Drug shortages in public hospitals in Sri Lanka has been an endemic problem for decades and the reasons for this are many and varied. Political interference, bureaucratic ineptness, funding shortages, policy issues, structural issues, private interests of medical practitioners in government service, the lobbying and marketing practices of the pharmacy industry, and more, have all contributed to a greater or lesser degree to these shortages from time to time.
This article attempts to outline a conceptual framework to address this vexed issue. It is a framework that looks ahead rather than looking back to addressing issues on a piecemeal basis, as has happened time and again, and unsuccessfully as reports seem to indicate. The discussion is about a mindset change that is needed to address this issue as previous attempts have had limited and inconsistent results. The mindset change requires readers to consider options outside the “box” so to speak, and think laterally as to how best drug shortages may be addressed. In order to address this long-standing issue, this article proposes the establishment of a
- Peak Drug Demand Estimation Secretariat (PDDES)
- Peak Procurement Secretariat (PPS) and
- Transformation of the role of the State Pharmaceuticals Corporation
At a very fundamental level, there are obviously two sides that contribute to shortages or even excesses of drugs, and that is the supply side. And the demand side. Ideally, if everything worked well, supply would equal demand and there should not be shortages or excess supply.
Broadly, the supply side usually depends on efficiency while the demand side depends on effectiveness. This is not to say that both sides need to be efficient and effective, but looking at a hypothetical situation, a very fundamental difference can be elaborated. Say if the demand has been estimated as 100 units and a very efficient supply operation delivers the 100 units exactly on time, at the right quality, quality and at the right place, but if the estimated demand had not been computed accurately, and either its more than 100 units or less than 100 units, then the efficiency of the supply operation becomes irrelevant to the desired outcome as either there will be a shortage or an excess supply. The effectiveness of the demand estimate is what matters then, and based on this very simple premise, effective computation of demand takes precedence over an efficient supply operation, although the latter is also a very important component of the supply chain.
This concept is framed around what perhaps can and should be done to address drug shortages. It is not a simplistic approach, and it will require a major shift in thinking and attitudes. Considering the precedence of demand computation over supply operations, possible approaches to make demand more effective are discussed first.
Sri Lanka spends around Rs 141 to Rs 164 billion (at today’s exchange rate) for importation of drugs intended for the public sector via the State Pharmaceuticals Corporation and around Rs 25 billion via the State Manufacturing Corporation. It has approximately 1300 distinct items on its drug list. Accurate estimation of demand for these is not an easy task. Demand maybe computed using usage data and also past purchases. Both pose a problem as usage data may be understated or overstated and past purchases done using such data would be inaccurate. In all instances, using morbidity data, derived from patient categorization or classification that is done as a routine in all hospitals on a daily basis, and medicine prescribed and issued to them would be a data verification information that can and should be used to substantiate data derived from other routine methods. It is also understood that based on information sourced directly from some patients, there is a practice to over prescribe drugs to a patient if that patient mentions another ailment in addition to the ailment he or she has for which a routine monthly or bimonthly clinic is attended by that patient, rather than being investigated and a diagnosis made first. A particular patient mentioned that he takes 15 different medicines every night.
Depending on how widespread this practice is, it could affect demand very substantially and result in drug shortages as some of this would be unforeseen or unplanned demand on some drugs. Drug shortages may also be reported as shortages when doctors prescribe drugs that are not stored in some or all public hospitals and which have to be sourced from private pharmacies. The above-mentioned factors and others not noted here indicate the complexity of demand estimation, and the difficulty in making accurate estimations.
It also shows that the process relating to demand estimation involves many players and internal and external factors and the need to consider a very specialized task that requires greater expertise, and the use of today’s technology that is evolving very rapidly.
In respect of the supply side of the equation, procurement management plays a major part in the supply chain, and two radical proposals are made below in respect of demand estimation and procurement management. In order to address both sides of the equation, the following are suggested.
- Establishment of a Peak Drug Demand Estimation Secretariat (PDDES)
It is suggested that the minister of health considers establishing a high level expert entity within the department of health to undertake the task of drug demand estimation, and for such an entity be supported by local and international expertise, to map out, develop necessary policy and procedural requirements, use of appropriate technology, carry out the task of demand estimation, and monitor actual usage against the demand estimates so that timely action may be taken if supply shortfalls are foreseen. Such an entity is termed as the Peak Drug Demand Estimation Secretariat (PDDES) to reflect its critical nature as the peak body responsible for the task of drug estimation. If this body is to perform their tasks efficiently, effectively and deliver the desired results, it needs complete authority to make decisions pertaining to processes relating to drug estimation.
What is suggested is not another bureaucratic entity filled with staff, but an entity that relies on technology as a tool to undertake this staff. Development of appropriate artificial intelligence algorithms and digitalization of information collection, flow and analysis would be an essential component of the proposed entity. In order to prioritise and plan the roll out of a strategy to achieve the desired outcomes, the VEN classification (Very essential, essential and non-essential) categorization of drugs could be used to introduce the proposed demand estimation process in a staged manner.
