Pharmaceutical Supply Chain Management PDF

Pharmaceutical Supply Chain Management BY: Hafiza H. (B.Pharm, MSC in Health supply chain management) Chapter one 1.1. Introduction to National Drug Policy 1.2. Development and implementation of National Drug Policy 1.3. Objectives and key strategies of NDP 1.4. Concep...

Pharmaceutical Supply Chain Management BY: Hafiza H. (B.Pharm, MSC in Health supply chain management) Chapter one 1.1. Introduction to National Drug Policy 1.2. Development and implementation of National Drug Policy 1.3. Objectives and key strategies of NDP 1.4. Concept of essential medicine 1.5. Formulary process National drug policy  What is a national drug policy? A political commitment to a goal and a guide for action.  It expresses and prioritizes the medium- to long-term goals set by the government for the pharmaceutical sector, and identifies the main strategies for attaining them.  It provides a framework within which the activities of the pharmaceutical sector can be coordinated.  It covers both the public and the private sectors, and involves all the main actors in the pharmaceutical field.  National drug policy… The policy document should be developed through a systematic process of consultation with all interested parties. In the Policy process:  The objectives must be defined, Priorities must be set, Strategies must be developed and  Commitment must be built. 34  Objectives of a national medicine policy  In the broadest sense an NMP should promote equity and sustainability of the pharmaceutical sector.  Objectives of a National Drug policy The general health related objectives To ensure: Access: equitable availability and affordability of essential drugs Quality: the quality, safety and efficacy of all medicines Rational use: the promotion of therapeutically sound and cost- effective use of drugs by health professionals and consumers.  National Drug policy… Other Goals of NDP Economic related goals To reduce foreign exchange for pharmaceutical import To provide jobs (dispensing, pre-packaging, production of pharmaceuticals) National development goal Develop national pharmaceutical production To take a stand on intellectual property rights  National Drug policy…  The specific goals and objectives of a NDP may vary from country to country depending on Structure of health care system Capacity of drug regulating authority Pharmaceutical distribution system The level of funding of pharmaceuticals The country situation The national health policy Political priorities set by the government Key components of a national drug policy 1.4 Concepts of Essential Drugs  Concept of Essential medicines/ Drugs Health is a fundamental human right. Access to health care, which includes access to essential drugs, is a prerequisite for realizing that right. Access  Physical availability  the type and quantity of product or service needed and provided  Affordability  users ability to pay for the products/services  Geographical accessibility  the location of the product/service and eventual user  Essential medicines are intended to be available within the context of functioning health systems at all times adequate amounts appropriate dosage forms assured quality and at a price the individual and the community can afford. Essential medicines are medicines that satisfy the priority health care needs of the population and therefore should be ☑available at all times, ☑in adequate amounts ☑in appropriate dosage forms and ☑at a price the individual and the community can afford” Essential drugs concept “a limited number of carefully selected drugs based on agreed clinical guidelines leads to more rational prescribing, to a better supply of drugs and to lower costs”. It is a global concept that can be applied in any country, in the private and public sectors and at different levels of the health care system. Essential Medicines: Selection Registered Medicines Essential Public Health Medicines Relevance Medicines Cost Efficacy and effective safety Almost 2 billion people – one-third of the global population – do not have regular access to essential medicines.  WHO Model Lists of Essential Medicines The WHO Model Lists of Essential Medicines has been updated every two years since 1977. The current versions are the 23rd WHO Essential Medicines List (EML) and the 9th WHO Essential Medicines List for Children (EMLc) updated in 2023. CURRENT LISTS EML – 23rd edition (July 2023) EMLc – 9th edition (July 2023)  The formulary process The formulary process consists of preparing, using and updating a Formulary list or essential medicines list (EML) Formulary manual Standard treatment guidelines (STGs).  The formulary list or Essential medicines list The formulary list/ essential medicines Is a list of pharmaceutical products approved for use in specific health care setting E.g. National formulary list, provincial formulary list, Hospital list Alphabetically and therapeutically arranged lists of drugs  Advantages of essential medicines list Prescribing Training is more focused and simpler More experience with fewer medicines Non-availability of irrational treatment Reduction of antimicrobial resistance Focused drug information Better recognition of ADR  Advantages of essential medicines list Supply Easier procurement, storage and distribution Lower stocks Better quality assurance Cost Lower prices, more competition Patient use Focused education efforts Reduced confusion and increased adherence to treatment Improved medicine availability How STGs and EMLs lead to better prevention and care  Formulary/essential medicines list Selection criteria ☞Pattern of prevalent disease ☞Treatment facilities ☞Training and experience of available personnel ☞Financial resources ☞Genetic, demographic and environmental factor ☞Medicines which have sound, adequate data on efficacy and safety (clinical studies, evidence from general setting)  Formulary/essential medicines list ☞ Adequate quality, including bioavailability, stability under anticipated conditions of storage and use ☞ When two or more medicines appear to be similar in the above respects, ☞the choice is made by carefully evaluating their relative efficacy, safety, quality, price and availability. ☞ Cost ☞Consider the cost of the total treatment rather than the unit cost of the medicine ☞The basis of a cost-effectiveness analysis.  Formulary/essential medicines list ☞Other factors such as ☞PK properties, availability of facilities for storage or manufacturers. ☞Essential medicines are formulated as single compounds. ☞But fixed-ratio combination products are acceptable only when ☞The dosage of each ingredient meets the requirements of a defined population ☞The combination has a proven advantage over single compounds administered separately in therapeutic effect, safety or compliance. Developing and implementing a formulary list Prioritize a list of common problems/diseases being STEP treated in the hospital and determine the first choice 1 of treatment for each problem Draft, circulate for comment, and finalize the STEP formulary list 2 STEP Develop policies and guidelines for implementation 3 Educate staff about the formulary list and monitor STEP 4 implementation  Formulary manual  is the publication that brings all the important summary information on medicines in the formulary list together in a manual.  Is drug centered  Handy reference that contains selected information relevant to prescriber, dispenser, nurse or other health worker Drug information included in a comprehensive formulary Introductory information Acknowledgment, List of approved abbreviation Introduction ( development of manual, intended user) Formulary policies and procedures  Formulary manual Basic information about each Supplementary information for medicine medicines Generic name Price Dosage and strengths Regulatory category Indications, CI and Storage guidelines precautions Patient counseling Side-effects information Dosage schedule Labeling information Instructions and warnings Brand names and synonyms Drug, food, laboratory interactions  Formulary manual Prescribing and dispensing guidelines Rational prescribing techniques Principles of prescription writing Guidelines for quantities to be dispensed Controlled drug requirements Adverse drug reaction reporting requirements Dispensing guidelines List of precautionary labels Common drug interaction tables  Standard Treatment Guidelines Systematically developed statements that help practitioner or prescriber in deciding on appropriate treatments for specific clinical conditions. It reflect consensus on the optimal treatment option within health facility or health system Standard Treatment Guidelines  It is disease centered  common disease and complaints, treatment alternatives  STG exist for various level of health care  Standard Treatment Guidelines Information on STG Diagnostic criteria Treatment of first choice Cost of treatment Important CI, SE Important drug information, warnings and precautions Referral criteria index  Potential benefits of STG For health officials ☑Identify cost effective treatments ☑Provides a bases for assessing and comparing quality of care ☑It helps to combat antimicrobial resistance ☑Provides information for practitioner on institutions standards of care ☑Is a vehicle for integrating special programs such as control of diarrheal disease, acute respiratory tract infection, TB, Malaria at the point of primary health care provider  Potential benefits of STG For supply management staff ☑Identifies which medicines should be available for the most commonly treated problem ☑Facilitates pre packaging of course of therapy quantities of commonly prescribed items ☑Makes medicine demand more predictable, so forecasting is more reliable  Potential benefits of STG  For patients  ☑Encourage adherence to treatment through consistency among prescriber at all location within the health care system  ☑Ensures most cost effective treatment are provided  ☑Improves availability of medicines  ☑improves treatment and outcomes  Standard Treatment Guidelines The problems associated with STGs include: 🖝The development process Difficult, time-consuming, and requires human and financial resources 🖝the need to update regularly to avoid STGs becoming obsolete 🖝the danger of inaccurate or incomplete guidelines providing wrong information to prescribers  Steps in developing and implementing STGs STEP 1 Identify the working group to adapt/develop the hospital STGs. STEP 2 Develop an overall plan for developing and implementing the STGs STEP 3 Identify the diseases for which STGs are needed STEP 4 Determine the appropriate treatment STEP 5 Determine what information should be included in the STGs STEP 6 Draft the STGs for comments and pilot test STEP 7 Implement – (publish, launch, disseminate, train and supervise) STEP 8 Update  EML, STG, Formulary Manual, Which one need to be developed 1st ? Why?  