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Effective pharmaceutical procurement and supply chain management Henk den Besten, Senior Supply Chain Advisor, Partnership for Supply Chain Management.

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Presentation on theme: "Effective pharmaceutical procurement and supply chain management Henk den Besten, Senior Supply Chain Advisor, Partnership for Supply Chain Management."— Presentation transcript:

1 Effective pharmaceutical procurement and supply chain management Henk den Besten, Senior Supply Chain Advisor, Partnership for Supply Chain Management (PFSCM) Eric Mallard, Senior Health Specialist, The World Bank Christopher Game, Chief Procurement Officer, The Global Fund to Fight AIDS, Tuberculosis and Malaria Dr. Mark Abani, Country Director, Nigeria, Crown Agents Emmanuel Higenyi, Head, Capacity Development, Joint Medical Stores, Uganda Moderator: Dr. Guy Bertand Njambong, Technical Sales Manager, Africa, Unipex Solutions AFRICA PHARMACEUTICAL SUMMIT 2013

2 The Partnership for Supply Chain Management Inspiring supply chain innovation for public health August 2013

3 PFSCM was established in 2005 to bid on the SCMS contract, but our work is expanding PFSCM USAID SCMS 2005 Global Fund PPM 2009 UNITAID CPP

4 PFSCM’s public-private partnership brings the multi-sectoral expertise of non-profit and commercial organizations 4

5 PEPFAR awarded the Supply Chain Management System (SCMS) project to PFSCM in Establish and operate a safe, secure, reliable, and sustainable Supply Chain Management System (SCMS) and develop self-sustaining supply chain skills and capability within the countries 8 million on treatment by 2015 have the drugs they need (not all supplied by SCMS) 1.Ensure patient access to commodities 2.Reduce product and supply chain costs 3.Ensure product quality 4.Elevate value of supply chain to health President’s mandate: Health impact: Value proposition:

6 Why was SCMS needed? 6 Supply Chain Barriers Poor coordination among governments, funders, aid providers Little long-range planning and forecasting Limited procurement capacity Lengthy procurement cycles Lack of timely order placement Inadequate warehousing and distribution Impact on Treatment Programs Stockouts, overstocks, high product expiry, inappropriate treatments High costs, long lead times, poor quality Unreliable delivery, rationing, treatment interruptions Confusion, redundancies, gaps

7 Innovative design and a willingness to do things differently enabled our work The USG’s forward-thinking design established a structure for SCMS that is: Scalable Flexible Robust Cost effective Key USG innovations: USAID working capital fund USFDA approval of generic drugs Country-led programs 7

8 Going to scale 8 15,600+ commodity shipments worth $1.51 billion to 57 countries Only $177K loss (0.1%) 1,644 products (128 ARVs) in e-catalog with >4,700 separate products procured over life of project Using regional distribution centers (RDCs) Smaller, regular shipments to protect local systems Rapid response to emergency and routine requests *Data are for life of project as through October 2012, except as noted

9 Saving money saves lives Saved $1.38B over Accelerated Access Initiative prices USFDA approved generics ~90 percent of purchases Saved $119 M in freight costs using sea and road, and RDCs instead of air In South Africa, helped reduce ARV prices by 50 percent, saving USG $93M and the GoSA $630M 9 Pooled procurement helped decrease prices 68% reduction in average generic ARV prices 30% reduction in male circumcision kit prices SCMS prices at or below all others 68% Reduction

10 10 Connecting the global and national levels Building capacity in 22 countries Virtually no stockouts of ARVs or HIV rapid test kits at central level in PEPFAR countries US small business participation: $51.6M* Strengthening local economies Contracts with 650 local firms and vendors * As of March 31, 2013

11 SCMS uses public- and private-sector best practices to institutionalize sustainable, cost- effective national supply chains Drives down prices for large and small programs through global pooled procurement Strengthens national supply chains, does not create parallel systems 11 Optimizes laboratory systems (harmonization, maintenance and rational procurement) Enhances quality assurance capacity (e.g., new technologies, waste management) Improves infrastructure, including warehousing and distribution Builds systems (e.g., LMIS, forecasting/quantification, automated or manual WMS, ERP)

12 Building sustainable capacity in national supply chains 12

13 Urgent response Responsive, flexible systems make us the emergency provider of choice for other donors Delivered $8 M in unplanned orders from October 2012 to March Helped prevent stockouts in 20 countries in the last year. Haiti SCMS office/Côte d’Ivoire Côte d’Ivoire

