Drug Shortages and Alternative Systems of Drug Supply
DDBA 8560 - Seminar in Healthcare Managerial Decision Making
In fulfilling the goals of a national drug policy government has a central role in ensuring that
drugs distributed through the public and private sectors are of acceptable quality, safe and
effective. Also governments have a responsibility to promote the rational use of drugs. *In
addition, it is necessary to actively promote drug availability (geographic access) and
affordability (economic access). .
*Among the decisions which governments have to face in the pharmaceutical sector, the most
complex and the most costly often concern the financing and supply of drugs for government
health services. In some countries public sector drug supply is well financed and administratively
efficient. In other countries (with Kenya being a prime example) the drug supply system is
unreliable and shortages are common. Such systems suffer from inadequate funding, outdated
procedures, inefficiency or a mixture of these and other problems. .
*Insufficient health budgets due to deteriorating economic conditions, combined with burgeoning
health problems such as the global HIV/AIDS pandemic, have led to an acute shortage of drug
and medical supplies and unaffordable out-of-pocket costs for health services’ consumers (WHO,
2008). With corruption as both a cause and effect, the result has been the deterioration of general
health among individuals and degradation of the health system in developing countries (World
The effectiveness of drug supply systems in achieving a reliable supply of essential drugs needs
to be continuously and objectively assessed. The drugs management cycle involves four basic
functions: selection, procurement, distribution and use (Quick, 2003). At the centre of the *cycle
is a core management support system, and the entire cycle rests on the policy and *the legal
framework that establishes and supports the public commitment to ensure that *essential drugs
are accessible to the intended population. Many countries, including Malawi, have* adopted the
principle of an essential drug list for the public health sector, which is a list of certain drugs that
are supposed to be available at all times (Malawi Central Medical Stores, 2005). The goal of the
Malawi health authorities is to be able to provide these essential drugs free of charge at all public
health facilities.. It is crucial that essential drugs actually reach patients in need of them.
However, there is evidence that drug shortage is a major barrier to access to essential drugs in the
sub-Saharan Africa (Jitta et al, 2003; Foster, 1991; Geest et al, 2000).
The essential medicines concept introduced in 1977 went a long way in improving availability of
drugs (Quick, 2003; Laing et al, 2003). Availability was further enhanced with the kit system
which was designed to guarantee that certain subsets of medicines essential for primary health
care delivery were available at service delivery points. Although these kits were originally meant
to be supplemented by other drugs as needed, in many areas they became the main, and at times,
the sole drug supplies. This constituted the ‘Push’ system of drug supply. The authorized supplier
determined the types and quantities of drugs to be issued to the peripheral units. It offered several
advantages especially in areas affected by wars or natural disasters but there remained some
inconsistency between the needs of the user areas and the drugs supplied (WHO, 2004). This is
similar to the experience of patients in Kenya, where the decision makers who determine the type
and quantity of drugs to be delivered to health facilities do not have any real time feedback on
the needs of patients. Due to poor record keeping, there are also opportunities for drugs to
disappear through corruption (Ferrinho et al, 2004). Thus there is a need to examine other forms
of drug supply in an effort to redress this situation.
*Alternative Systems of Drug Supply
Central medical stores (CMS)
This is a conventional drug supply system, in which drugs are procured and distributed by a
centralized government unit. Drugs are financed, procured and distributed by the government,
which is the owner, funder and manager of the entire supply system. Selection, procurement and
distribution are all handled by the central government, often by a unit within the ministry of
health. Financing is usually from central treasury allocations and/or donors, though a CMS can
function as a revolving drug fund (MSF, 1997).
This is a demanding approach in terms of human resources, physical infrastructure, management
systems and communication systems, requiring the state to manage and fund every aspect of the
system. It has been a logical approach in situations where the vast majority of items were
imported through one channel; the demand was predictable; finance and administration were
highly centralized; and a developed and professional private sector did not exist (MSF, 1997).
Using the traditional CMS system the availability of drugs in the public sector has deteriorated in
many (but not all) countries as the nature of medical practice has changed (due to new challenges
like HIV/AIDS) and real financial resources have diminished. At the same time the demand for,
and cost of, health service provision has increased (Kangwana et al, 2009).