CHAPTER TWO Health commodity security Chapter content 2.1. What is health commodity security? 2.2. Strategic pathway to health commodity security 2.3. Steps involved in health commodity security 2.4. The purpose of logistics system 2.5. Major activities of the logistics system 2.6. Components of a logistics cycle  Definition Commodity security (CS), which is described as the ability of clients or end users to obtain and use health commodities when and where they need them. These CS approaches and WHO’s essential medicines access strategy can be seen as similar, comprehensive approaches to the broad challenges of medicine supply availability.  Commodity security for any health product requires adequate financing, logistics systems, program coordination, and other factors that make up the enabling environment that supports access and use. WHO Medicine access Strategy  WHO Medicine access Strategy The strategy is not limited to just one or a few categories of essential medicines. All countries and stakeholders seeking to secure essential health commodities need to adopt the strategy. It is much broader in scope and does not include program specific components, such as those in the RHCS and HACS frameworks.  Category-specific approaches to commodity security have proven successful in being able to diagnose gaps in access to commodities and, subsequently, to develop strategic plans to address them. Example: HIV/AIDS CS Reproductive Health CS HIV/AIDS Commodity Security Framework  The prospects for the success of a commodity security strategy whether for a few or many product categories will be maximized by 1. identifying and addressing the different characteristics of the medicines that it seeks to secure; and 2. taking advantage of opportunities to achieve overall system efficiencies and reduce redundancies. The purpose of logistics system  The goal of a health logistics system is much larger than simply making sure a product gets where it needs to go.  Ultimately, the goal of every public health logistics system is to help ensure that every customer has commodity security.  Commodity security exists when every person is able to obtain and use quality essential health supplies whenever he or she needs them.  A properly functioning supply chain is a critical part of ensuring commodity security— financing, policies, and commitment are also necessary. The PURPOSE of a logistics system is to get the RIGHT QUANTITIES of the RIGHT GOODS to the RIGHT PLACES at the RIGHT TIME in the RIGHT CONDITION at the RIGHT COST. 130 Logistics and Supply chain Management 124 Supply chain management  encompasses the planning and management of all activities involved in sourcing and procurement, and all logistics management activities.  Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers.  In essence, supply chain management integrates supply and demand management within and across companies.  Logistics management  is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers‘ requirements.  The pharmaceutical supply chain  is the management of pharmaceutical supply from raw material sourcing to active ingredient manufacturing through formulation, packaging and distribution to the patient.  It is the means through which medicines are delivered to patients.  Drug Supply Management cycle Management support → core  Organization → functional  Financing and sustainability → adequate  Information management → reliable  HR management → motivated staff The entire framework relies on policies, laws and regulation 132 Drug Supply Management cycle Components of a logistics cycle  The logistics cycle includes:- major activities in the cycle heart of the logistics cycle quality monitoring of the activities logistics environment—policies and adaptability of the system. The Logistics cycle  Selection of Drugs  Drug selection: Is the process of identifying and picking out a number of essential drugs in order to achieve better supply, more rational use, and lower costs.  Pharmaceuticals may constitute up to 40% of the health care budget in developing countries,  Yet large portions of the population frequently lack access to even the most essential drugs.  Limited funds available are frequently spent on ineffective, unnecessary, or even dangerous medications.  Nowadays there are about 250,000 drug products available in the world market.  70% of the pharmaceuticals on the world market today are  Duplicative or non-essential  Many are minor variations of a prototype drug and  offer no therapeutic advantage over other drugs  Some are newly released with insufficient information on their efficacy and toxicity Due to this impossible for prescriber to be up to date and to compare alternatives inconsistent prescribing with in the same health care system or health facility Difficulty in procurement  In short, pharmaceuticals can provide great benefits, but their cost is substantial.  For one thing, no country or program can afford to purchase all pharmaceuticals circulating in the market within its given budget.  For the other thing, the limited funding available shouldn’t be spent on ineffective, unnecessary or even dangerous medications.  Careful selection of pharmaceuticals has considerable impact on quality of care and cost of treatment and  it is therefore one of the areas where intervention is most cost-effective. The rationale for selecting a limited number of essential pharmaceuticals 1. A better supply  Easier procurement, storage and distribution  Adequate stocks  Better quality assurance  Easier dispensing 2. More rational prescribing and dispensing  More focused training and drug information  More experience with fewer pharmaceuticals  No irrational alternatives available  Better recognition of drug related problems 3. Lower cost  Increased competition, lower cost 4. More rational patient use  Focused patient education  Reduced confusion and increased adherence to treatment  Basic steps and criteria in drug selection 1. Establish drug selection committee with an appropriate representation. 2. Determine the prevalent health problems and patient characteristics 3. Decide which health problems may be treated at the level of health care unit before selection. May depend on diagnostic facilities and prescribing practice:  Complete treatment  Initial treatment  Follow up treatment  Repeat visit and  Preventable health service  Basic steps……..Cont’d 4. Choose the drugs to be used for the health problems 5. Structure the list of drug products The list of selected drug should be categorized: – Pharmaco-therapeutically and/or alphabetically. – By the level of health care  If the prepared list includes drug products to be used by different level of health care and dispensing units, it should be structured accordingly to the level of importance (VEN) All the drugs included in the list may not be equally important and hence, they should be categorized by the level of importance into three categories. i) Vital drugs (very essential) ☞Which are potentially life- saving and have major importance in basic health services. e.g. Anti-malaria, ORS, vaccines ,etc. ii) Essential drugs ☞Which are effective against less life threatening, but significant health problems e.g. certain antibiotics iii) Non essential ☞This are used for minor or self-limiting health problems or have a high cost and low therapeutic advantage. e.g. cough syrup, antacid tablet or suspension.  N.B:- This type of classification help in setting priority for drug purchasing and stock keeping 6. Introduce the final list of drugs 7. Up – date the list of drugs  The list of drug should be reviewed periodically  Any addition into and deletion should be on the basis of the selection criteria.  Additionally the following issues should be considered during preparation of a pharmaceutical list:  Pharmaceutical list should be prepared based on generic name of products.  A pharmaceutical list should include standardized description and specification. For example a medicine in the list must compose generic name, dosage form and strength  Minimize the number of strengths stocked for the same medication  Include second-line alternatives to medicines of choice as needed, but minimize therapeutic duplication.  Ensure that pharmaceutical list at the facility level is in line with national list.  Monitoring & evaluation of drug selection Drug selection should be monitored & evaluated against its objectives using indicators. Sample indicators are:- Availability of drug which are not relevant Availability of drug above the level of health institution. Unavailability of relevant drugs Whether selection of drugs is done without considering the major factor for drug selection. Discuss with groups  Assume you are deployed as pharmaceutical supply personnel in a new district hospital. Based on the above lecture you learn on selecting pharmaceuticals discuss the situation of the selection process during the COVID-19 pandemic period Quantification of Pharmaceuticals  Quantification: is the process of estimating the quantity and cost of the products required for a specific health program (or service), and, to ensure an uninterrupted supply for the program, determining when the products should be procured and distributed  Process of estimating the quantities of specific drugs needed for procurement.  