- Establishment of a Peak Procurement Secretariat (PPS)
Presently, the State Pharmaceuticals Corporation (SPC) is understood to be the entity that undertakes procurement imports on behalf of the public sector in Sri Lanka. These procurements are based on demand estimates submitted by the State Medical Stores. Various reports indicate issues associated with the procurement process, such as tender process delays, and funding shortfalls and delays. Besides the procurement process, the SPC is also responsible for importing drugs for the private market, a role they share with private sector importers, and the logistics process of consignment clearance and delivery to the State Medical Stores, and the storage of drugs for the private market (via private pharmacies) and distribution of drugs to the State run Rajya Osu Sala’s, or State retail outlets. Leaving the logistics side of the SPC mandate aside, it appears that the procurement process is yet another operational responsibility of the SPC carried out without a strategic vision or more modern approaches relating to best practice. In order to achieve this objective, it is suggested that an independent State entity is established outside the SPC, and as an independently managed entity, to undertake the procurement process. Hence the setting up of a Peak Procurement Secretariat (PPS).
Current tender procedures for importation of drugs are long and requires a lengthy lead time from planning the importation to actual receipt of quality assured drugs in the warehouses of the State Medical Stores or SPC’s own warehouses. It is estimated that this period is around 9 months if not more. A long lead time immediately translates to carrying more stock physically to meet the demand for the drugs until new stocks arrive and also involves carrying buffer stock to meet potential shortfalls in supply due to delays. Typically, if a three-month buffer is added to the stock needed to cater to the lead time of 9 months, the total stock held equates to 12 months stock. In a situation where demand estimates have not been accurate as one anticipated, stock outs for varying periods become inevitable consequences.
Until Sri Lanka becomes more self-sufficient in locally manufactured drugs by the State Pharmaceutical Manufacturing Corporation (SPMC) and private sector manufacturers, the dependency on imports (around 85% of the requirements) will continue for the foreseeable future, and strategies for improved procurement will have to consider a range of options. It is felt that examining these options should be the task of the proposed body which should have the expertise to do so, supported by local and international technical assistance.
Some strategies that should all be carried out through a competitive and open process,
- Establishment of long-term contracts for a select number of drugs with manufacturers where the initial lead time could be reduced from nine months, and where the overall lead time could be reduced by establishing contracts for periods up to 3 to 4 years.
Once contracts are established, the lead time is restricted to the time span for actual shipment by an overseas manufacturer over the contract period of 3 to 4 years.
- Establishment of Period contracts for a select number of drugs where prices, and one or more suppliers, are established for a range of drugs for a period of 3 years, where the Peak Procurement Secretariat (PPS). could place purchase orders as and when needed with suppliers on period contracts and at the prices noted in such contracts.
Over time, when hospital budgeting is devolved and allocations are provided to them to purchase drugs, they could be given the authority to purchase all or some of their requirements from suppliers in the period contracts and at the prices noted in the contracts. This is a longer-term proposition, and it could be discussed and appropriate policy submissions made to the Minister for Health by the PPS.
The expertise and the independence of the Peak Procurement Secretariat will facilitate the development and execution of the above mentioned strategies and other appropriate ones that would improve the supply side of the equation by introducing more certainty to the procurement process, reduction of the lead time, reduction of stock holdings and ability to respond quicker to unforeseen/unplanned changes to demand estimates, and importantly, be able to respond more expeditiously to potential stock out situations.
Role of the State Pharmaceuticals Corporation
The above-mentioned change to the procurement process will necessarily impact on the SPC as they will not be responsible for this process any longer. It is suggested that their role is transformed into a logistics operation where they undertake the clearance of cargo, warehousing (for the private sector) and distribution to the Rajya Osu Sala’s. The State Pharmaceuticals Corporation was established in 1972 when technology was different and consequent to the policy position of the then government. Circumstances are different today and technology has moved a considerable distance from that time. While the procurement strategies suggested do not take away one of the key principles associated with the SPC, that is, ensuring the best and lowest prices are obtained through an open and competitive process, it ensures the public sector gets the best and lowest price for drugs, and it takes note of today’s reality that the private sector is a partner in the drug supply industry of the country, and they are also subject to maximum prices set by the Ministry of Health for some drugs. In order to provide a choice to the public, whether they should buy from a Rajya Osu Sala or a private pharmacy, it is suggested that more Rajya Osu Sala’s are opened throughout the country in addition to the existing number which is reported as 43 outlets.
Conclusion
The task of accurate drug demand estimation is not an easy task in more than 1,500 public healthcare institutions and in local clinics, regional storage facilities, and individual dispensaries, managing drug stocks across over 2,900 locations island wide. These include large national hospitals, teaching hospitals, and specialised institutes (e.g., Apeksha Cancer Hospital or Lady Ridgway Children’s Hospital), Provincial General Hospitals, District General Hospitals, and Base Hospitals, hundreds of smaller Divisional Hospitals and Peripheral Units scattered across rural sectors. primary & preventive Healthcare Facilities like smaller village-level clinics that stock essential everyday medicines for outpatient care, and MOH Offices that stock specialized preventive medicines, maternal healthcare supplies, and national immunization program vaccines. Besides these, the planned Arogya Health facilities, 1000 of them over 3 years, will add a further complexity to the already difficult demand estimation process.
Accurate and appropriate demand estimation is very complex, but paramount in a centralised drug supply situation dependent on imports, and this has to be managed with limited funds available to the State. Appropriateness of the demand becomes very important here and the use of up-to-date patient treatment guidelines to standardise the diagnosis and prescription of drugs and linking this to patient (or morbidity) information is vital to compute demand estimates.
The specialised entities suggested for demand estimation and procurement should be options that needs consideration as strategies to address drug shortages. Long term contracts and period contracts are not new phenomena as they are in practise in several countries. Besides improving the procurement process, they also help manufacturers as they have certainty of purchases by the buyers for the period of the contract. This leads to better and consistent pricing as well. The challenge now is to see how many will be willing to lookat things as they never were, and ask why not?
