In the last blog, we looked at how we can enable pharmaceutical manufacturers to use quality as a differentiator and empower the citizens of our country to make more informed decisions about the medicines that they purchase. We briefly touched upon access, and I said we will come back to revisit this topic later. Let us now look closely at a few interesting facts about how our public procurement systems work, which is a key determinant of access.

Other than policy related documents on how procurement of medicine “should” work in our country, there has been very little research on its implementation and on-the-ground reality of how it actually does. The best reference I came across is this 2013 study published in the British Medical Journal where the authors from Indian School of Business and Indian Institute of Public Health compared drug procurement among five Indian states. Using information collected through the RTI process among other things, they looked at how Tamil Nadu, Kerala, Odisha, Punjab and Maharashtra implemented their drug procurement policies. The article makes for very interesting reading, and their conclusions are nicely summarized in this poster,

For the purposes of our discussion here, I would like to draw your attention to the following conclusions drawn by the authors followed by my comments inline:

  • Lack of any sophistication in demand estimation and forecasting models. States use previous year’s consumption as the basis, no feedback in the modeling exercise.
    • In today’s complex and dynamic disease burden conditions, clearly we can do better than this. Forecasting is sophisticated science, there is absolutely no reason we shouldnt utilize it in our demand planning.
  • Quality control: Empaneled private labs and/or government labs.  Tamil Nadu has empaneled laboratories to which every sample from each batch is sent for quality testing before distributing to user institutions.  Odisha and Maharashtra do not have any quality testing protocols in place, apart from the supplier s internal quality certificate. Pre-qualification criteria, GMP/WHO-GMP/US-FDA is a requirement for all
    • I have trouble reconciling this fact with what the DCGI and the CDSCO has publicly said, that a large majority of our manufacturing facilities do not conform even to Schedule M, forget WHO-GMP. How then are these states fulfilling this requirement?
  • More than half of the suppliers to Tamil Nadu are from within the state. The same statistic for Kerala is 14%, for Maharashtra 34% and for  Odisha, a surprising 0%! 
    • While it could be a good practice to help develop the local drug manufacturing industry, this also points to political patronage. Although difficult to substantiate, patronage manifests itself in many ways, including shortages, availability and overpayments.
  • There was no observed correlation between price vs. volume but there is a negative correlation between level of quality control and pre-qualification criteria vs. price
    • This is very surprising, particularly the second observation. Clearly, quality is not a differentiator when it comes to public procurement it appears. As far as the first observation goes, doesn’t it defeat the whole purpose of having a consolidated procurement system?
  • Tracking dispatched/delivered drugs: value based to none
    • Again, we can do a whole lot better here. Leakages within the system benefit no one, especially, those toward whom this is targeted. Political patronage plays a key role here.
  • A clear difference in the efficiency of the processes can be seen between the autonomous organizations and the state-run organizations in terms of lead times for payments, quality control and in the usage of IT systems and so on. Autonomy refers to the extent of government involvement in the decisions of the procurement organization; fully autonomous’ implies minimal involvement while government owned indicates a high degree of involvement. The idea of having an autonomous organization in the public sector is to enable it to function more transparently by avoiding the plausible procedural delays and also to enable it to make decisions of contracting and outsourcing that are best suited for the prosperity of the organization.  

The procurement process followed by the central and the state governments is vividly described, with interesting anecdotes in this 2007 Working Paper from the University of Edinburgh, which also makes for very interesting reading.

While this study is limited to just a few states, the observations and conclusions drawn are applicable to all. If access to medicines is a priority for us, several of these obvious gaps in our supply chain need to be better managed.

There are no silver bullets, this is a complex web. Most of the changes needed here are systemic. However, there are a number of things we can do in short order to help. Here are some low hanging fruit that we can adopt to simplify our supply chain:

  • With the advent of GST, one of the key reasons for the existence of the many Clearing & Forwarding (C&F) Agents that dot our drug supply should vanish. These entities existed primarily to address the disparate tax collection systems between the various states and the centre and contributed to the price of the drug at the pharmacy counter.
  • While selecting the provider and negotiating contracts:
    • We should change our approach away from selecting the lowest bidder in government contracts. When it comes to medicines, the lowest cost bidder is not always the best. We want the industry to function, and deliver good quality medicine.
    • Only those formulations which have proven therapeutic efficacy should make the cut. The manufacturer ought to have secured regulatory approval for safety and efficacy prior to qualifying for the bidding process
    • The bidding process should be transparent and automated to make it free of political influence. In all my research, this seems to be a big factor. Because Health is a State subject, individuals in power within the State administration essentially have a carte-blanche when it comes to procurement of medicine. There is virtually no accountability or transparency.

Then there are lessons we can draw from how the US is handling drug shortages. Driven primarily by the regulatory observations and actions against pharmaceutical manufacturers based in India, the US public health system has also been at the receiving end of shortages of some life saving drugs. The way in which the system responded to these challenges and the remedies that they have put in place is instructive to us as a country. For more information on how they did it, you can read it here.

As you can see, affordable medicines is a noble objective which can be achieved. But it needs us to understand why we are where we are and chart out a roadmap to our goal in a thoughtful and deliberate manner.

Guidelines from the MCI for example, which were reiterated last week, show how poorly these institutions understand the ground reality of how our drug supply chain works. We should refrain from offering such simplistic platitudes and focus our effort toward developing a better understanding how how the system works today, where systemic issues such as the ones highlighted here prevent efficiencies and therefore result in lack of access.