Quantification = forecasting + supply planning  Quantification is not a one-time, annual exercise that ends when the final quantities and costs of the pharmaceuticals have been determined. It is an iterative process with reviews and updates required year-round  Quantification is a critical supply chain activity that links information on services and pharmaceuticals from the facility level with program policies and plans at the national level, and  is then used to inform higher level decision making on the financing and procurement of pharmaceuticals Steps in quantification of pharmaceuticals 1. Preparation Prior to collecting data, two initial steps should be taken: A. Describe the program and B. Define the scope, purpose, and timeframe of the quantification. C. Collect required data A) Describe the program Summarize the background, current status, and performance of the program for which the pharmaceuticals/ commodities are being quantified. This summary should include a review of program goals, strategies, and priorities, and any expansion plans or change in policies that may significantly influence uptake of services and demand for commodities  B. Purpose of the Quantification It is important to identify the purpose of the quantification and how it will address the program’s needs. Examples of the purpose of a quantification include the following:  To provide data on specific commodity requirements and costs for the government’s annual budget allocations  To inform donors about funding requirements and advocate for resource mobilization for commodity procurement Forecasting Time Horizons  Short-range forecast  Up to 1 year, generally less than 3 months  Medium-range forecast 3 months to 3 years  Long-range forecast  3+ years C. Collectrequired data Data for Forecasting  Consumption data: quantity of each product dispensed or consumed over the past 12month period  Services data: number of visits, number of services provided, lab tests conducted, treatment episodes, or number of patients on treatment over the past 12-month period  Morbidity data: incidence and prevalence of specific diseases/health conditions 2. Forecasting  Forecasting, the second step in the quantification process, uses the data collected during the preparation step to estimate the quantity of each product that will be dispensed or used during each year of the quantification.  These quantities are the basis for calculating the total commodity requirements in the supply planning step.  The forecasting step in a quantification exercise is a four-part process  Organize, analyze, and adjust the data.  Build and obtain consensus on the forecasting assumptions.  Calculate the forecasted consumption for each product.  Compare and reconcile results of different forecasts 3) Supply Planning Supply planning step is used to estimate the total pharmaceuticals requirements and costs for the program To calculate this estimate, start with the forecasted consumption for each product from the forecasting step; then,  consider the existing stock on hand;  any quantities of product already on order, but not yet received; and  the established maximum and minimum stock levels.  Be sure to include procurement and supplier lead times and provide a buffer stock for unexpected delays Supply planning process Organize and analyze data.  build supply planning assumptions.  estimate total commodity requirements.  develop supply plan.  Compare costs to available funding.  Organize and analyze data Data for the supply planning step are different from the data for the forecasting step. However, you can collect data for both the forecasting and the supply planning steps at the same time   Product related data specific product characteristics (formulations, dosages, shelf life, temperature requirements, number of units per pack size, unit cost, and others)  Supplier related data supplier prices, supplier packaging, information supplier lead times, Current shipping and handling costs by supplier  Funding Funding sources for procurement of commodities, amount and timing of funding commitments by funder funding disbursement schedule  Procurement Procurement lead time for each procurement mechanism Indicators of poor quantification:  Shortage of drugs  Overstocking of drugs  Irrational prescribing  Inefficient budget use  Suppression or distortion of demand  There are four basic methods for estimating drug quantities. 1) Consumption method 2) Morbidity method 3) The adjusted consumption method 4) Service – level projection of Budget requirements  Consumption Method This method uses past consumption of the selected drug in order to calculate the total amount of drug required. Consumption data provides a direct link with the end users.  This method is used if the health facility: is adequately funded. has acceptable patterns of prescribing has adequate and uninterrupted drug supply. has reasonable good stock management, complete and accurate consumption and stock out information has low level of wastage and losses  Definition of common terms Basic Unit (BU): – the smallest unit in which a medicine can be conveniently dispensed or administered. E.g. capsule, tablet, tube, vial Lead time: – The time between when new stock is ordered and when it is received and available for use. Safety stock: – the buffer or minimum stock that is kept on hand to protect against stockouts that are caused by delay in deliveries, increased consumption or other unexpected events 180 Average monthly consumption: is the average of the quantities of product used calculated by dividing total quantity consumed to number of months (commonly the most recent three months) Procurement or review period: is the interval of time between assessments of stock levels to determine if additional stock is needed and hence initiate order or procurement Stock on hand/inventory: is the quantity of usable stock available at a given point in time Stock on order: is the quantity of a product ordered but not received yet received  Consumption Method Steps in quantification 1. Prepare list of drugs to be quantified 2. Determine the period of time to be reviewed for consumption 3. Enter consumption data for each drug – The total quantity used during the review period in BUs(basic units) – The number of the days in which the drug was out of stock – The lead time for the last procurement (averaged from last several procurements)  NB! Sources of data: Stock records, invoices from supplier Dispensing records (e.g. patient drug registration book) Distribution report (central/regional /district distribution point) Computerized inventory mgt. e.g. Dagu, HCMIS 4. Calculate average monthly consumption CA= CT/(RM - (DOS/30.5) ………....................................................equation 1 Where CA =average monthly consumption (AMC), adjusted for stock out CT = total consumption during the review period, in Basic Unit RM = Review period in months DOS = No. of days an item was out of stock during the review period 30.5 is constant assigned for average number of days in a month 5. Calculate projected average monthly consumption for expected changes in consumption pattern CP=CA+ (CAxAU) Where CP= Projected average monthly consumption AU= Use adjustment  Consumption Method 6. Calculate the safety stock needed for each drug SS = CA X LT ………………………………………………………………………….equation 2 Where SS = safety stock CA = average monthly consumption, adjusted for stockout LT = average lead time 7. Calculate the quantity of each drug required in the next procurement period QO= CP X (LT + PP) + SS - (Si + So) Where QO = quantity to order before adjustment for losses or program change PP=procurement period Si = stock now in inventory, in BU So = stock now on order, in BU 8. Adjust for losses QA=QO+(QO x AL ) Adjust for avoidable wastage mainly results from QO = quantity to be ordered  Poor stock management  Poor storage AL = Loss adjustment  Careless handling  Theft Expiration … etc 9. Compile decentralized quantification (if applicable) 10. Estimate costs for each drug and total costs 11. Compare total cost with budget and make adjustment – either obtain more funds or – reduce the number of drugs/or quantities ordered. Example, calculate the amount of Ampicillin 250 mg capsule for the next six month (procurement period) based on the following data – CT=89,000 capsule Si=81,000 – So=58,000 LT=3 month – Dos= 34 days – Use adjustment for 6 month=5% – Loss adjustment for 6 month=10%  Consumption Method  CA = CT/(RM - (DOS/30.5)  = 89,000/(6 – (34/30.5)) = 18,218  CP = CA + (CAxAU)  = 18,218 + (18,218 x 5%) = 19,129  SS = CA X LT  = 18,218 x 3 = 54,654  QO= CP X(LT +PP)+SS -(Si+So)  = 19,129 x (3 + 6)+ 54,654 – (81,000 + 58,000) = 87,815  QA= QO +(QO x AL)  = 87,815 + (87,815 x 10%) = 96,596.5  Consumption Method QA =QO+(QO x AL) – 96596.5 capsule converted into pack – 97 pack – Probable price 1 pack = 24.70 USD – Value of proposed order (USD) = 2,395.9≈2396 Advantage and Disadvantage of using consumption method Advantages:  Does not require detailed morbidity data or standard treatment protocol  Requires less detailed calculations  Useful for facilities in which their health problems are numerous and drug treatments are complex  Identifies stock management problems and encourages improvements  Reliable if consumption is well-recorded and stable Disadvantages:  Does not encourage good morbidity recording  Unreliable if there had been long stock outs (over three months) and high drug wastage or losses  Doesn’t address appropriateness and may not correspond to priorities and needs  Does not provide a detailed and systematic basis for reviewing drug use by improving prescribing patterns. (May perpetuate irrational drug use)  May be difficult to obtain reliable drug consumption data especially in new or rapidly changing services 3. Morbidity Method Morbidity method  Morbidity Method:- estimates the need for specific pharmaceuticals based on the expected number of attendances, the incidence of common diseases, and standard treatment patterns for the diseases considered.  