14 Challenges on our way to 2015 Supporting countries to get to 15 million on treatment Supporting USG goal to get to 4.7 million VMMC Working with suppliers to make sure there is enough API and medicines supply Increasing capacity of African suppliers to provide quality-assured commodities Reducing costs of in-country supply chains to maximize treatment numbers Coordinating with global partners to optimize the use of available resources 14

15 Can local production help PFSCM/SCMS uses local production sources to increase access to quality Essential Medicines - Use SRA or WHO PQ’d sources for EM - Apply country specific solutions, PV model in Tanzania, FO managed procurement in Ethiopia - Base the sourcing on a defined (short) list of products - Collaborate with local partners, both government and private PFSCM/SCMS has experience in buying from local producers - Pre qualification of vendors, including GMP and GDP audits - Experience with pharmaceutical products for use in Tanzania, Ethiopia, S Sudan, Cote Ivoire, Rwanda etc - Food products for use in various PEPFAR countries 15

16 Drug Procurement and Distribution Challenges Key procurement aspects are - procurement planning - funding availability - meeting regulatory requirements, including NRA registration - decrease the supply intervals (RDC’s or LDC’s) Distribution challenges - public distribution models, using regional/district stores - distribution up to the last mile Opportunities - increased buying power creates demand up country - use of “ADDO” accredited shop concept as EM outlets 16

17 Thank you! Questions? Finalist

18 Effective procurement and supply chains Eric Mallard Africa Pharmaceutical Summit - September 24 th 2013

19 Find the right balance: public/private, monopoly /multiplicity Public/private: – Government involvement is desired to ensure public health mission – Centralized supply chains come with a number of disadvantages (limited incentives for efficiency, high capital and operating costs…) Quality assurance may be easier to manage in monopolistic situations; However, multiplicity in supply systems is desired as a risk- mitigation strategy in case of non-availability of essential products Africa Pharmaceutical Summit | Eric Mallard | Sept

20 No magic bullet, need to adapt to the local situation and to the product features Local situation can determine the most effective supply chain – Fragile state (e.g. Zimbabwe) – Maturity of the private sector (e.g. Ghana) – Country size and geographical features Product characteristics and customer needs can shape the supply chain: – Direct delivery system for short shelf-life or high value products – Limit redundancy of high CAPEX channels (cold chain) Supply chain segmentation will play an important role in the future Africa Pharmaceutical Summit | Eric Mallard | Sept

21 Managing quality upstream and downstream is key to maintain safety Procuring from qualified manufacturers and wholesalers – Leverage the WHO pre-qualification process – Regulatory harmonization initiatives are key to accelerate convergence towards Stringent Regulatory Authorities – Opportunity for joint identification, selection and pooled procurement Sampling and testing are required to ensure quality maintenance – Risk-based approach to ensure cost-efficiency – Investment into a local or regional specialized QC laboratory – Mobile minilab opportunity Africa Pharmaceutical Summit | Eric Mallard | Sept

22 Can local production help strengthen weak public distribution networks? Local manufacturing provides an additional incentive to governments to strengthen supply chain: – ensuring sustainable local market opportunity for this local industry – Aligning supply and demand around a common interest Downstream quality management is facilitated with local production (reduced consignment or recall time) Local manufacturing can be attractive for products with specific characteristics (short shelf-life) It can end up with a win/win situation for the local industry, regulatory bodies and patients (e.g. SCMS in Tanzania) Africa Pharmaceutical Summit | Eric Mallard | Sept

23 Effective procurement and supply chains Eric Mallard Africa Pharmaceutical Summit - September 24 th 2013

24 Find the right balance: public/private, monopoly /multiplicity… Africa Pharmaceutical Summit | Eric Mallard | Sept

25 Find the right balance: public/private, monopoly /multiplicity… Africa Pharmaceutical Summit | Eric Mallard | Sept

26 No magic bullet, need to adapt to the local situation and to the product features Local situation can determine the most effective supply chain – Fragile state (e.g. Zimbabwe) – Maturity of the private sector (e.g. Ghana) – Country size and geographical features (e.g. Chad) Product characteristics and customer needs can shape the supply chain: – Direct delivery system for short shelf-life or high value products (e.g. ARV in Angola) – Limit redundancy of high CAPEX channels (cold chain) Supply chain segmentation will play an important role in the future Growing importance of defining successful outcomes and assessing cost-effectiveness Africa Pharmaceutical Summit | Eric Mallard | Sept

