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Framework contracts for medicine inventory management in public healthcare

Muhammad Naiman Jalil, Wafa Malik, Areeb Javaid and Ali Jan Khan

I t was a cold afternoon of January 2, 2018 when Shahbaz Yasin - a procurement specialist who led medicine procurement at Primary & Secondary Healthcare Department (P&SHD) - met Ali Jan Khan (Secretary, P&SHD) along with rest of medicine procurement team. The agenda of the meeting was to review the progress on the medicine procurement carried out for that financial year 2017-2018 and start planning for procurement process for the next year.

"We signed medicine supply contracts with suppliers for year 2017-18 in September, 2017. We also issued the purchase orders in November, 2017. These days, the medicine shipments from suppliers are starting to arrive", started Shahbaz.

Ali Jan asked while pondering over a handout that listed the stock levels from January 17th May, 2017, "Do we have enough warehousing capacity to hold stocks this year? I remember, we ran out of warehousing space last year".

"Yes, we arranged for additional space in our Medical Stock Depot (MSD), but I guess the key here is that our distribution plan for distributing these medicines onwards to medical facilities should be well-organised and timely. But still, all our yearly supplies shall arrive in MSD till May, 2018. So, we shall be stocked up during coming months", Shahbaz replied earnestly.

Ali Jan quipped, "I think the choice of the procurement configuration is also critical here. Since it directly impacts medicine inventory levels and the warehouse space used, I know we would have to look at that later, but I am just thinking out loud about the possibilities here." He took a pause and resumed to ask, "Anyways, how are we looking in terms of medicine procurement for next financial year (year 2018-19)?"

"We have already started demand data collection, and we shall be starting preparation of procurement documents in March, 2019", replied Shahbaz.

After few more minutes of consideration, the meeting was over. Shahbaz and his team started to leave for their office. On his way back, Shahbaz kept pondering about Ali Jan's remark about procurement configuration. Shahbaz knew that such a task required optimising the current periodic inventory cycle in relation to the medicine consumption and procurement process. Given that P&SHD was a public sector entity, he also knew that the cycle had to follow governmental procurement and financial regulations. This meant that Shahbaz had to also deep dive into how the financial cycle tied with the procurement scheduling process. With his work cut out for him, he paced towards his office to get a head start on this complicated task.

Primary and secondary health-care department

Formed in November 2015, Primary and Secondary Health-care Department (P&SHD) constituted the main department assigned with the fundamental responsibility for health development of the whole population and communities within Punjab. P&SHD delivered on several levels - promotive, preventive, rehabilitative and curative health-care services from primary health-care level to secondary health-care level. These services were provided through a large network of almost 3,000 health facilities throughout the province. An overview of P&SHD is given in Exhibit 1 along with information on the number of primary and secondary health-care facilities, number of beds at each facility level and the catchment populations served by these facilities. P&SHD maintained an inventory of almost 300 medicines, vaccines and medical supplies throughout its network.

Financial (budget) planning and clearing

Similar to other governmental functions, P&SHD was subjected to the annual financial cycle for budget planning and clearing for its provision of funds. Shahbaz wanted to have a complete grasp of the budget planning process and remembered that his previous discussions with Mubashir ul Hassan had yielded some important insights into the budget planning timeline. He hence spared no time in meeting with Mubashir at his first availability. Together, they reviewed the standard financial planning process. Mubashir brought timeline of government budget cycle from his office to assist Shahbaz in understanding the process (Figure 1). The process of budget making was a continuous one where financial planning of next year's budget started right after the finalisation of the current year's budget. The financial planning for the budget of the next year starts in September of the previous year with the issuance of Budget Call Letter. During the next three to four months, all governmental departments prepared their budget estimates and consolidated these estimates. These budget estimates included next year's potential expenses for existing schemes and new initiatives, as well as current year's statements of expenses to identify any excess amounts available from current year's budget. After validations and approvals, the first draft of next year's budget was presented to the Finance Department and Planning and Development (P&D) Department.