This method starts from two sets of data: the number of episodes of each health problem and average standard treatment schedules  Morbidity method… This method is used when:- ☞Available consumption data are incomplete or unreliable. ☞Prescribing patterns are not cost effective ☞The budget is unlikely to be sufficient to meet estimated requirements. ☞The health facility or services are expanding rapidly or new. N.B:- morbidity method is estimation of required drug to treat common disease based on standard treatment protocols and epidemiological data.  Morbidity method The morbidity method uses data on patient use (attendances at the health facilities) and morbidity (the frequency of common health problems) to project the need for medicines based on assumptions about how the problem will be treated.  Morbidity method Steps in quantification using morbidity method 1. Specify the list of problems 2. Establish the list of medicines to be quantified 3. Establish standard or average treatments QE = DCUX ND X LD Where QE = Quantity of medicine needed for each tt episode Tt episode= a pt contact for which a std course of drug tt is required DCU=basic unit per dose ND=Number of doses per day LD=length of treatment per episode  Morbidity method 4)Collect morbidity data for each health problems treated Estimate expected number of contacts CE= C+(C x AU) Where, C - past total no. of contacts AU - Use adjustment CE-expected total no. of contacts  Morbidity method Sources of information for Morbidity data Health Information system – morbidity pattern and treatment Key issues in conducting studies episode  Obtain No. of contacts and No. of – Information is not usually available treatment episodes Special study in Sentinel facilities  Include only pt contacts that – Retrospective review of records in normally need drug tt selected facilities E.g. exclude well baby clinic > accessible, complete and accurate – Prospective study in a sample of health facilities  Key issues in conducting studies…  Express the frequency of each health problem in terms of common denominator, such as 1000 inpatients or outpatient visits  Separate frequencies must be developed for all age group specified in a STG  If discrete type of prescribers (Doctors Vs Nurses) use different treatment regimen, the number of episodes must be compiled separately for each prescriber type  The sample data should also specify the No. of patient contact per total population in the area served by the sample facilities.  Morbidity method  5)Calculate the No. of tt episodes for each health problem  ET=CE X F  Where  ET =number of treatment episodes  CE = expected total number of contacts in thousands  F = the frequency of health problem estimated per 1000 contacts 6)Estimate the quantity of drugs needed for each health problem QT=ET X QE X PT QT=quantity of drugs needed ET= number of treatment episodes QE=quantity of drugs for each treatment episode, BU PT=percentage of cases that are treated with that specific regimen  Morbidity method 7)Combine the estimates for each drug from the various health problems into a master procurement list 8)Adjust quantities to cover other health problems, for filling the pipeline and current stock position, and for expected losses 9)Estimate costs for each drug and total costs 10)Compare total costs with budget and make adjustment 195 Example  Estimate the total quantity of medicines required for the treatment of Otitis Media based on the following information. Last total No. of contacts (C)= 3,123,408 5% expected rate of increase Frequency of Otitis Media (per thousand) = (106 for 5)  Morbidity method Treatment for Otitis Media Under 5 – Cotrimoxazole suspension 5ml BID for 10 days – Paracetamol sol/n of 120mg/5ml, 1.5ml QID for 10 days – Pseudoephedrine syrup 2.5ml QID for 5 days Above 5 – Cotrimoxazole 800/160 mg tab BID for 10 days – Paracetamol 500 mg tab, 2 tab QID for 5 days – Pseudoephedrine 60 mg tab QID for 5 days All patients of Otitis Media are expected to be treated by cotrimoxazole and paracetamol, whereas 80% of patients also treated with Pseudoephedrine  Morbidity method  Solution  QE = DCU X ND X LD Paracetamol 500 mg tab  Under 5 2 tab x 4 x 5 =40 tab Cotrimoxazole suspension Pseudoephedrine 60 mg tab  – 5ml x 2 x 10=100 ml 1 x 4 x 5= 20 tab Paracetamol 120mg/5ml CE= C+(C x AU)  – 1.5ml x 4 x 10=60 ml  – 3,123,408 + (3,123,408 x 5/100)) Pseudoephedrine syrup  – 3,279,578  – 2.5ml x 4 x 5= 50 ml ET=CE X F  Above 5  – 3,279,578 x 106/1000= 347, 635  – 3,279,578 x 29/1000= 95,108 Cotrimoxazole 800/160 mg  – 1 tab x 2 x 10 =20 tab  Morbidity method QT=QE X ET X PT – Under 5 Cotrimoxazole suspension –100 ml x 347, 635 x 1 –34,763,531 Paracetamol 120mg/5ml –60 ml x 347, 635 x 1 –20,858,119 Pseudoephedrine syrup –50 ml x 347, 635 x 0.8 –13,905,412 4. Service-level projection of budget requirements  It uses the average drug procurement cost per attendance or bed-day in different types of health facilities in a standard system to project drug costs in similar types of facilities in the target system.  Information needed:  Average number of curative outpatient attendance, non-curative attendance, and inpatient bed days for each type of facility in the source health system.  The average cost per outpatient attendance, per non-curative attendance and per bed-day in each type of facility.  This method does not estimate quantities of individual medicines rather it is used to estimate financial requirements Steps in quantification 1. Establish the categories of facilities and determine the number in each category 2. Determine the patient contact denominators for each type of facility and estimate the average number of patient contacts of each type at each category of facility 3. Calculate the average cost per contact Average cost per contact = Total drug purchase/Total attendance or bed days 4. Calculate the total projected drug costs  Multiply the average number of patient contacts for each facility by the number of facility and average drug cost. Chapter 5: Pharmaceutical Procurement Chapter objectives  Explain the basic concepts of pharmaceutical procurement  Statethe operational principles of good pharmaceutical procurement  Identify factors affecting cost of pharmaceuticals  Discuss the pharmaceutical procurement process  Describe pharmaceutical procurement methods  Identify common challenges related to pharmaceutical procurement  Describe the pharmaceutical procurement rules and regulations in Ethiopia Introduction  Pharmaceutical procurement is the process of acquiring drug products through purchase, manufacture, or donation.  The pharmaceutical procurement system is a major determinant of pharmaceutical availability and total pharmaceutical costs.  In many countries, public health officials have limited experience in designing an optimal procurement system to fit their market context. An effective pharmaceutical procurement process should;  Seek to manage the buyer-seller relationship in a transparent and ethical manner  Procure the right medicines in the right quantities  Obtain the lowest practical purchase price  Ensure that all procured pharmaceuticals meet recognized standards of quality  Arrange timely delivery to avoid shortages and stock-outs  Ensure supplier reliability with respect to service and quality  Set the purchasing schedule, formulas for order quantities, and safety stock levels to achieve the lowest total cost of purchasing at each level of the system Strategic objectives of pharmaceutical procurement  There are four strategic objectives of pharmaceutical procurement set by WHO 1. Procure the most cost- effective drugs in the right quantities  The first strategic objective is that all organizations responsible for procurement should develop an essential medicines list to make sure that only the most cost-effective drugs are purchased  Procedures must also be in place that accurately estimate procurement quantities to ensure continuous access to the products selected without accumulating excess stock 2. Select reliable suppliers of high- quality products  The second objective is that reliable suppliers of high- quality products must be selected and that active quality assurance programs involving both surveillance and testing must be implemented 3. Ensure timely delivery  The third strategic objective is that the procurement and distribution systems must ensure timely delivery of appropriate quantities to central or district stores and adequate distribution to health facilities where the products are needed 4. Achieve the lowest possible total cost The fourth objective is that the procurement and distribution systems must achieve the lowest possible total cost, considering five main components:  The actual purchase price of drugs  Hidden costs due to poor product quality, poor supplier performance, or short shelflife  Inventory holding costs at various levels of the supply system; and  Operating costs and capital loss by management and administration of the procurement and distribution system  Opportunity costs Operational principles for good pharmaceutical procurement 1. Different procurement functions and responsibilities should be divided among different offices, committees and experts, each with the appropriate expertise and resources for the specific function  Without appropriate separation of function and authority, the procurement personnel may be able to bias drug selection, manipulate orders to increase the quantities of certain drugs, prejudice supplier qualification decisions, manipulate the final award of the tender, and slant product specifications to limit competition 2. Procurement procedures should be transparent, following formal written procedures throughout the process and using explicit criteria to award contracts  Fairness and the perception of fairness are essential to attract the best suppliers and achieve the best prices  When the pharmaceutical tender process is less transparent and even secretive, it tends to be perceived as corrupt or unfair  Unsuccessful suppliers may feel that they have no chance of winning and consequently withdraw from future tenders 3. Procurement should be planned properly and procurement performance should be monitored regularly; monitoring should include an annual external audit  In order to ensure that drugs are available where and when they are needed, drug procurement must be carefully planned.  