: an effective procurement program must ensure that the drugs purchased and distributed are of high quality , according to international standard.

12. Sourcing Through direct contacts
Special catalogues of manufacturers in a specific area, eg. drugs
Through trade missions in respective embassies
Exhibitions, fairs
UN Business Seminars
Internet
Important to realize: Regarding sales and marketing efforts, all UN organizations should be treated as individual companies, it is not sufficient to deal with only one of them and expect the information to be replicated automatically to everyone in the UN family.

13. Drug procurement scenarios
Who are the potential suppliers?
Pharmaceutical manufacturers
Pharmaceutical wholesalers
International drug supply agencies
Where are they situated?
Well-regulated countries
Less well-regulated countries

14. Select reliable suppliers of high quality products
What is the advantage of pre-qualifying suppliers?
Elimination of sub-standard suppliers
More efficient adjudication process
What should be considered in a pre-qualification?
Production standard (GMP)
Business viability

15. Select reliable suppliers of high quality products
Who and how to pre-qualify?
Ask for references
Inspection of manufacturers

16. Supplier Registration Process
Company Data
Financial Data
References
Supplier Profile Form
Step 3
Supplier interested
Step 2
UNICEF interested
Step 1

17. Supplier Evaluation
Suppliers are evaluated on their financial soundness, capacity, quality performance, technical capability, ability to service their products in the destination countries.
Preference is to purchase directly from manufacturers and not from dealers.

18. Request information about manufacturer
What is the link between the supplier and the product?
Marketing authorisation holder? Manufacturer? Distributor?
What is the regulatory situation in the country of manufacture?
Product currently registered and marketed? Registered but not marketed? Product registered for export only? No registration?
Regulatory situation in other countries? EU/USA
Request certificates:
Certificate of Pharmaceutical Product according to WHO Certification Scheme
Statement of Licensing status of Pharmaceutical Product according to WHO certification Scheme
Marketing license
Export license

19. First things to consider
Large/small quantities required?
Acceptable lead time?
National procurement capacity?
Financial resources available?

20. Procure the most cost-effective drugs in the right quantities
Questions to ask:
Drug selection -
Is there a national list of essential drugs?
Are drugs requested on this list?
If not, why are drugs requested - relevance to the pattern of prevalent diseases?

21. Procure the most cost-effective drugs in the right quantities, cont.
Quantification of drug requirements -
How many patients can be treated with requested quantities?
Does this tally with morbidity data or past drug consumption figures?
Can the quantity be used before expiry?

22. Procure the most cost-effective drugs in the right quantities, cont.
Questions to be asked:
Product specification - Is it a generic or a proprietary drug?
Patent situation?
Is drug registration requested?
If it is a generics drug - what quality of product are we aiming at supplying? Consider finished product specifications and quality of active ingredient, product stability, therapeutic equivalence.
Product specifications must be clear and detailed in the ITB

23. Example of contents of product specification
Name (INN)
Dosage form
Strength per dosage unit
Route of administration
Number of units/volume/weight per container
Type of container, in certain cases specification
Acceptable pharmacopoeias references/ standards
Request the following information
Finished product specification
Active pharmaceutical ingredient specification (DMF/CEP)
Stability: what testing has the product been subject to?
Label and insert information
Therapeutic equivalence

24. Procurement Cycle Determine Quantities Review Drug Needed Selection
Reconcile
Needs and
Funds
Collect
Consumption
Data
Choose
Procurement
Method
Distribute
Drugs
Locate and
Select
Suppliers
The procurement cycle includes most of the decisions and actions that determine the specific drug quantities obtained, prices paid, and quality of drugs received.
Procurement is defined here as the process of acquiring supplies from private or public supplies or through purchases from manufacturers, distributors, or agencies such UNICEF, WHO, MSF, or bilateral aid programs.
These sources may be used individually or in combination to meet the entire range of drug needs.
Make
Payment
Specify
Contract
Terms
Receive
and
Check drugs
Monitor
Order
Status

25. Procurement Methods Open tender Restricted tender
Competitive negotiation
Direct procurement
Open tender: formal procedure by which quotations are invited from any manufacturer on a local or worldwide basis, subject to the terms and conditions specified in the tender invitation. ICB as specified in WB guidelines, is a tender open to all interested international manufacturers from WB member countries.
Restricted tender: closed bid or selective tender, interested suppliers must be approved in advance, often through a formal prequalification process that considers adherence to GMP, past supply performance, financial viability, and related factors.
Competitive negotiation: buyer approaches a limited number of selected suppliers (at least 3) for price quotations. May also bargain with suppliers to achieve specific price or service arrangements.
Direct procurement: simples, most expensive, is direct purchase from a single supplier at quoted/negotiated price.
Single source/patent with no ,license agreements.