27 Exploring options for more effective procurement Procurement breakdown according to the type of product – Central for vertical programs (ARVs, malaria, family planning…) – Framework contracting for high volume essential medicines procured at the periphery to ensure economies of scale, affordable and high quality medicines (e.g. World Bank and WHO recommendations to Ghana) Performance-based financing as a tool to strengthen accountability – World Bank’s Nigeria State Health Investment Project proposes to improve health systems governance at all levels – local government authorities (LGA) enter into a performance contract with the State Governor, which includes quality assessment of the drugs – States enter into a performance contract with the Federal Government, which includes timely funding release to LGA and LGA performance assessment transparency Africa Pharmaceutical Summit | Eric Mallard | Sept

28 Focusing on the “enablers” to improve public central medical stores efficiency Compe- tition Flexi- bility Efficiency Africa Pharmaceutical Summit | Eric Mallard | Sept Auto- nomy Incen- tives CMS

29 Improving logistics capacity at the district level and optimizing the distribution Africa Pharmaceutical Summit | Eric Mallard | Sept Number of days of stock outs in Q World Bank-funded pilot supply chain project in Zambia

30 Managing quality upstream and downstream is key to maintain safety Procuring from qualified manufacturers and wholesalers – Leverage the WHO pre-qualification process – Regulatory harmonization initiatives are key to accelerate convergence towards Stringent Regulatory Authorities – Opportunity for joint identification, selection and pooled procurement Sampling and testing are required to ensure quality maintenance – Risk-based approach to ensure cost-efficiency – Investment into a local or regional specialized QC laboratory – Mobile minilab opportunity Africa Pharmaceutical Summit | Eric Mallard | Sept

31 Can local production help strengthen weak public distribution networks? Local manufacturing provides an additional incentive to governments to strengthen supply chain: – ensuring sustainable local market opportunity for this local industry – Aligning supply and demand around a common interest Major manufacturers develop an integrated distribution business (e.g. Ghana: regional distribution points, mobile vans) Downstream quality management is facilitated with local production (reduced consignment or recall time) Local manufacturing is an asset for products with specific characteristics (short shelf-life) It can end up with a win/win situation for the local industry, regulatory bodies and patients (e.g. SCMS in Tanzania) Africa Pharmaceutical Summit | Eric Mallard | Sept

32 24 September 2013 Christopher Game Chief Procurement Officer 32 Effective procurement and supply chains.……. getting the first Mile right, drives the Last Mile

33 What is The Global Fund ? 4.2 Million 4.2 Million People currently receiving ARV therapy 9.7 Million 9.7 Million New smear-positive TB cases detected and treated 310 Million 310 Million Insecticide-treated nets distributed Since its inception in 2002, the Global Fund to Fight AIDS, Tuberculosis and Malaria has become the main multilateral funder in global health. It channels 82 percent of the international financing for TB, 50 percent for malaria, and 21 percent of the international financing against AIDS. It also funds health systems strengthening, as inadequate health systems are one of the main obstacles to scaling up interventions to secure better health outcomes for HIV, TB and malaria. $3Bn 600 Employees

34 What started as a Procurement Transformation…….. 34 The Global Fund will endeavour to become the benchmark organisation in the sector for Sourcing and Procurement Minimising waste and eliminating non value adding activities Using simple, clear leading edge processes and tools designed by and for the organisation Ensuring effective governance and watertight compliance With measurable performance in value and lives saved Building collaborative relationships with partner agencies suppliers and donors Is directly aligned to the Global Fund’ s strategy and creates a flow into country centric operations………..

35 Industry must love us as a sector ? 35 Or perhaps they don’t ? We are silo’d We are fragmented We are impeded by process / bureaucracy We have poor funds flow Inadequate planning & forecasting Much of what we do is outsourced Regulatory barriers All of these carry a $$$$ premium Risk increases with fragmentation, and we pay for that risk Long lead times reduce system stress at manufacturers How can we become a customer of choice ?