Planners should consider factors such as access to suppliers; funding availability and timing; the number of levels in the logistics system; constraints of time and resources affecting procurement activities:-  such as reviewing drug selection, quantification, tendering, and contracting; the lead times at various levels of the system; import procedures; customs clearance; and access to transport. 4. public sector procurement should be limited to an essential drugs list or national/local formulary list.  A limited list of drugs for procurement, based on an essential drugs list or drug formulary, defines which drugs will be regularly purchased  This allows the health system to concentrate resources on the most cost- effective and affordable drugs to treat prevailing health problems. 5. Procurement and tender documents should list drugs by their International Nonproprietary Name (INN), or generic name.  The INN is widely accepted as the standard for describing drugs on a procurement list or tender request.  When purchasing products that present potential problems with pharmaceutical equivalence or bio-equivalence the procurement request should specify the quality standards but not mention specific brands. 6. Order quantities should be based on a reliable estimate of actual need.  Accurate quantification of procurement requirements is needed to avoid stock-outs of some drugs and overstocks of others.  In addition, if suppliers believe the estimated procurement quantities are accurate, they are more willing to offer the lowest competitive price on an estimated quantity supply contract.  When funds are not available to purchase all drugs in the quantities that were estimated to be needed, it is necessary to prioritize the procurement list to match available financial resources.  By using various techniques such as VEN Analysis, and ABC Analysis can be used to select priorities and reduce the quantities of less cost-effective drugs. 7. Mechanisms should be put in place to ensure reliable financing for procurement.  Good financial management procedures should be followed to maximize the use of financial resources  Potential sources of funds for pharmaceutical procurement include government financing, user fees, health insurance, community co-financing, and donor financing.  The most important considerations for procurement are total funds available, adequate access to foreign exchange, and the regularity with which funds are available. 8. Procurement should be in the largest possible quantities in order to achieve economies of scale  Larger procurement volume makes favorable prices and contract terms more likely,  by increasing suppliers’ interest in bidding and by providing them with an incentive to offer a competitive price. 9. Procurement in the public health sector should be based on competitive procurement methods, except for very small or emergency orders. There are four main methods for purchasing drugs.  Three of them are competitive: restricted tenders, open tenders, and competitive negotiations. The fourth method is direct negotiation with a single supplier.  Since inducing supplier competition is a primary key to obtaining favorable pricing, the public sector should use competitive methods for all except for small or emergency purchases.  As long as drug quality and service reliability are assured, competition should be increased to the point at which drug prices are as low as possible.  The “rule-of-five” for pharmaceutical pricing holds that generic prices generally reach their minimum when there are at least five generic alternatives on the market and that prices in tendering systems are at their lowest where there are at least five bids per item; adding more bids generally does not result in further lowering of prices. 10. Members of the purchasing groups should purchase all contracted items from the supplier that holds the contract.  Except in those systems where each health facility negotiates prices and purchases drugs individually, public pharmaceutical procurement systems are seen as purchasing groups.  Group purchasing achieves lower prices than would be available to the same group of health facilities if they were purchased individually.  These discounts are based on the fact that facilities that are part of the purchasing group will purchase contract items only from the selected contract supplier, as long as that supplier can perform. This is called sole-source commitment. 11. Prospective suppliers should be pre-qualified, and selected suppliers should be monitored through a process that considers product quality, service reliability, delivery time, and financial viability.  Pre and post-qualification procedures help to eliminate substandard suppliers if properly managed.  Pre-qualification is the procedure of evaluating supplier capacity and reputation before bids are solicited for specific products.  Post-qualification evaluates the suppliers after bids have been received.  If there are numerous offers from unknown suppliers there may be long delays in awarding contracts, as it will be necessary to validate suppliers’ capacity to supply good-quality products. 12. Procurement procedures/systems should include all assurances that the drugs purchased are of high quality, according to international standards.  The selection of suppliers that are known to provide high-quality products is the primary key to ensuring drug product quality.  Four components make up an effective quality assurance system:  Selecting reliable suppliers of quality drugs;  Using existing mechanisms, such as the WHO Certification Scheme on the Quality of Pharmaceutical Products Moving in International Commerce;  Establishing a program for reporting product defects; and  Performing targeted quality control testing. Factors influencing pharmaceutical unit prices and total costs Unit prices – Competition among supplier number of products and generic version  Rule of five Gov’t policy  registration, licensing, prescribing, dispensing Procurement method  Reorder frequency and the total cost of purchasing  Pharmaceutical acquisition prices are only one part of the total cost of pharmaceutical purchasing;  the other important components are the costs associated with holding inventory, the costs of operating the purchasing system, and the extra costs incurred when stockouts occur (shortage)  Total cost = Drug acquisition price + inventory holding cost + purchase operating cost + shortage cost  Although procurement offices typically concern themselves mainly with pharmaceutical acquisition costs, the other cost components may increase the total purchasing cost by 50% or more of the acquisition costs.  For each country’s situation, total purchasing costs can be minimized by choosing the optimal reorder frequency model, as defined by;  The interval between orders; options include annual (one order per year), scheduled (periodic orders, for example, every three months), and perpetual (orders are placed whenever stock falls to a specified level).  The interval for a system is guided by Safety stock, target- -lead time, consumption pattern, and service level objectives  Visible and hidden costs  Total cost= Hidden cost + visible cost  Hidden costs associated with poor performance by the supplier or the procurement office include;  Increased acquisition costs due to emergency procurement, such as when a vital medicine is ordered too late or usage exceeds estimates or the supplier fails to deliver on time  Replacement costs when goods are lost or must be discarded because of poor packaging, improper shipping conditions, rapid spoilage, or short shelf life  Replacement costs for short shipments, wrong concentrations of liquid preparations, wrong dosage forms, and so on  Storage, port charges, and administrative expenses due to inefficient clearing procedures or lack of funds or proper documentation  Health and economic costs of stockouts resulting from delay or default on delivery The impact of hidden cost on the total cost  Pharmaceutical procurement process Pharmaceutical procurement composes different activities stated in the following figure 1. Identify what to procure: You have to review the selected drugs each time you begin the procurement process. Give priority to vital and essential medicines. 2. Determine how much to procure: Obtain the quantified amounts of pharmaceuticals from the step of quantification. 3. Reconcile Needs and Fund/Budget: Estimate the cost of the quantity of pharmaceuticals to be procured. 4. Determine when to Buy 5. Locate and select suppliers 6. Prepare tender documents/Tender invitations/ specify contract terms: It is a document that lays down the technical and basic legal requirements for obtaining products of acceptable quality. It serves as a reference if problems with suppliers arise. 7. Evaluation of Bids: After thoroughly evaluating the bids, a special committee or tender board usually awards the tender. A pharmacist or a person with technical knowledge of pharmaceutical products and their manufacturer must be a member of the tender board. 8. Prepare purchase order/Requisition: This form specifies among other things; the generic name, strength dosage form, of the drug, unit monthly consumption, quantity in stock, quantity requested (to be filled by the purchaser) and the quantity supplied, unit cost and total cost (as per the tender agreement). It also specifies the supply period and full address of the two parties. 9. Monitor order status: Recording of the date on which the requisition is prepared; approval sent to the supplier, and previous supplies received must be kept in order to react when there is unnecessary delay. 10. Receive and check drugs: Check for the type and quantities received against the pharmaceutical requisition and invoice.  Besides, we have to check the quality, packaging, and labeling of the products in order to verify whether they meet the required standards. Report any discrepancy in quantity or quality to the supplier. 11. Make payment as per contract: we have to pay the amount of money or assets we agreed to pay within the contract. 