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Managing Procurement and Logistics of HIV/AIDS Drugs and Related Supplies World Bank Training Program

Managing Procurement and Logistics of HIV/AIDS Drugs and Related Supplies World Bank Training Program . Jabulani Nyenwa, MD, MPH, MBA May 2005. Acknowledgements. Jillian Clare Cohen Heather Bennett Patrick Osewe Olukemi Osinusi. Organization of Module.

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Managing Procurement and Logistics of HIV/AIDS Drugs and Related Supplies World Bank Training Program

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  1. Managing Procurement and Logistics of HIV/AIDS Drugs and Related SuppliesWorld Bank Training Program Jabulani Nyenwa, MD, MPH, MBA May 2005

  2. Acknowledgements • Jillian Clare Cohen • Heather Bennett • Patrick Osewe • Olukemi Osinusi

  3. Organization of Module • Importance of pharmaceutical systems • Failure of pharmaceutical systems • ARV treatment programs • Key considerations in the supply chain management of ARV drugs

  4. Learning Objectives • Explain the importance of the pharmaceutical system in the overall health system • Understand and identify the key components of supply chain management • Understand and identify the determinants of pharmaceutical system failure • Understand and identify the key considerations of ART supply chain management

  5. Importance of Pharmaceutical Systems • Drugs are specialised health commodities • Pharmaceuticals are the second highest public health budget expenditure in most countries • Drug expenditure accounts for 50-90% of non-personnel health system costs • Access to affordable high quality health commodities is central to health care systems • Drug availability promotes confidence in health systems • Management of pharmaceutical systems is complex

  6. Role of pharmaceutical systems • Uninterrupted availability of pharmaceuticals • Affordability of pharmaceuticals • Ensuring that safe and efficacious drugs are available in the correct form and condition for the correct indication and at an affordable cost whenever client needs them


  8. Logistics Cycle • The framework through which pharmaceutical systems function • Ultimate goal is to meet customer needs • All the components of the cycle should be carefully planned, implemented and monitored • Emphasis must be placed on creating an enabling environment for effective pharmaceutical management

  9. Determinants of Access to Pharmaceuticals

  10. Availability • Research & Development • International Trade Agreements • National Regulatory Systems • Procurement mechanisms

  11. Affordability • Pricing policies • Government public health expenditures • Family income

  12. Use • Inventory management • Rational drug use

  13. Pharmaceutical System Failure • Stock out of essential drugs is a clear sign of pharmaceutical system failure • Government Failure • Market Failure • Income gap

  14. Government Failure • Low health expenditure • Public drug expenditure <US$2 per capita in 38 developing countries • Public health expenditure US$57 billion short of minimum for basic care (WHO, 2002) • Inadequate regulatory capacity • 10-20% drugs fail quality control tests in developing countries • Inefficient use of resources • Corruption

  15. Market Failure • Developing countries are a small market to global pharmaceutical market (20% sales, 80% global population) • Little spent on R&D for tropical diseases • Global AIDS drug gap • Significant barriers to domestic manufacture

  16. Corruption • World Bank Definition • “..behaviour on the part of officials in the public and private sectors, in which they improperly and unlawfully enrich themselves and/or those close to them, or induce others to do so, by misusing the position in which they are placed.”

  17. Pharmaceutical Industry • Big Pharma • research based, patented, “branded” medicines (GSK, Pfizer, BMS, Merck, Abbott) • compete on exclusivity (patents) • Generic manufacturers • copies of patented or off-patent drugs • Big Pharma also make generics • compete on price

  18. How the drug industry works • Drugs expensive to manufacture but easy to copy • R&D very expensive ($800 m/drug*), most new drugs fail • To do R&D, companies need incentive • IP: Patents for 20 years - “market exclusivity” • but what happens in: • Markets where public has no purchasing power • Diseases that have no profits (malaria) • 10% of R&D spending on diseases that cause 90% of global disease burden (* Pharma funded study)

  19. The Pharmaceutical Controversy • Drug companies want to maximize profits • Public Health aims to maximize impact • Big Pharma argues no profit, no R&D (except publicly funded e.g. vaccines) • So how do you reconcile profits and access? • TRIPS and Doha Declaration