26. Special procurement types
Direct Ordering
“Contract set up by SD allowing Country Offices to buy internationally”
Long Term Agreement
“Not binding frame agreement setting the terms and limits for contracts”
Typically 24 month agreements +

27. Organization of the national procurement process
Who will prepare invitation to bid (ITB) and handle the commercial aspects
Who decide on standards for product and production, quantities etc.
There are several keys functions which typically require different expertise. In general, these functions should be handled by separate individuals, units, committees. Such functions include:
selection of drugs;
quantification of drug requirements;
preparation of product specifications;
approval of suppliers (pre or post qualification)
adjudication and award of tender.
Without separation of functions, the procurement process is much more susceptible to influence by special interests.
Separation of keys functions contributes to professionalism and accountability.
Who will adjudicate the bid
and take care of quality
assurance
Who will take care of delivery
and distribution and monitor
supplier performance

28. Organization of the national procurement process, cont.
Clear definition (and division) of responsibilities, authorities, procedures for
procuring
selection of drugs
pre-selection of suppliers
quantification of needs
standard-setting
technical adjudication
quality assurance
distribution
to ensure transparent process

29. Supply Division Organisation
Bidding
RFQ/RFP
Contracts
- DO/LTA
Contracting
Sourcing
Technical
specifications
Web catalogue
Technical
Quality Assurance
Supplier registration
Supplier evaluation
Inspections

30. INVITATION TO BID VALUE FOR MONEY Product - quality
Depending on the circumstances, qualified suppliers are either invited to bid or to submit a quotation.
Bid Opening. Bids are opened publicly and suppliers are welcome to attend.
VALUE FOR MONEY
Product - quality
Technical compliance
Cost of product
Cost of freight and delivery
Timeliness of delivery
Bids or Requests for Proposals are adjudicated based on total cost, which includes:
Successful bidders are then notified.
Quality assessment of supplier’s capability takes place before final award.

31. Monitor and maintain quality
Pre- and post shipment inspection
Analytical drug testing
Appropriate storage, distribution, dispensing
Reporting system for complaints

32. Supply Drug supply systems need to achieve three main objectives:
a high level of service, as measured by low rates of shortages and stockouts;
efficiency, as measured by having low total costs for a given level of service;
quality, in terms of delivering drugs of satisfactory quality.

33. Market mechanisms in public drug supply
Can market mechanisms help to ensure access to essential drugs in the public sector? Market mechanisms have been used to strengthen public drug supply systems. These mechanisms include:
autonomous drug supply agencies;
direct delivery contracts;
primary distributor systems.

34. Organization of the supply system
At least five different methods exist for supplying drugs to governmental and nongovernmental health services:
Central medical stores (CMS): This is a conventional drug supply system, in which drugs are procured and distributed by a centralized government unit. It is possible to decentralize this system by having medical stores at provincial or state level.
Autonomous supply agency: This is an alternative to the CMS system in that drug supply is managed by an autonomous or semi-autonomous drug supply agency.

35. Organization of the supply system (cont’d)
Direct delivery system: This is a decentralized, non-CMS approach in which drugs are delivered directly by suppliers to districts and major facilities. The government drug procurement office tenders to establish the supplier and price for each item, but the government does not store or distribute the drugs.
Primary distributor (“prime vendor”) system: Another non-CMS system, in which the government drug procurement office establishes a contract with a single primary distributor ("prime vendor"), as well as separate contracts with drug suppliers. The prime vendor is contracted to manage drug distribution by receiving from suppliers, storing and distributing all drugs to districts and major facilities.

36. Organization of the supply system (cont’d)
Fully private supply: In some countries, drugs are provided by private pharmacies in or near government health facilities.
With such an approach, measures are required to ensure equity of access for the poor, those with the greatest medical need, and other target populations.

