Public procurement of medicines: More sustainability, more health

Author: José Luis Cardenas, Sr. Director Government & Access Teva LatAm. (Published in “El Economista")

During the pandemic, health systems had to react quickly to respond to the multiple challenges they faced. One of these was the supply of medicines in times of shortages and the disruption of global supply chains. Procurement systems had to adapt to a crisis context.

Now that the pandemic-related situation is somewhat more under control - but with an ongoing war conflict - it is worth reflecting on how to improve the public procurement system for medicines. This discussion is especially important if we consider that medicines procurement represents between 17% and 25% of health budgets in OECD countries and between 35% and 45% in middle-income countries.

This issue has recently been analyzed by the European Commission in the report "Implementation and best practices of national public procurement policies in the internal market". The document states that there is a preference in the public system to award at the lowest price because it is considered "simpler and more objective", and that the quality-price criterion "is applied in few cases".

However, evidence has shown that the notion of the value of a given healthcare technology cannot be limited to price alone, and that it is essential to consider other relevant variables such as, for example, the sustainability of supply. A tangible case: in the European Union, 83% of generic drugs that are out of stock are those whose prices for a daily therapy are less than €0.10.

The lack of sustainability of the public procurement system for medicines is further exacerbated under single-award models (known as "winner takes all"), as opposed to those in which multiple bidders are awarded. In the latter case, a better balance between price and predictability of supply can be achieved, avoiding potential shortages. This is expressly stated in the European Commission's new "Pharmaceutical Strategy for Europe", which calls for the design of intelligent and innovative procurement procedures that seek, among other things, timely delivery, security and continuity of supply.

In Latin America, this issue has also been the subject of analysis and discussion. A group of think tanks from Argentina, Brazil, Chile, Colombia and Mexico, coordinated by Geneva Network, an international public policy research and advocacy organization on innovation, trade and development, published a document with recommendations for Latin American countries to maximize the value of public spending on the purchase of medicines.

The recommendations aim to favor public procurement models that consider the value of medicines throughout their life cycle, instead of focusing uniquely on their price. While public procurement systems that are based on price may achieve discounts and save economic resources in the short term, in the long term they may not be in the best interest of patients and may even cost more, given the tendency to concentrate supply and weaken the certainty or predictability of supply.

The Geneva Network principles also emphasize the importance of diversifying supply, warning of the shortcomings of the single-award model. It also points to the importance of transparency, predictability and national treatment (non-discrimination) as relevant factors to optimize the outcome of public procurement of medicines.

For its part, the Inter-American Development Bank has placed emphasis on clearly defining the objectives to be achieved with public procurement systems, such as the quality of medicines, improving their access, the rationality of their use, as well as regularly monitoring compliance with the procurement system, both qualitatively and quantitatively.

The various international recommendations in this area are quite cross-cutting and there seems to be a certain consensus among experts on how to move towards the construction of a public procurement model that is efficient with the use of resources, that guarantees the sustainability of the system and that puts the patient at the center, improving health levels, which, in turn, has a significant social and economic impact. However, when we look at the different systems, we see that they deviate, to a greater or lesser extent, from the aforementioned recommendations.

This can be explained, in part, by the fact that a more efficient system of public procurement of medicines requires a long-term strategic vision, while political cycles encourage short-term solutions, which tend to be incompatible with the above.

Political will is required from governments to move towards a change of approach in this area. The traditional mechanisms for public procurement that focus exclusively on the price of medicines, and not on their value, will be insufficient to meet the new health challenges that lie ahead in our region. The population in Latin America is living longer, and we are going to see a significant increase in chronic diseases. The challenge for governments will then be to obtain more value from health spending. A change in the public procurement model could undoubtedly contribute to better meet this challenge, making the system more efficient, more sustainable and healthier, always putting the patient and his or her wellbeing at the center.