36 What started as a Procurement Transformation…….. 36 Turned into a process for industrializing thought leadership I soon realised that we are not a customer of choice Many inputs, few outputs Data often out of date and not easily refreshable Slow and operating in silos' That too many are thinking and too few are doing Substantial amount of people feeding at the table Numerous barriers to improvement (agent structures and cash flow) Drugs often mid-late lifecycle Partial aversion or fear of the private sector…… Our behaviors may erode the incentive to innovate Complex regulatory landscape That upstream leverage irons out some downstream supply issues

37 Working Upstream to improve the Downstream 37 I am going to illustrate how upstream transformation can drive downstream performance What we soon realised :- Lack of Accountability High Agency Costs Multiple Agencies Incentive model Agency ‘local versus Global’ expertise Poor visibility of lost innovation Lack of ownership / supplier relationships Poor funds flow driving wrong behavior Fragmentation = difficult to plan Little competition in pricing Role of many funders largely executional No volume leverage/Many spot purchases How we responded :- Subscription, (spend under control) driven by transparency and ease of application Leverage with other large funders / donors to become a customer of choice Agency accountability (track & trace) Vendors incentivized to innovate Creation of product market & supply chain experts Ownership of relationships, up and downstream Greatly improved funds flow ? Cash flow Simple user designed processes Comprehensive market intelligence Frequent price competition Scalable and can be leveraged COGS versus Market based costing

38 So how does this relate to local manufacture ? 38 It creates the foundation to attract partners We will have scale We will be able to de-couple at various process stages Funds flow will be greatly improved Risk will decrease Relationship will give better access to pipelines Where are our supply chains broken ? We lack accountability – outsourcing can lead to poor partner choice Funds flow breaks the process Track and Trace is sporadic We manage our service providers without rigid deliverables The private sector should be a source of learning and leverage Just as we are partnering upstream we should be partnering downstream to reduce redundancy

39 1. Fixing the Plumbing first ? Creating the Ecosystem 39 Upstream partnering facilitating downstream partnering creating the Ecosystem Funders Manufacturers / Logistics Countries Phase 1 : Creating Partnerships Substantial Duplication of Effort

40 A Single Ecosystem Fixing the Plumbing first ? Creating the Ecosystem 40 Upstream partnering facilitating downstream partnering creating the Ecosystem Funders Manufacturers / Logistics Countries Phase 2 : Creating Capacity and Capability Underscored by common systems and transparency Common Accountability for OTIF Leveraged Funders Leveraged Regulatory Leveraged Quantification Optimized Supply Chains Leveraged Regionally Centre's of excellence

41 To Reflect – How does fixing the first mile influence the last mile ? 41 How upstream transformation can drive downstream performance Phase 1 (Upstream) :- Make the Public Sector a customer of choice for the private sector Leverage funders / buyers Harmonize specifications Improve forecasting View longer term replenishment cycles Improve planning Standardize track & trace Open leverage to smaller buyers +cost of doing business Pay on time Create transparency Phase 2 (Downstream) :- Use savings generated to build country level capacity Take an academic approach to buffering supply chains Harmonize regulatory landscape Create regional centers of excellence building on upstream partner leverage Make logistics partners accountable and KPI to that accountability

42 How does one de-couple 42 Starting Materials Intermediates Advanced Intermediates APIFormulation Distribution Primary Packaging Secondary Packaging One works backwards of course………. Map and leverage supply chains irrespective of source Amalgamate demand Common Regulatory landscape Harmonize identification and recognition platforms Rigid KPI driven track & trace Quick route to establishing the basics of a pharma’ plant Easier to qualify Flexible for differing donor or country requirements Allows for regional flexibility Opens up a whole new industry around the manufacture of folding boxes and other materials Logical next step Builds on experience Allows for smaller batch runs / greater variation when needed Quicker responses The final step of true local industry High complexity High barrier to entry in terms of cost Scale needed Best sourced globally at lowest cost Implementation Complex Easier Logical Manufacturing Flow in simple terms Local Manufacture in simple terms

43 How do you choose a partner ? 43 Generic ? – large portfolio – speed – simplicity – cost Originator ? – slower – integrity – quality – infrastructure - $$$ A mix ? Understanding the reasons behind a partner wanting to enter developing markets How late in lifecycle are the drugs on offer ? Are we extending the market life and restricting new therapies ? How transferred is “Tech-Transfer” ? What is the ownership and profit model What does the pipeline look like, does the partner have the right portfolio How sustainable is the partnership, will excitement turn into complacency ? Important questions to ask

44 Back Up Day Month YearPlace 44 Q&A

45 The Commercial Relationship 45 To ensure we maintain a competitive price in a longer term contractual framework we will need to change our commercial model.