12. Update the balance of the budget: Once the purchased drug and inventory control are received, subtract the cost from the previous balance in order to know the current status of the drug budget.  Pharmaceutical procurement methods Pharmaceutical procurement methods  The major pharmaceutical procurement methods used by health systems are  open tender,  restricted tender,  competitive negotiation, and  direct procurement,  which vary with respect to their effect on the price, delivery times, and workload of the procurement office.  Open Tender  Open tendering is a formal procedure by which quotations are invited from any supplier’s representative on a local or worldwide basis, subject to the terms and conditions specified in the tender invitation.  Assessment of suppliers in an open tender can be time-consuming because of the large number of bids.  As a result, too many offers may be submitted that overload the limited capacity of procurement agencies and the assessment of suppliers and bids may not get done as thoroughly as they should. Restricted Tender (closed bid or selective tender)  A restricted tender, open only to prequalified suppliers.  In a restricted tender, interested suppliers must be approved in advance, often through a formal prequalification process that considers adherence to GMP, past supply performance, financial viability, and related factors.  A restricted tender could provide a better system for quality assurance than an open tender.  Since the pre-qualification of suppliers is done independently of the evaluation of prices of the products the supplier assessment can be done more objectively. Competitive Negotiation  In competitive negotiation, the buyer approaches a limited number of selected suppliers (typically at least three) for price quotations.  Buyers may also bargain with these suppliers to achieve specific price or service arrangements.  Usually, this procurement method is used primarily in the private sector, because public-sector procurement organizations are generally forbidden from negotiating or bargaining with suppliers.  Usually, this method results in higher prices. Direct Procurement  This is the simplest but perhaps the most expensive procurement method of all  It involves direct purchase from a single supplier either at quoted prices or negotiated prices.  This method is well suited for emergency situations but is not the preferred choice for routine orders. Advantages and Disadvantages of pharmaceutical procurement methods Method Advantages Disadvantages Open tender ♦ Many bids, some with low ♦ High workload is required in prices evaluation of bids and selection ♦ New suppliers can be identified of suppliers Restricted tender ♦ Fewer bids (less workload than ♦ More limited options open tender ♦ System for prequalification ♦ Quality is easier to ensure must be set Competitive negotiation ♦ Suppliers are generally well ♦ Higher price known ♦ Less evaluation work Direct procurement ♦ Easy and quick ♦ Higher price Challenges of pharmaceutical procurement Inadequate rules, regulations, and structures Public sector staff with little experience in responding to market situations Absence of a comprehensive procurement policy Government funding that is insufficient and/or released irregularly Donor agencies with conflicting procurement regulations Fragmented drug procurement at the provincial or district level Lack of unbiased market information Lack of trained procurement staff Suspicion of Fraud or Theft Limited Supplier Network Paper-Based Processes  Monitoring and evaluation of pharmaceutical procurement performance  Procurement should be monitored and evaluated against its objectives using appropriately designed indicators. The following indicators can be used to measure the performance of procurement. 1. Procurement efficiency: This indicator measures the efficiency of procurement practices by comparing the prices paid for medicines with international price standards. The formula for computing this indicator is; Procurement efficiency = Median price of products procured International median reference value 2. On–Time Delivery:  This indicator measures the percentage of all orders delivered by the requested delivery date, as indicated in the purchase order or contract during a defined period of time. The Formula for calculating this indicator is; On-time Delivery = Number of orders delivered within requested period x 100 Total number of orders delivered 3. Percentage of orders fully comply with essential medicine list:  This indicator evaluates the percentage of requisitions made for medicines only within the essential medicine list.  The formula for determining this indicator is % of orders fully comply with EML = Number of orders fully comply with EML x 100 Total number of orders delivered 4. Supplier Fill Rate: This indicator measures supplier’s ability to fill orders completely in terms of items and quantity as defined in purchase order or contracts, during a definite period of time. The formula is; Supplier Fill Rate = Number of Orders Filled Correctly * 100 Total Number of Orders Inventory Management  Inventory management  Inventory management refers to the process of ordering, storing, issuing, and selling of pharmaceuticals.  It is an approach for keeping track of the flow of inventory.  In many countries, poor inventory management in the public pharmaceutical supply system leads to waste of financial resources, shortages of some essential medicines or overages of others resulting in expiration, and decline in the quality of patient care.  The objective of good inventory management is to maintain steady supply to operating units (and patients) while minimizing the costs of holding inventory and managing inventory.  Compiling information on the total variable costs of inventory management (drug acquisition costs, inventory holding costs, purchasing operations costs, and shortage costs) allows managers to evaluate strategies for reducing costs.  Sick inventory management systems generally feature subjective, ad hoc decisions about order frequency and quantity, inaccurate stock records, and a lack of systematic performance monitoring. Purpose of Inventory Control System:  The purpose of an inventory control system is to inform the store man or other concerned body when and how much of a pharmaceutical to order/issue  and to maintain an appropriate stock level to meet the needs of patients.  A well-designed and well-operated inventory control system  prevents shortages, oversupply, and expiry of pharmaceuticals Seven basic issues must be carefully considered when an IMS is being initially designed or upgraded: 1. Definition of the context in which the IMS must function 2. Determination of the types of stock records and inventory reports needed 3. Selection of items to be stocked as standard items 4. Maintenance of appropriate service levels for different classes of items 5. Adoption of a decision rule or a model for determining when to reorder 6. Adoption of a decision rule or a model for determining how much to reorder 7. Identification and control of inventory management costs using product classification systems such as ABC analysis, VEN analysis, level of use, and other cost minimizing techniques. Issues to be considered during designing or upgrading IM 1. Defining the context in which the IMS must function – Independent demand system vs Dependent demand system – Pull or push distribution system 2. Determination of the type of stock records and inventory reports needed Stock records – Primary source of information – Can be manual or computerized – Commonly used manual records Vertical file records, Kardex system, Ledger system  stock keeping records Purpose of stock keeping records? – to record information about items in storage. What essential data items do stock keeping records contain? – the quantity of stock on hand – the quantity of losses and adjustments. Usually, products are not distributed (dispensed) directly from the storeroom to the customer; therefore, actual consumption data is not collected on a stock keeping record. 3/23/2023 How are the data on a stock keeping record organized? – Stock keeping records are organized by date. – They record receipts, issues, losses and adjustments, and the balance on hand. – They also record the results of physical inventories (when items are counted to verify the quantity in storage). 3/23/2023  In what formats are stock keeping records printed? – Two stock keeping records are used in the inventory management – the Bin Card and the Stock Record Card. 3/23/2023 Difference between Stock Card and Bin Card  The Bin Card does not include Unit Price  The Bin Card does not include Location  The Stock Record Card does not include the Batch Number  The Stock Record Card is kept in the pharmacy manager’s office while  the Bin Card is kept with the pharmaceuticals on the shelf.  The Stock Record Card is not used at health posts 3/23/2023 237  NB! Stock records (manual or computerized) - Must be current and accurate Stock count is important:- – Reordering purpose – Determining inventory value Stock count can be done – Annually – Cyclic counting → best No shut down of warehousing and distribution Relatively easy to trace discrepancy if it arise 240  3. Selection of items to be stocked as standard items Reason to hold a stock – To ensure availability – To maintain confidence in the system – To reduce the unit cost of medicine – To avoid shortage cost – To minimize ordering cost – To minimize transport cost – To allow fluctuation in demand Disadvantage of holding high stock – Capital can be tied up in inventory → unavailable for other purpose – Cost (personnel, utilities, insurance, storage facilities and other – Loss (spoilage, expiry, obsolescence, theft) 3/23/2023 Which item to be stocked? Stock versus non stock – items are decided based on Stock movement (high vs low)  ABC analysis  VEN system Level of use  Aspirin, Anticancer ( all level vs tertiary care hospital) Local availability 3/23/2023  To help maintain adequate stock levels for each health facility in the system, one needs to know:  The maximum months of stock  Minimum months of stock  Emergency order point Review period: is the routine interval of time between assessments of stock levels to determine if additional stock is needed. Review period stock is the quantity of stock dispensed during the review period. 