The causes are many. CMSs have experienced problems with financial management,
quantification of requirements, management of tenders, warehouse management, transport and
security of drugs. These problems have also been exacerbated by political or administrative
influences and weak staff discipline procedures in an atmosphere of diminishing incentives.
Where public financing is adequate then the public sector CMS system can be effective in
providing a supply of drugs as has been demonstrated in the past in many countries and is still
seen in some. .
*The inability of the CMS system to achieve its purposes in the current economic and
commercial climate in many countries indicates a need to consider alternative mechanisms for
the procurement and distribution of drugs (MSF, 1997).
*Autonomous supply agency
It is a centralized supply system in which the management responsibility is devolved to an
autonomous or semi-autonomous Board. The problems which have been experienced with CMS
systems have led some governments to establish systems which place the responsibility for bulk
procurement, quality assurance, storage, distribution and financial management in the hands of
an autonomous or semi-autonomous supply agency (Quick, 2003).
Autonomous supply agencies are often constituted as parastatals, either under the ministry of
health or as independent organizations, with a board of directors including representation from
other (than health) government ministries. Their primary and priority client is government health
services and they may or may not operate on a non profit basis. The goals of establishing an
autonomous supply agency are to achieve the efficiency and flexibility associated with private
management and private sector employment conditions. *At the same time sufficient public
sector supervision is maintained to ensure that the services provide a range of essential drugs, at
reasonable prices, with adequate control of quality. The basic concept is that, under the right
conditions, a well-constituted management board or board of directors will have the freedom to
appoint qualified senior managers, who will in turn ensure an efficient, accountable supply
agency. Whatever the financing mechanism, autonomous agencies can only function if there is a
market for their products and if the client(s) has funds to purchase the products (Foster, 1991).
A whole series of difficulties may occur, for example, if senior managers are political appointees
rather than professional managers appointed by an independent management board. Again, if
special interests outside the agency influence drug procurement, or if the agency is required to
retain staff members regardless of their ability or performance, these factors will be counter-
productive. Countries considering an autonomous supply agency should recognize that this
approach will not solve problems related to supply of drugs. .
*Direct delivery system
It is a decentralized, non CMS approach in which drugs are delivered directly by suppliers to
districts and major facilities. The government drug procurement office tenders to establish the
supplier and price for each item, but the government does not store and distribute drugs from a
central location. In general, CMS and autonomous supply services involve bulk procurement
into, and distribution from, a central warehouse. The costs and logistical problems associated
with central storage and distribution are substantial. An alternative is the direct delivery system.
In this non CMS model, a government procurement office tenders to establish prices and
suppliers for each essential drug, but drugs are then delivered directly by the suppliers to
individual regional stores, district stores or major health facilities (Muyingo et al, 2000). In
Indonesia annual allocations for drugs are made on a per capita basis to each district. *Using their
budget and the Ministry’s current price list for essential drugs, each district determines its own
Contracts for direct delivery may specify fixed quantities with scheduled deliveries (generally
the approach in Indonesia) or estimated quantity tenders with orders placed by the local store or
health facilities as needed. Financing arrangements can be a sensitive issue. Debts can quickly
accumulate if drug supplies are not balanced against available funds. This means maintaining
separate accounts for each supply point (if funding is from central allocations) or ensuring that
all supplies are paid for at the time of delivery. Like most procurement systems, direct delivery
contracts require a sole-source commitment, that is, for the tender drugs the local warehouses
and facilities will order from the supplier who holds the tender contract. The local purchasers are
free to order drugs that were not on the tender from any supplier.
Direct delivery contracts preserve the benefits of centralized selection (the essential drugs list),
bulk procurement (suppliers offer favourable prices to get all the business for the products they
are awarded), and centralized quality control (only reputable suppliers are invited to tender).
Hospitals and/or districts benefit from being able to manage their own funds and determine the
exact quantities needed. Also, the problems of security, central storage and transport are shifted
from the ministry to the private suppliers. With a direct delivery system, however, district level
and facility level drug management responsibilities are much greater, since the quantities and
quality of drug deliveries must be confirmed. Success will depend on the ability and willingness
of staff to manage the increased responsibilities.
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