46 i-Fund for The Global Fund 46 Equipment, Goods and Services team Health Products Team The Support Group SuppliersPartners GF PSM’sSuppliers Knowledge & Collaboration Country Ownership & Supply Track & Trace

47

48 EFFECTIVE PROCUREMENT AND SUPPLY CHAINS- TRANSITION TO COUNTRY OWNED SYSTEMS 48

49 EFFECTIVE PROCUREMENT AND SUPPLY CHAINS- TRANSITION TO COUNTRY OWNED SYSTEMS 49

50 EFFECTIVE PROCUREMENT AND SUPPLY CHAINS- TRANSITION TO COUNTRY OWNED SYSTEMS 50

51 Discussion Themes APS September Emmanuel Higenyi; B.Pharm, MPH, PgD-Management, Business and Law Studies

52 Supply Chain definition and Information requirements This is a system for the flow of materials, information, money, and people: – between pharmaceutical scientists, regulatory authorities, manufacturers, distributors and health care providers. Supply chain information requirements include morbidity & demographics, logistics, physical & technical capacity, pharmacovigilance, and pharmacoeconomics.

53 Supply Chain Activities Drug Discovery Drug Development Commercial Production Procurement Storage & Distribution Utilization and Review Disease Surveillance

54

55 Challenges for the African Pharmaceutical Industry Supply Chain Activity Challenges Drug discoveryLimited scientific infrastructure to facilitate drug discovery Limited linkages between universities and pharmaceutical firms Limited know-how in translational research Drug development Regulatory hindrances on clinical trials for herbal medicines No guidelines on herbal research Commercial production Limited local production infrastructure Shortage of skill in pharmaceutical technology Small markets

56 Challenges for the African Pharmaceutical Industry Supply Chain Activity Challenges Procurement Storage and distribution Constraints from public procurement and disposal of assets regulations Substandard and Counterfeits drugs Poor inventory management at national and facility Lack of tools for forecasting and supply planning Fragmentation of the procurement process Inadequate technological infrastructure for distribution route planning Transport industry with limited experience in distribution of pharmaceuticals No guidelines on transportation of pharmaceuticals Shortage of personnel with training in supply chain

57 Challenges for the African Pharmaceutical Industry Supply Chain Activity Challenges Utilization Review and Evaluation Non adherence to treatment guidelines Inadequate collection, processing, analysis and interpretation of supply chain information Lack of monitoring and coordination mechanisms Limited skill in pharmacoeconomic evaluation of drugs Disease surveillance Limited capacity to predict outbreaks Limited data on incidence and prevalence Limited data on drug resistance

58 Promoting drug discovery ZimbabweAfrican Institute of Biomedical Science and Technology Madagascar Madagascar drug discovery project S. AfricaDrug Discover Centre E.& C AfricaNatural Products Research for Eastern and Central Africa (NAPRECA) AfricaPan-African natural product library (P-ANPL) UgandaChemotherapeutics research laboratory

59 Sources centre.html centre.html https://www.google.co.ug/#q=African%20Institute%20of%20Biomedical%20Scienc e%20and%20Technology https://www.google.co.ug/#q=African%20Institute%20of%20Biomedical%20Scienc e%20and%20Technology g_2.html g_2.html nterfeit.pdf nterfeit.pdf o_onwuka pdf

60 1.Effectiveness and Efficiency of Supply Chains for safe and quality medicines APS September Emmanuel Higenyi; B.Pharm, MPH, PgD-Management, Business and Law Studies 2.Local production to enhance supply chains

61 Supply Chain definition and Information requirements This is a system for the flow of materials, information, money, and people: – between pharmaceutical scientists, regulatory authorities, manufacturers, distributors and health care providers. Supply chain information requirements include morbidity & demographics, logistics, physical & technical capacity, pharmacovigilance, and pharmacoeconomics.

62 Supply Chain Activities Drug Discovery Drug Development Commercial Production Procurement Storage & Distribution Utilization and Review Disease Surveillance

63 Models and formats Programme-based e.g. EMP, MCP, ACP, UNEPI Product-based e.g. FP, MH Sector-based e.g. PNFP, Public, PFP

64 Experiences and Lessons Develop METRICS, measure, monitor, evaluate Start COLLABORATIVE forecasting and replenishment Ensure supply chain SECURITY CLARIFY roles Ensure INVETORY VISIBILITY across the chain Actively perform POST MARKETING surveillance Develop SPECIFICATIONS Remove information ASYMMETRY between levels HARMONIZE clinical and logistical aspects Develop guidelines for TASK SHIFTING in pharmaceutical care

65 Design or Redesign supply chain Pull vs push vs hybrid Replenishment intervals Inventory levels Quantifications rules and procedures Monitor, review and evaluate systems LMIS


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