3/23/2023 247  The maximum months of stock – is the largest amount of each pharmaceutical a facility should hold at any one time.  The minimum months of stock – is the approximate level of stock on hand at the end of the reporting period when an order is placed.  The emergency order point – is the level where the risk of stocking out is likely, and an emergency order should be placed immediately. 248 Example: Health logistics system of Ethiopia Level Review Maximum Minimum Emergency Period Months of Months of Order Point Stock Stock HC and Every other 4 months 2 months 0.5 months Hospitals month (= 2 wks) Health Monthly 2 months 1 months 0.25 Posts months (= 1 wk) 249 QUIZ 1. What is the difference between maximum months of stock and minimum months of stock? 2. Why do we hold inventory? 3. What is the purpose of inventory control system? Stock Status Assessment  The purpose of assessing stock status is to determine how long supplies will last. When to assess stock status  The stock status should be assessed regularly for each product in the store room.  Assessing the stock status recommended monthly for all products in store.  Stock status should also always be assessed during quantification exercises.  If the number of products you store is large, you may not be able to assess the stock status for each product every month.  In such cases, consider a (VEN) analysis, which categorizes products by public health priority; and/or an ABC analysis, which categorizes products by cost, and count a subset of products monthly, based on their importance and cost. How to assess stock status at any level in the system  Assessing stock status can be expressed in terms familiar to logisticians.  The amount we have is the same as stock on hand.  The amount we use is the same as the rate of consumption.  Because stock assessment is measured in terms of months of stock (a convenient measure because data are often collected monthly at the service delivery point [SDP] level), the average monthly consumption (AMC) more accurately describes the rate of consumption.  How to assess …. Assessing stock status at any level, will late you to know that —  The levels you supervise are overstocked.  The levels you supervise are under stocked; additional shipments are needed.  Any products will expire in storage before they can be dispensed to users.  Some facilities have too much stock and others not enough.  Supplies are reaching customers instead of sitting in warehouses. Determining How Much to Order or Issue  Determining How Much to Order or Issue Stock Status – Purpose of assessing stock status is to determine how long supplies will last. 3/23/2023  The storekeeper should use the following formula to calculate the quantity to order or issue for each product—  Where…  Max stock quantity = Average monthly consumption × Max stock level  Average monthly consumption = average of the quantities of product dispensed to users or patients in the most recent three months, as appropriate. Calculating Order or Issue Quantities If a facility, for some reason, has not received the previous order or issue, but is positive that stock will arrive, they should subtract the quantities expected from the next resupply quantity. – Order/issue quantity = Max stock quantity − stock on hand − quantity on order 3/23/2023 Example – calculate the quantity of Chloroquine to order if the maximum stock level for Chloroquine is 4 months and an emergency order point of 1 month. One case of 300 Chloroquine was ordered and has not yet been received. Use an average of the last 6 months data for your calculations. 3/23/2023  Chloroquine Dispensed to Users October 11 178 November 11 Types of Max-Min………….cont’d 552 December 11 540 January 12 846 February 12 630 March 12 578 April 12 812 May 12 508 Balance of Chloroquine on hand May 30, 2013 is 756 tablets 3/23/2023  Step 1: Calculate average monthly quantity of Chloroquine consumed – AMC = Total Chloroquine tabs/6 months = 3914/6=652 tabs per month Step 2: Calculate reorder quantity – Max stock Qty = AMC(652) X MAX months (4) = (2608 ) Order Quantity =max Qty (2608) - SOH (756) – SOO (300) = 1552 Order Quantity =1552 3/23/2023 Bisrat H. Types of Inventory control system  Based on the time of setting order/making issue, there are three types of inventory control systems.  For each of the systems, the same formula is used to determine how much to order or issue.  The basic difference between the systems is the trigger for ordering or issuing, i.e., when the order should be placed or an issue made. These are: Types of Max-Min Inventory Control System 1. Forced-ordering system: the trigger for ordering is the end of the review period. 2. Continuous review system: the trigger for ordering is when the facility reaches the minimum level. 3. Standard system: the trigger for ordering is the end of the review period for the commodities that are at the minimum level.  1. Forced-ordering max-min system The inventory control system of Ethiopia. All facilities are required to report on a fixed schedule for all products  Health Posts – monthly  Health Centers and Hospitals – every other month 3/23/2023 257  Storekeeper decision rule to resupply – At the end of each review period, review all stock levels and order or issue enough stock to bring the levels up to the max. – Place an emergency order if the stock level for any item falls below the emergency order point before the end of the review period. – all products are re-supplied each time a report is completed 258 Advantages of forced-ordering max-min system – The rule for resupply is simple order/issue every item at the end of the period. – easier to ensure the availability of transport resources b/c orders are placed at regular intervals – Every facility orders or is resupplied at the end of every review period – No need of storekeepers constantly assess stock status, unless they think a potential stock out is possible 3/23/2023 259 Disadvantage of a forced-ordering system – orders for some items may be for small quantities because all items are ordered regardless of the stock on hand. 260  Cont… Forced–ordering variation: One variation of a forced-ordering max-min system is the delivery truck system, sometimes called a topping-up or bread truck system. It can also be called Vendor Managed Inventory (VMI) system. The rules for the storekeeper and the considerations for the designer are the same as for a regular forced-ordering system. 3/23/2023 261  difference b/n regular vs delivery truck forced-ordering system – the way the deliveries are made – a truck is loaded with supplies at the end of the review period. – The truck and a delivery team travel to each facility – assess the stock & leave (top up) an amount of each product that is sufficient to bring stock levels up to the max at that location. 262 Advantages of the forced-ordering delivery truck system  The order is filled on the spot – the lead time is zero – lowers the min and the max stock levels.  Damaged or expired products can be put back on the truck for disposal  The truck can be sent out with a full load of supplies, eliminating multiple small orders.  The LMIS report can be completed and collected at the time of delivery. – Avoid delayed reporting  The training requirements are significantly less for the facility staff only for delivery team.  If a supervisor goes on the truck for deliveries, on-the-job training and supervision at the various stops. 3/23/2023  Disadvantages of the forced-ordering delivery truck system  All types of max-min systems rely on their delivery trucks. – However this system is vulnerable to breakdowns – the whole system breaks down  A sufficient number of staff must be available in the office – team leaders are away making deliveries.  Require larger trucks – always carry more stock than they will actually deliver. 3/23/2023  2. Continuous review max-min system Store keeper decision rule – Review the stock level of each item every time you make an issue. – If the stock level is at the min, or has fallen below the min, order enough stock to bring the level up to the max. The least appropriate for most health programs...why???? 3/23/2023 In a continuous review system— The review period is not fixed The storekeeper must know both the max and min stock levels. The storekeeper does not need an emergency order point – an order can be placed any time stock is needed. The storekeeper must assess stock status each time an issue is made. – storekeeper’s workload increases if there is many item The storekeeper must be able to order – pull system – b/c only the storekeeper determine stock level (min or not) 3/23/2023 Advantages of continuous review max-min system  rule for resupply is simple: reaching minimum  The system is more responsive and flexible – orders can be placed at any time.  Small orders are eliminated – stock levels are at the min when an order is placed. Disadvantages of a continuous review system  Transportation resources are harder to schedule.  Overload storekeepers in large facilities with a large number of products 3/23/2023  Cont… Continuous review system variation: two-bin Resupply rule is the same The difference – the way of determining when the min has been reached. two equal-sized bins of each individual product When the first bin is empty, the min has been reached. 3/23/2023 Advantages continuous review system variation: two bin. Require less training than a normal pull systems empty bin No calculations are required and paperwork is minimal. Disadvantages: bin size must be continually reviewed – If consumption for products is not stable 3/23/2023  3. Standard max-min system Resupply (when to and how much to order) is based on Reviewing all stock levels at the end of each review period. Falling below the min Ordering/issuing new stock is based on the min stock level and the review period. the storekeeper must know the min, max, and review period. an emergency order point is needed to ensure stock outs between review periods 270  In a standard system to ensure that a stock out does not occur between review periods the stock status must be assessed at the end of each review period  Decision rules: Review all stock levels at the end of each review period.  