37. Different supply systems

38. The UNICEF Supply Chain can be
Where do the Potential Bottlenecks occur along the Supply Chain?
The UNICEF Supply Chain can be
as short as one month, as long as one year
(excluding emergency responses)
Incomplete specifications
Rushed orders
Unrealistic TADs
What does the
programme want?
Long order processing
time
Order changes
PPO/PPA
SRQ
PO/DEL
SUPPLIER
Missed consolidations
Synchronising the arrival
of components
Supply evaluation
Inventory/History
RECEIVED
BY FINAL
BENEFICIARY
WAREHOUSING
DISTRIBUTING
CLEARING
RECEIVING
SHIPPING
Lack of Distribution Plan
Appropriate structure
Clear responsibility & procedures
Inventory system & reporting
-Early clearance process
-Control
Shipping status
Shipping docs

39. Distribution Cycle Port Clearing Receipt Drug and Procurement
Inspection
Drug
Procurement
Inventory
Control
Consumption
Reporting
Storage
Distribution cycle begins when drugs are dispatched by the manufacturer or supplier. It ends when drug consumption information is reported back to the procurement unit.
Drug procurement: point where drugs are available for delivery.
Port clearing: is the first step in making drugs available for distribution. Involve in identifying shipments as soon as they arrive in port, processing all importation doc..
Receipt&inspection: must carry out a complete inspection of every shipment as soon as it is received from the port or local supplier. Inspectors should check for damaged and missing items& for compliance with the contract conditions concerning drug type, qtity, presentation, packaging, labeling, special requirements.
Inventory control: is used for requisitioning and issuing drugs, for financial accounting, and for preparing the consumption and stock balance reports necessary for procurement.
Storage:proper location, construction, organization, and maintenance of storage facilities help maintain drug quality, minimize theft, and maintain regular supply.
Requisition: drug supply system may operate under a push or pull system. Requisition system may be manual or computerised but it should always be designed to simplify distribution by facilitating inventory control.
Delivery: drugs may be delivered by warehouse or collected by health facilities.
Dispensing: distribution process schieves its purpose when drugs reach hospital, helath centres or community health workersand are appropriately prescribed and dispensed to patients.
Consumption: closing link in the distribution cycle is the flow of info on consumption and stock balances back up the distribution system to the procurement office for use in quantifying needs.
Dispensing to
Patients
Requisition of
Supplies
Delivery

40. Distribution systems
Public distribution includes wholesale distribution and retail dispensing by government-managed drug supply and health services as well as distribution through state-owned enterprises (state corporations).
Private distribution includes private for-profit wholesalers and retailers, and not-for-profit essential drugs supply services.

41. Distribution Dispensing clinicians
Doctors, clinical officers and nurses in private practice both prescribe and dispense drugs to their patients in many parts of the world
Clinicians dispense to their patients partly as a service, but also because they have learned that patients are often much more willing to pay for drugs than simply for consultation
In some countries, general practitioners derive 60% of their income from the drugs they dispense. This creates an obvious and measurable incentive to overprescribe

42. Warehouse & Logistics Center
UNICEF
Supply Division
Inventory Management/
Purchasing
Packing
Production
Systems/
Process
Support
Delivery
Processing
Receiving
Shipping
40 Staff Members

43. Customer Service Center
Picking/Packing/Shipping
Sales Orders/Deliveries
All Centers
Technical Center
Material Master
Maintenance
Contracting Center
Purchase Orders
Issue of Purchase Req.
Goods Receipts /
Stock Placement into WH
Goods receipt
Goods Issue of stock
Warehouse & Logistics Center
Finance
Cycle Counting
Settlement of Kits Production
Health programs are frequently managed by well-qualified health personnel who lack logistics experience. Logistics is defined as the ‘art of getting the right amounts of the right things to the right places at the right time.
Warehouse and transport managers may have these skills but may have little influence on decision making. The best way to use their knowledge and skills is to make them part of a logistics team to manage the system design process.
The primary management goal is to maintain a steady supply of drugs and supplies to facilities where they are needed while ensuring that resources are being used in the most effective way.
A good distribution system is a cost-effective system.
Inspection of shipments
Procedures Management
Quality Assurance Center

44. Order processing time: 65 days
Purchase
order
MRP
Warehouse Processing
Delivery Creation
Warehouse
G/R
UNICEF
Supply Division
Picking
Sales Order Creation
Order processing time: 65 days
2001 target: 45 days
Booking of
Transportation
Printing & sending
shipping docs
Issuing goods
Packing

45. UNICEF Warehouse Medical Area Non-MedicalArea GR area Haz.Mat. Area
Bulk Area
Locked Area
Production
GI area

46. Consignment Stock (UNHCR / IFRC)
UNICEF
Plant 1100
IFRC
IFRC
WHO
Storage of technical files and documents

47. Group discussion What do you do with this list?
You receive a request from the Ministry of Health for purchase of drugs for the national malaria and HIV/AIDS control programmes. You are given a list of 100 drugs requested.
What do you do with this list?
How do you decide what to purchase and where?
How do you ensure that the drugs will imported and distributed smoothly?