Needs-based quantification
Quantification of items should be driven from the primary healthcare level up… that is sometimes described as ‘needs-based’ quantification. Wherever possible, quantification at the national level should be driven by what is actually being given to patients at the health facility level. There are some terrific free resources online to help guide you in quantification. Tupaia is a partner of mSupply, which provides a tablet-based program called mSupply Mobile, which can be used all the way down to the clinic level to supply medicines, track usage and place orders. a lot of the data on Tupaia.org is provided through facilities that use mSupply Mobile. More information on mSupply Mobile is available here.
Usage at the clinic level is not the only source of information for quantification. To supplement this, you should use epidemiological data (statistics on disease in your country), population data (is the population growing or changing?), expert opinion (you should meet with the heads of each specialist department at least once a year, particularly for items that are not commonly used), other countries (particularly if you are introducing a new medicine, or have changed the approved indication for a medicine) and supply data (that is, how much did you actually supply to health facilities in the past year).
Pre-qualification
Prequalification means selecting a restricted list of suppliers (wholesalers) prior to tendering for any items and then procuring only from those selected suppliers for a set period of time. Prequalification of suppliers is a way of ensuring you are dealing with the most reputable, reliable wholesalers and have access to pre-information on your manufacturers. Prequalification is the first step in ensuring Quality Assurance of medicines…
- You advertise for companies to submit documentation for prequalification as a supplier to your country. Typically, this involves providing information on their eligibility, legal history, financial situation and general experience (for other countries and organisations). Complete prequalification documentation is found here.
- You assess the applications according to strict criteria. Normally, there is no scale of quality – when purchasing medicines, companies are either able to meet the quality standards or they are not. These companies become ‘prequalified’ and are eligible to bid on all tenders you advertise (usually for up to two years before they need to resubmit). When their bids arrive, you can then just choose the lowest bidder for each item.You don’t apply a formula that measures bid price and quality – only companies that meet a minimum standard are eligible to bid.
- Prequalification does not remove the need for companies to supply documentation for goods they are supplying to you, including Specimen Certificates of Pharmaceuticals, which should be supplied with each item. A summary of the documents companies are required to provide is here.
Annual Tendering
The annual tender should consume the bulk of your annual medicines budget. In fact, one way of tracking your performance is to measure the percentage of money you spend on supplementary and emergency orders – you should try to reduce this percentage each year, as supplementary orders are generally more expensive (due to smaller quantities and shorter lead times). Some countries and organisations have moved towards longer term ‘framework agreements’, where they pay an agreed price for each item – subject to negotiation – over several years to the same supplier. Framework agreements reduce the need for an annual tender but there are several drawbacks to using them. Managing price increases can be difficult to negotiate and countries can end up trapped in contracts where they are no longer receiving the lowest price on the market. Suppliers tend to hedge with long term Framework Agreements, bidding at higher prices because they are unsure what will happen to the price of raw materials and they do not have certainty on the quantities that will be purchased. Whilst there is a concept that countries can place a series of smaller orders based on an agreed price, in smaller countries, the quantities may become unrealistically low and suppliers may not honour quoted prices on smaller runs. In the end, countries may end up paying third year prices in the first year of an agreement, or being pressured on price re-negotiations to the point that they require ongoing specialist support.
Annual tenders, with line-by-line bid evaluation, ensure that countries are always receiving the best price on the market and with strong quantification tools and regular reviews, many countries have used annual tendering very effectively. Most importantly, annual tendering empowers local staff to take control of procurement. Framework Agreements placed every few years are extremely complicated and almost inevitably require external technical assistance every time, along with ongoing contract management support.
Annual tenders, with line-by-line bid evaluation, ensure that countries are always receiving the best price on the market and with strong quantification tools and regular reviews, many countries have used annual tendering very effectively. Most importantly, annual tendering empowers local staff to take control of procurement. Framework Agreements placed every few years are extremely complicated and almost inevitably require external technical assistance every time, along with ongoing contract management support.
Annual tender documentation is available here. and may be used and adapted for free – it should of course be adapted to your country’s needs.
Line-by-line bid evaluation
Line-by-line bid evaluation is one of the most effective ways to reduce prices, improve quality and increase availability of medicines.
Typically, tenders are advertised all-in-one or sometimes split into lots. In these cases, companies are required to bid on 100% of lines in the tender or lot and a contract is awarded to the company with the lowest overall price.
When you conduct line-by-line bid evaluation, each line in the tender is awarded to the lowest bidder for that line. This typically results in four to five successful bidders on each tender, each of whom gets awarded a contract. To avoid very small Purchase Orders that no supplier would want to accept, you can set minimum contract value – for example a company has to win $50,000 worth of lines to receive a contract. If they don’t reach the minimum, the lines that they would have won go back into the pool and are re-awarded to the next lowest bidder on each line.
Line-by-line bid evaluation has several benefits – it dramatically lowers prices, sometimes by up to 50% on the total tender cost. It also allows you to exclude certain manufacturers, without excluding the entire bid from a particular wholesaler. It also allows wholesalers to bid on less than 100% of lines, which in turn allows bidding from more suppliers (some of whom specialise in particular product areas) – this increased competition further drives down the overall price.
Quality Assurance
Prequalification of suppliers is only one step towards ensuring medicines quality. Every product coming in to your warehouse should be formally inspected and end-users (pharmacists, nurses, doctors and patients) should have the ability to report problems with items back to the warehouse. Systematic laboratory testing of products is also encouraged – this may not be possible for every item, so countries should prioritise lab testing of the most important products and of those products where poor quality is suspected.
Lab testing is obviously not available for every item all the time. For all items, visual inspections can play a valuable – critical – role in helping to ensure quality. Even the highest standard laboratories in the world will commence the testing of products with a visual inspection. The item assessment checklist for visual inspections is available here and may be used and adapted for free.
