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Continued from Previous…… This series is based on a report compiled by Jilian Clare Cohen1, Monique Mrazek2, and Loraine Hawkins3 for World Bank.
Six decision points were identified where corruption could infiltrate. The first was manufacturing, second was marketing authorization, third was selection, fourth is discussed below.
Decision Point Four: Procurement[Quote] Procurement is the principal interface between the public system and drug suppliers, and its goal is to acquire the right quantity of drugs in the most cost-effective manner. Government functions in this decision point includes: inventory management, aggregate purchasing, public bidding contests, technical analysis of offers, the proper allocation of resources, payments, receipts of drugs purchased and quality control checks. Procurement is often poorly documented and processed, which makes it an easy target for corruption. [Unquote]
The procurement of publicly funded drug supplies is particularly at the risk of corruption because the volumes are high. To bring transparency in the process, the successive governments in Pakistan have been adding various procedural checks. Currently, it is quite an elaborate system which covers all stages of procurement process. Compared to many years ago, this is a more transparent system which encourages quality and economy and discourages malpractices. Despite criticism from various quarters, the overall process has certainly improved.
The report I am partaking from is largely focused on some African, Caribbean, and Latin American countries.[Quote] The procurement of publicly funded drug supplies is particularly susceptible to corruption because drug volumes are usually large and the value of contracts is usually high even if unit costs are low, hence contracts can be very lucrative for suppliers. In the procurement process, domestic or international suppliers may pay public officials bribes to gain advantage at any of a number of steps in the tender process. Biased procurement methods can also be employed, such as the use of direct purchase when there is no emergency to justify it. This is due to several factors, including: the method to determine the volume of drugs needed is often subjective; there are difficulties in monitoring quality standards in drug provision; coordinating procurement and product registration processes in a timely way can be challenging if the pharmaceuticals licensing agency is inefficient and/or corrupt; suppliers use different prices for the same pharmaceutical products and can artificially inflate prices, and specifications for drug procurement can be tailored to suit the products of one supplier. All of these factors require strong oversight mechanisms within the public procurement process. If there is a lack of good governance in the procurement area possible adverse consequences include favouring of one supplier through the limiting of competition or the writing of biased specifications, purchasing of inappropriate products and the overpayment for products. [Unquote]
To improve the process of process of public procurement of drugs, the report recommends the following steps.
- Procurement procedures must be transparent, following formal written procedures throughout the process and using explicit criteria to award contracts to reduce the risk of corruption.
- Brazil in recent years has posted prices paid for publicly procured pharmaceuticals on a website as a strategy to reduce drug prices and preclude price manipulation. Through the use of electronic bidding and information dissemination about procurement procedures and results through the Internet corruption risks were mitigated.
- Establishing an initial list of pre-qualified suppliers per product is a time consuming process but ultimately saves time in the future.
- Successful procurement offices can monitor good supplier performance through a formal monitoring system which tracks lead time, compliance with contract terms, partial shipments, quality of drugs, compliance with packaging and labeling instructions, and other best practices described elsewhere.
- Pre-qualification tendering systems may keep sub-standard suppliers out of the tender process but this method is not free from the risk of corruption if the suppliers included on the list are not chosen by objective and verifiable criteria. A post-qualification system, conversely, may inappropriately exclude qualified bidders, if a procurement agency wants to favor certain companies.
- To mitigate corruption risks, the announced closing date should be strictly adhered to.
- All bids should be formally, and ideally publicly, opened on a specified date, and opened bids should be logged in a ledger and numbered for future reference.
- The procurement office should be required to report regularly on key procurement performance indicators.
- Finally, the procurement office should be audited annually by a third party that is screened for professionalism. The auditor should issue a statutory report in accordance with the legal regulations of the jurisdiction and in addition should issue a detailed Letter of Comment to the management of the organization and the appropriate public supervisory body. The annual audit should be available publicly through a website or through a government public information office.
To be Continued……
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- Jilian Clare Cohen – Toronto, Canada
- Monique Mrazek – Latin America
- Loraine Hawkins – London