  20. Public Health/Pharmaceutical Scale Are rights to IP >, = or < Right to Health? Intellectual Property Health & Life

  21. Equity Pricing • Drug pricing to equity according to ability to pay • Criteria include economic indicators (wealth, income) and disease burden • Forms of equity pricing • Preferential pricing • Market segmentation • Differential pricing

  22. Problems with Equity Pricing • Some consumers pay MORE than others • Reference Pricing – middle tier countries demanding African prices for ARVs • Diversion/Leakage – difficult to keep markets separate

  23. Marginal Cost Pricing • Marginal cost: Direct cost of producing one additional unit, assuming fixed costs (R&D, factory, equipment, testing etc.) are already covered • For ARVs fixed costs are very high (hundreds of millions) but marginal costs may be cents • Marginal cost pricing: charging marginal cost per production unit • Low marginal costs = opportunities for equity pricing

  24. Should Big Pharma care about pricing? • Bad publicity • Pressure from activists • Huge markets in China, India, Brazil etc • Future markets in Africa (not important consideration) • Weakening IP in developing countries threatens whole IP system

  25. HIV/AIDS Programs

  26. Clinical Services Pyramid ART Supply Chain Supply Chain Prevention & Treatment of OIs CommunitySupport Lab Capacity Prevention VCT Basic HIV/AIDS clinical services Patient Education

  27. Goals of ART • Maximum and durable viral suppression • Durability of viral suppression by initial treatment regimen is a determinant of sustainable access to efficacious ART • Restoration and preservation of optimal immune function • Reduction of morbidity and mortality • Improvement of quality of life

  28. Key Considerations for ART Pharmaceutical Systems • Policy framework • Selection • Forecasting and quantification • Procurement • Storage and Distribution • Use • LMIS • Commodity security

  29. Policy Framework • National ART plan • Vertical or integrated supply chain system • Sources levels of funding • Detailed SOPS including guidance on patient selection criteria • Drug regulatory policy • Patent laws • Pricing policy to patients

  30. Product Selection (1) • Drug selection committees • National Treatment Guidelines • Other treatment guidelines • DRA registration • WHO prequalification

  31. Product Selection (2) • FDA approval • Patent status of proposed drugs • Cost considerations • FDC and single drug formulations • Remember to plan for children

  32. Forecasting & Quantification • This must be done prior to commencing an ART program • Always consider newness of ART programs • lack of accurate data • Use available data e.g. other programs, demographic, morbidity • Careful monitoring of consumption and program performance • Need for flexibility as data is gathered from the program

  33. Procurement • Design and understand the ARV pipeline • Detailed procurement plan must be developed • Procurement strategy • Single source – direct contracting • Limited source – limited international bidding • Multi source – international competitive bidding • Procurement contract flexibilities • Monitoring of the procurement plan • Computerised systems – software

  34. Inventory Management & Use • Storage • Security • Storage space • Cold chain • Dedicated distribution system • Rational use of ARV drugs • Training of health care workers (prescribers) • Knowledge of PLWHA – treatment literacy • Adherence strategies

  35. Logistics Management Information System (LMIS) • The need for an information system to manage the supply chain is not an option • ARV LMIS should be developed prior to starting an ART program • Training of healthcare workers

  36. Commodity Security • Generally ARV drugs are not in full supply • However the pharmaceutical system must ensure uninterrupted supply for ALL patients started on ART • The system must also have the capacity to accommodate any planned program scale-up • Sustainability of ART programs is directly related to the pharmaceutical system capacity

  37. Role of Pharmaceutical Systems in ART Programs • Access • Durability • Scalability • Sustainability

  38. Conclusions • Pharmaceutical policies reach beyond health and touch on areas of trade and industrial policies • The global drug gap is due to market and government failures and limited budgets and income in developing countries • Governments can turn to outside support for technical assistance when desired • Domestic drug production can be a solution to solving the drug gap • Policies and practices should be in place to ensure well-functioning pharmaceutical systems

  39. Speaking about AIDS is a point of pride, not a source of shame. There must be no more sticking heads in the sand, no more embarrassment, no more hiding behind the veil of apathy K. Annan Bangkok 2004

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