Download Managing Procurement and Logistics of HIV/AIDS Drugs and

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
• Importance of pharmaceutical systems
• Failure of pharmaceutical systems
• ARV treatment programs
• Key considerations in the supply chain
management of ARV drugs
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
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
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
THE LOGISTICS CYCLE
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
Determinants of Access
to Pharmaceuticals
Availability
• Research & Development
• International Trade Agreements
• National Regulatory Systems
• Procurement mechanisms
Affordability
• Pricing policies
• Government public health expenditures
• Family income
Use
• Inventory management
• Rational drug use
Pharmaceutical System Failure
• Stock out of essential drugs is a clear sign of
pharmaceutical system failure
• Government Failure
• Market Failure
• Income gap
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
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
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.”
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
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)
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
Public Health/Pharmaceutical Scale
Are rights to IP >, = or < Right to Health?
Intellectual Property
Health & Life
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
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
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
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
HIV/AIDS Programs
Clinical Services Pyramid
ART
Supply Chain
Prevention
&
Treatment of OIs
Prevention
VCT
Basic HIV/AIDS
clinical services
Patient Education
Supply Chain
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
Key Considerations for ART
Pharmaceutical Systems
• Policy framework
• Selection
• Forecasting and quantification
• Procurement
• Storage and Distribution
• Use
• LMIS
• Commodity security
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
Product Selection (1)
• Drug selection committees
• National Treatment Guidelines
• Other treatment guidelines
• DRA registration
• WHO prequalification
Product Selection (2)
• FDA approval
• Patent status of proposed drugs
• Cost considerations
• FDC and single drug formulations
• Remember to plan for children
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
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
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
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
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
Role of Pharmaceutical Systems
in ART Programs
• Access
• Durability
• Scalability
• Sustainability
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 wellfunctioning pharmaceutical systems
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