Figure 1 Procurement timeline for the year 2017-2018

Start of Sep 16-Start of Jan 17 Start of May-Start of July 17 . Issue Budget Call Letter . Resubmission of budget to . Submit and Consolidate: Finance and P&D . Estimates of Receipt and Expenditure, . Estimates of Excess and Surrender, . Final Review and Finalization . Estimates of Supplementary Budget, . Presentation to Parliament . Schedule of New Expenditure . Printing of Budget Book Sep16 Nov 16 Jan 17 Mar 17 May 17 Jul 17 Oct 16 Dec 16 Feb 17 Apr 17 Jun 17 Start of Jan- Start of May 17 . Presentation of first draft budget to Finance and P&D . Review and preparation of second draft . Second review by Finance and P&D . Review by Secretary P&SHD . Submission to and review by CM Secretariat Source: Created by authors based on interviews with Primary and Secondary Healthcare Department Officials60% 300,000 50% 250,000 40% 200,000 30% 150,000 PKR / Month 20% 100,000 10% 50,000 0% Tender Pre-Qualification Technical Officer Coordination Coordination Specialist Officer Support Officer Time Contribution 10% 25% 55% 10% Average Salary 250,000 150,000 100,000 60,000 Note: *Salary based on 25 working days/month Source: Created by authors based on data from Primary and Secondary Healthcare Department (P&SHD)70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 Units 20,000,000 10,000,000 O Jun- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Aug- Sep- Oct- Nov- Dec- Jan- Jul-16 Jul-17 16 16 16 16 16 16 17 17 17 17 17 17 17 17 17 17 17 18 Stocks (Units) 27,5 30,6 26,2 25,5 21,1 19,7 18,7 11,3 15,5 22,1 24,1 34,3 48,2 57,9 44,7 35,8 30,0 27,3 23,0 16,5 Consumption (Units) 2,59 2,77 3,53 4,36 3.64 4.40 4.21 3,64 3,23 3,01 3,44 3,17 4,33 4,32 6,22 6,72 6,02 6,62 5,14 4,01 *Stocks (Units) -Consumption (Units) Source: Created by authors based on data from Primary and Secondary Healthcare Department (P&SHD)2017 2018 Process Steps Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Timeline Man-days* Manpower (No.) Design of formulary 15the Mar-31= Mar 2017 12.5 10 Collecting demand against essential medicine 137 Apr-20th Apr 2017 15 9 list Rationalization of demand and finalization of 20th Apr-30* Apr 2017 10 medicine list Prepare Bid Documents / Finalize Bid 30ch Apr-254 May 2017 10.5 Document Pre-Bid Meeting Preparation and Meeting 25th May -27* May 2017 + Changes to bid criteria or specifications 27+ May-5 June 2017 2 Bid Submission Period 5th June - 7th July 2.5 Bid opening meeting 7" July 2017 Evaluation of bids 8th July-8th Aug 2017 22.5 Grievance period 8th Aug-20th Aug 2017 Price Confirmation 20th Aug -24" Aug 2017 AAT 24th Aug- 26th Aug 2017 2.5 Performance guarantee 26th Aug-8* Sept 2017 Contract Signing gth Sept-12t Sept 2017 2.5 3 PO system setup and start of PO issuance 12# Sept-By Dec 2017 1 3 1" installment and delivery By Jan 2018 end ed installment and delivery By Mar 2018 end 3me installment and delivery By May 2018 end Source: Created by authors based on data from Primary and Secondary Healthcare Department P&SHD)Fefol Spansule- Monthly Demand 30,000 25,000 20,000 15,000 ('000s of Units) 10,000 5,000 0 Monthly Demand 13,487 12,569 14,364 13,237 18,080 18,039 25,972 28,060 25,137 27,643 21,463 Source: Created by authors based on data from Primary and Secondary Healthcare Department (P&SHD)Rural Areas Provincial District Tehsil /Union Council Reporting Line Secretary P&SH Chief Executive District Health Secondary Health Service Delivery Units Officer-CEO Officer DHO Catchment Area and Bed Strength: DHQ: 1-3 Million ; 60-150+ Beds per facility THQ: 0.5-1 Million : 40-60 Beds per facility Services Provided: Promotive, preventive, curative, advance Specia Director Additional DHO diagnostics, inpatient services, advance specialist, Secretary Provincial Health and referral services. Primary & Secondary Healthcare Secretariat P&SH Development -Basic and comprehensive Emergency Obstetric and Center PHDC New Born Care (EmONC). .Referral point for patients coming from THOH, RHC. BHU, LHW and other primary care facilities. THOs can refer patients to DHQs as well as Tertiary care Additional District Drug hospitals. DHQs Refers patients to the tertiary care Secretaries -AS Inspector P&SH Senior Medical hospitals and/or specialized institutions. Officer SMO/Medical Provision of 100 essential medicines Officer MO (RHC) 315 Primary Health Service Delivery Units Finance and Catchment Area and Bed Strength: Directorate Planning F&P Senior Medical General of Officer District Health Authority RHC: 0.1 Million ; 10-20 Beds per facility Officer SMO/Medical Primary Health Service Delivery Units Health (DHA) office Officer MO BHU: 0.025 Million ; 2-6 Beds per facility Services -DGHS 36 (BHU) 2520 Services Provided: Promotive, preventive, curative and referral services. . Outreach/community based services through LAWS, Other Projects Secondary Health Service Delivery Units Vaccinators etc. Senior Medical and Wings Medical Officer SMO/Medical Basic medical and surgical care, Mother and Child Medical Healthcare (MCH) services, family planning services. (IRMNCH, HCP, Superintendent Superintendent- Officer MO ACP, etc) -MS (DHQ) MS (THQ) (MHU) 54 Basic Diagnostic assistance: Ultrasound, X-Ray, basic Lab tests at RHC and MHUs 26 119 First level referral point to patients referred by LAWs. Supports Units Refer patients to secondary level facilities as and when (Procurement necessary cell, Finance . Provision of 18 essential medicines Department) Source: Created by authors based on interview and other data from Primary and Secondary Healthcare Department (P&SHD)Malik Mazhar Mahmood Head of Procurement Cell Procurement Specialist I Procurement Specialist !I Procurement Specialist III (Drugs/Medicines & Non- Contract Management Import Specialist (Equipment) (Services) Drugs Specialist Mudassar Farooq Muhammad Tariq Khawaja Syed Ahmad Nazeer Giani Muhammad Shahbaz Yasin Pre-Qualification Specialist Pre-Qualification Specialist Procurement Qualification Legal Expert / Litigation 1 (Drugs/Medicines & Non- Specialist 3 (Services) Officer Banking Expert Drugs) 2 (Equipment) Technical Officer 1 Technical Officer 2 Technical Officer 3 (Drugs/Medicines & Non- (Services) Research Associate Clearing Officer Drugs) (Equipment) Tender Coordination Tender Coordination Officer 1 Officer 3 Tender Coordination Officer Field Coordinator 1 5 (General Services) Drugs/Medicines) (Bio Medical Equipment) Tender Coordination Tender Coordination Officer 4 Officer 2 Tender Coordination Officer Field Coordinator 2 (Non Bio Medical 6 (Specialized Services) (Non-Drugs) Equipment) Support Coordinator 1 Bio Medical Engineer Support Coordinator 4 Support Coordinator 2 Support Coordinator 3 Source: Created by authors based on data from Primary and Secondary Healthcare Department (P&SHD)