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

3. 2 Agenda  Procurement statistics  Major commodity areas  Drug Procurement  Supply  Distribution  Case Study

4. 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

5. 4 SUPPLY DIVISION AT A GLANCE

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8. 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

9. 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.

10. 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

11. 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;

12. 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;

13. 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.

14. 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

15. 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

16. 15 Select reliable suppliers of high quality products Who and how to pre-qualify?  Ask for references  Inspection of manufacturers

17. 16 Supplier Profile Form Step 3 Supplier interested Step 2 Supplier Registration Process Company Data Financial Data References UNICEF interested Step 1

18. 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.

19. 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

20. 19 First things to consider  Large/small quantities required?  Acceptable lead time?  National procurement capacity?  Financial resources available?

21. 20 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? Procure the most cost-effective drugs in the right quantities

22. 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?

23. 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

24. 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

25. 24 Procurement Cycle Collect Consumption Data Determine Quantities Needed Review Drug Selection Reconcile Needs and Funds Choose Procurement Method Locate and Select Suppliers Specify Contract Terms Monitor Order Status Receive and Check drugs Make Payment Distribute Drugs

26. 25 Procurement Methods  Open tender  Restricted tender  Competitive negotiation  Direct procurement

27. 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 +

28. 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. Who will adjudicate the bid and take care of quality assurance Who will take care of delivery and distribution and monitor supplier performance

29. 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

30. 29 Supply Division Organisation Bidding RFQ/RFP Contracts - DO/LTA Contracting Technical Quality Assurance Sourcing Technical specifications Web catalogue Supplier registration Supplier evaluation Inspections

31. 30 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. INVITATION TO BID  Product - quality  Technical compliance  Cost of product  Cost of freight and delivery  Timeliness of delivery VALUE FOR MONEY 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.

32. 31 Monitor and maintain quality  Pre- and post shipment inspection  Analytical drug testing  Appropriate storage, distribution, dispensing  Reporting system for complaints

33. 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.

34. 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.

35. 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.

36. 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.

37. 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.

38. 37 Different supply systems

39. 38 The UNICEF Supply Chain can be as short as one month, as long as one year (excluding emergency responses) Where do the Potential Bottlenecks occur along the Supply Chain? RECEIVED BY FINAL BENEFICIARY PPO/PPASRQPO/DELSUPPLIERSHIPPING CLEARING RECEIVING WAREHOUSING DISTRIBUTING What does the programme want? Incomplete specifications Rushed orders Unrealistic TADs Long order processing time Order changes Missed consolidations Synchronising the arrival of components Shipping status Shipping docs -Early clearance process -Control Lack of Distribution Plan Appropriate structure Clear responsibility & procedures Inventory system & reporting Supply evaluation Inventory/History

40. 39 Distribution Cycle Port Clearing Drug Procurement Receipt and Inspection Inventory Control Storage Requisition of Supplies Delivery Dispensing to Patients Consumption Reporting

41. 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.

42. 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

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

44. 43 Warehouse & Logistics Center Sales Orders/Deliveries Customer Service Center Picking/Packing/Shipping Technical Center Material Master Maintenance Contracting Center Purchase Orders Issue of Purchase Req. Goods Receipts / Stock Placement into WH Quality Assurance Center Finance Cycle Counting Settlement of Kits Production All Centers Goods receipt Goods Issue of stock Inspection of shipments Procedures Management

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

46. 45 UNICEF Warehouse GR area GI area Locked Area Bulk Area Non- Medical Area Medical Area Haz.Mat. Area Productio n

47. 46 Consignment Stock (UNHCR / IFRC) UNICEF Plant 1100 UNHCR IFRC UNHCR IFRC WHO Storage of technical files and documents

48. 47 Group discussion 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?