for products that are at or have fallen below the min, order/issue stock quantities up to their max levels. Advantages of standard max-min system  Eliminate small orders  Avoid the need to assess stock status continually  Reduce the number of calculations  Transportation can be scheduled for specific times 3/23/2023 Disadvantages: Higher min stock level – Increase the likelihood of expiry – Require more storage capacity, – Increased costs. More training for the storekeepers may be required – b/c of their decision rules are more complex. 3/23/2023 Factors for selecting a Max-Min Inventory Control System  Distribution 3/23/2023  Drug Distribution is a continuous process of receiving drugs from the suppliers and moving them safely/securely to the many points in the health care system at which the drugs will be dispensed to patients. 3/23/2023  Goal of good distribution system  Maintain a constant supply of medicines  Keep medicines in good condition (storage)  Minimize medicines losses caused by spoilage and expiry  Rationalize pharmaceutical storage points  Use available transports as efficiently as possible  Reduce theft and fraud  Provide information for forecasting medication needs  Incorporate a quality assurance program 3/23/2023  Distribution cycle 3/23/2023  Distribution….cont’d Push vs pull system Pull system Each level of the system determines what types and quantities of medicines are needed and places orders with the supply source Push system Supply source at some level of the system determine what types and quantities of medicines will be delivered to lower levels 3/23/2023  Distribution….cont’d Conditions favouring a pull system – Lower level staff members are competent in assessing needs and managing inventory – Sufficient supplies are available at a source to meet all program needs – A large range of products is being handled – Field staff members are regularly supervised and performance is monitored – Good data are available to the decision makers 3/23/2023  Distribution….cont’d Conditions favouring a push system – Lower level staff are not competent in inventory control – Demand greatly exceeds supply, making rationing necessary – A limited number of products is being handled – Disaster relief is needed or the situation that calls for short-term supply through prepacked kits 3/23/2023  Distribution….cont’d Transport – Using private sector alternatives – Evaluating fleet capacity – Planning transport system improvements – Acquiring and disposing vehicles – Managing vehicle use – Maintaining vehicles – Maintaining medicines quality during transport 3/23/2023  What ideal distribution network, given current transport resources? Will it provide a satisfactory service level, without stock outs, at dispensing facilities? What would be the ideal distribution network if more resources were available? Monthly demand of products supplied to each health facility (total quantity, weight, and packaged volume) Location and distance of facilities from their supplying facility Season or weather 3/23/2023  Good Pharmaceutical Storage Practices  Products are stored at every facility in the pipeline; almost everyone working in the supply chain is responsible for product storage.  Storage ensures the physical integrity and safety of products and their packaging, throughout the various storage facilities, until they are dispensed to clients.  An important goal in storage of health products is the correct staging of health products to ensure that orders can be filled and distributed.  Regardless of storage facility size; from a small health center to a central warehouse; the main operational activities for storage are very similar.  How complex these activities become will vary based on the volume of products to be managed and storage facility size; as well as particular requirements, such as cold storage. MEDICAL STORES MANAGEMENT  Assist the movement of supplies from source to user  As cheaply and reliably as possible, and  Without significant wastage or theft  The purpose of store is to receive, hold and dispatch stock  This process is controlled by an inventory control system (manually or computer based) 43 THE CHARACTERISTICS OF A WELL- MANAGED STORES OPERATION  The store be divided into zones that provide a range of environmental conditions and degrees of security  Stock should be arranged within each zone according to some orderly system  Stock should be placed on pallets, pallet racks, or on shelves  Good house keeping that is cleaning and inspection should be maintained  Staff should be appropriately qualified, trained, disciplined, and rewarded  To promote efficiency, staff should have good working conditions and facilities 44 FLOW OF STOCK  There are six stages to this process: 1. Receiving:  Goods arrive in the receiving room and are inspected and entered into stock recording system and receiving reports are prepared 2. Storage:  Accepted goods are moved to their allocated storage positions in the warehouse  Stored in FIFO or FEFO order 24 0 3. Allocation of stock:  The manager determines whether or not to allocate the complete quantities requested when a requisition is received 4. Order picking :  Toidentify and collect the allocated items from the ware house 5. Order assembly for delivery:  Individual orders are assembled and checked in the packing area  They are then packed for delivery and delivery documentation is prepared 6. Dispatch and delivery:  The packed goods are loaded onto the transport and dispatched, accompanied 24 by the necessary 1 documentation CONTROLLING STOCK ROTATION  Stock rotation can be controlled using FIFO and FEFO/LIFO  To avoid accumulation of expired, items should be stored and issued on a FIFO or FEFO basis  Stock must be stored so that the earliest expiring or first delivered batches are picked and issued first (FEFO/FIFO)  Newly arrived stock sometimes has an earlier expiry date than a previously received batch of the same item (LIFO) 24 2 ZONING STOCK WITHIN THE STORE  Drugs and essential medical supplies must be located in the store with the correct combination of temperature and security  Zone can be  Separate building, or room (e.g. flammables),  Alocked cupboard (eg. for narcotics and other controlled substances),  Arefrigerator (eg. for vaccines, test kits), a freezer, or a cold room 24 3  Store drugs based on the product manufacturer’s storage instructions In a deep freeze (-15°C) In a refrigerator/cold 2°C -8°C Cool temperature 8°C-15°C Room temperature 15°C - 25°C STOCK CLASSIFICATION 1. Therapeutic or pharmacological category:  Convenient in small warehouses e.g. Antihypertensives  Limitation: many drugs may have multiple clinical indications 2. Alphabetical order (by generic name):  May not result in optimal use of available space 3. Dosage form  In smaller warehouses 50  It allows optimal use of space STOCK CLASSIFICATION… 4. Level of use:  In higher level stores, products used in only one level of facility are stored together e.g. hospitals, health center 5. Random Bin:  Identified by a unique location code  It can combine the methods described above (alphabetically and therapeutic classification) 6. Commodity code:  Based on a unique article code combined with a unique location 24 6code. STOCK STORAGE AND HANDLING  There are four basic systems for storage 1. Shelves: when the volume and weight are too small  Manual goods handling is locally more reliable or economical than mechanical handling 24 7  Heavy and fragile items on Batch No: Batch No: Batch No: the lower Expiry: Descrip tion Expiry: No:Desc ription Expiry: Desc ription Batch No: Batch Batch No: shelves Expiry: Expiry: Expiry: DescriptionBatc h No: Description Batc h No: Description Batc h No: Ex pir y: Exp iry: Exp iry: Frequently Desc ription Batc h N o: Batch No: Desc rip tion Batch No: Desc ription picked items at Expiry: Desc ript ion Expiry: Description Expiry: Description waist height Reserve Stock Reserve Stock Extra stock on the upper Batch No: Batch No: Batch No: shelves (if it is Expiry: Description Expiry: Description Expiry: Description Batch No: Batch No: not too heavy) Expiry: Expiry: Batch No: Batch No: Batch No: Expiry: Expiry: Expiry: Description Description Boxes tidy and Description Description Description closed as much as possible Batch No: Batch No: Expiry: Expiry: Description Description Fragile Items Fragile Items Heavy Items Heavy Items 24 8 STOCK STORAGE AND HANDLING… 2. Floor pallets:  In warehouses with ceiling heights of less than 3 meters and in stores where the cost of pallet racking and forklift trucks can not be justified  Many heavy or bulky items, such as rolls of cotton, drug kits or large hospital equipment, require floor locations 24 9 STOCK STORAGE AND HANDLING… 3. Block stacked pallets: pallets containing light goods may be stacked on top of one another in blocks ⚫ For items without expiry dates or with very high turnover, because the first in items are at the bottom of the stack ⚫ Cheap and space efficient method of storage, and no racking is required STOCK STORAGE AND HANDLING… 4. Pallet racking: combines the benefits of shelving and pallet  Simplest pallet racks generally have two or three tiers.  It is possible to have several more tiers, but sophisticated mechanical handling equipment is required. Hand pallet truck Pallet Racking 55 Reading assignment ( included in your exam) Pharmaceutical warehouse lay out Health Care Waste Management  To store pharmaceutical wastes properly and safely, it is recommended to follow any existing standard operational procedures (SOPs).  Store chemical wastes, such as expired pharmaceuticals separately from unexpired product.  When possible, separating pharmaceutical wastes where it is generated, based on the main categories is important:  Infectious hazardous  Non-hazardous waste (paper and packaging, bottles, cans, and glass for general use)  Non-infectious but hazardous  General waste.