managing procurement and logistics of hiv/aids drugs and related supplies world ... · managing...
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Managing Procurement and Logistics of HIV/AIDS Drugs and Related Supplies
World Bank Training Program
Jabulani Nyenwa, MD, MPH, MBA
May 2005
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Acknowledgements
• Jillian Clare Cohen
• Heather Bennett
• Patrick Osewe
• Olukemi Osinusi
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Organization of Module• Importance of pharmaceutical systems
• Failure of pharmaceutical systems
• ARV treatment programs
• Key considerations in the supply chain management of ARV drugs
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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
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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
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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
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THE LOGISTICS CYCLE
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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
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Determinants of Access to Pharmaceuticals
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Availability
• Research & Development
• International Trade Agreements
• National Regulatory Systems
• Procurement mechanisms
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Affordability• Pricing policies
• Government public health expenditures
• Family income
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Use
• Inventory management
• Rational drug use
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Pharmaceutical System Failure
• Stock out of essential drugs is a clear sign of pharmaceutical system failure
• Government Failure
• Market Failure
• Income gap
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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
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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
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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.”
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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
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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)
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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
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Public Health/Pharmaceutical Scale
Are rights to IP >, = or < Right to Health?
Intellectual Property Health & Life
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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
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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
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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
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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
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HIV/AIDS Programs
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Clinical Services Pyramid
ART
Commun
itySu
ppor
tPrevention
&Treatment of OIs
Patient Education
Lab
CapacitySupply Chain Supply Chain
Prevention VCT
Basic HIV/AIDS clinical services
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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
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Key Considerations for ART Pharmaceutical Systems
• Policy framework
• Selection
• Forecasting and quantification
• Procurement
• Storage and Distribution
• Use
• LMIS
• Commodity security
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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
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Product Selection (1)• Drug selection committees
• National Treatment Guidelines
• Other treatment guidelines
• DRA registration
• WHO prequalification
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Product Selection (2)
• FDA approval
• Patent status of proposed drugs
• Cost considerations
• FDC and single drug formulations
• Remember to plan for children
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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
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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
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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
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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
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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
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Role of Pharmaceutical Systems in ART Programs
• Access
• Durability
• Scalability
• Sustainability
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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
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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