GF/B03/DP15
Approved by the Board on: 10 October 2002
Measures Related to Procurement and Supply Management (Product Selection, Quality Assurance, Procurement and Pricing, Budgeting and Finance, Monitoring and Evaluation)
The Global Fund Board decided on the following measures related to procurement and supply management:
A. PRODUCT SELECTION AND RATIONAL USE
1. List of medicines to be procured
Fund resources may be used only to procure medicines which appear in current national, institutional or World Health Organization (WHO) standard treatment guidelines (STGs) or essential medicines lists (EMLs). The relevant STG or EML should be included in the proposal submitted to the Fund. Unlisted products may be procured only with appropriate and specific rationale presented in the proposal, as judged by the Technical Review Panel (TRP).
2. Plans for preventive, diagnostic and other public health products
Proposals for purchase of medications must be accompanied in the proposal by a plan of enabling diagnostics and other major categories of supplies related to the provision of these medications.
3. Adherence, drug resistance and monitoring adverse effects
a) It is strongly recommended to Recipients that they implement mechanisms to encourage adherence to treatment (including but not limited to Fixed Dose Combinations (FDCs), once-a-day formulations, blister packs, and peer education and support), to monitor and contain resistance, and to monitor adverse drug reactions (ADRs) according to existing international guidelines and, if necessary, drawing on budgeted requests for financial support from the Fund.
b) To help contain resistance to second-line TB drugs and consistent with the policies of other international funding sources, all procurement of medications to treat Multi Drug Resistant TB (MDR-TB) must be conducted through the Green Light Committee (GLC). [http://www.who.int/gtb/policyrd/DOTSplus.htm]
B. QUALITY ASSURANCE
4. Compliance with quality standards
a) For any medicinal product to be eligible for purchase with Fund resources, its compliance with quality standards must be assured. For multi-source, off-patent products with available dosage from public pharmacopoeial quality standards, verification of product compliance with standards would be conducted in accordance with the existing national procedures of the Recipient’s country.
b) Provided products are accepted by the national drug regulatory agency (NDRA)of the Recipient country (see 5 below), to be eligible for purchase with Fund resources any single or limited source product (that is, a medicinal product for which there are not publicly available quality assurance standards, analytic methods, and reference standards) must (a) have been found to be acceptable by the WHO-initiated UN Pilot Procurement Quality and Sourcing Project, or (b) have been authorized for consumption in its country by a stringent regulatory authority, [For the purposes of this policy a stringent drug regulatory authority is defined as a regulatory authority in one of the 28 countries which is either a PIC/S and/or ICH member] or (c) have been authorized by the national drug regulatory authority in the Recipient’s country. Option (c) is applicable only until December 31, 2004, after which suppliers must comply with one of the two standards as set out in (a) and (b) and in all cases are subject to monitoring product quality standards prescribed by the Fund as in 6.1.
5. National drug registration
a) Products procured with Fund resources are subject to authorization by the National Drug Regulatory Authority (NDRA) in the country in which they will be used, following its standard practices for drug registration for pharmaceutical products. For products that have passed the UN Pilot Procurement Quality and Sourcing Project review, as described in above, NDRAs are encouraged to expedite registration by accepting WHO pre-qualification inspection and supporting dossiers in lieu of national requirements.
b) For products which have been authorized by stringent drug regulatory authorities, NDRAs are encouraged to expedite registration by accepting in lieu of national requirements the Executive Summary of the Common Technical Document (CTD) or Summary parts for quality, safety and efficacy together with all necessary information to perform quality control testing of products and necessary reference standards.
6. Monitoring product quality
a) Recipients, their procurement agents, or NDRA’s must systematically draw random samples of pharmaceutical products purchased with Fund resources for quality control testing to monitor compliance with quality standards. Testing may be budgeted in proposals, to be funded by the Fund. For multi-source off-patent products with available public standards, samples should be sent to WHO-recognized laboratories in cases where the NDRA have no capacity for this testing.
b) For single- or limited-source products without public standards and pre-qualified by UN Pilot Procurement Quality and Sourcing Project, samples should be sent to WHO-recognized laboratories already participating in the WHO pre-qualification project in case the NDRA has no capacity. For single- or limited-source products that have been pre-qualified on the basis of authorization by a regulatory authority in an ICH and/or PIC/S member, testing shall be done by a laboratory identified by the purchaser as stated in the purchase contract. The laboratory should be a WHO-recognized laboratory, or a laboratory in ICH and/or PIC/S countries in case the country does not have identified laboratory capacity.
C. PROCUREMENT AND PRICING
7. Procurement practices
The Fund will require that, as a minimum, Recipient procurement offices and any contracted agencies/services adhere to the Interagency Operational Principles for Good Pharmaceutical Procurement. [Operational Principles for Good Pharmaceutical Procurement (Interagency document). WHO, Geneva, 1999. WHO/EDM/PAR/99.5. www.who.int/medicines/library/par/who-edm-par-99-5/who-edm-par-99-5.htm] Where practices differ from the Interagency Guidelines, Recipients or their agents must demonstrate to the LFA comparable systems for competitive bidding within a group of pre-qualified suppliers, transparency and accountability to their practices, and their application of necessary quality assurance mechanisms. Recipients should also demonstrate the existence of a full set of contractual documentation to govern each transaction.
8. Procurement responsibilities
a) The Recipient is responsible for all procurement, with the use of contracted local, regional or international procurement agents being at the discretion of the Recipient. The exception to this would be for those product categories for which local procurement capacity is insufficient, as judged by the Procurement and Supply Management Assessment. For such product categories, Recipients would be required to use established regional or international procurement services and will be informed by the Fund on which mechanisms are available.
b) Even for product categories for which Recipients have procurement capacity, the use of capable regional and global procurement services is encouraged wherever pooling of demand lowers prices for products of assured quality.
9. Monitoring supplier performance
Recipients are responsible for monitoring the performance of suppliers with respect to product and service quality and for submitting that information electronically for web publication through a mechanism established by or identified by the Fund. Reporting guidelines for supplier performance should be specified by the LFA, according to guidelines provided by the Secretariat of the Fund.
10. Lowest possible price
a) The Fund requests Recipients to use Good Procurement Practices, which includes competitive purchasing from qualified manufacturers and suppliers, as outlined in section B of these recommendations, to attain the lowest price of products. The Fund encourages Recipients to comply with national laws and applicable international obligations in the field of intellectual property including the flexibilities provided in the TRIPS agreement and referred to in the Doha declaration in a manner that achieves the lowest possible price for products of assured quality.
b) The Fund encourages the voluntary efforts of pharmaceutical companies to expand current tiered or preferential pricing arrangements, among other mechanisms, to promote differential pricing.
c) Disclosure of information on prices paid for purchases by Fund Recipients is a matter of principle and will facilitate a process leading to lower prices. The Fund will ensure that information on prices paid on products of assured quality with the same conditions (e.g., including other goods or services included in the contract) is made publicly available. The disclosure of this information will be pursued by the Fund. A methodology for assuring this transparency will be presented to the Board by January 2003.
d) In the cases of this policy, price refers to DDU costs – delivered duty unpaid. The approach taken may be to publicly list average, minimum, maximum, and mode prices and/or prices for individual companies and/or Recipients. This choice requires further consideration by the Fund to identify or develop standard methods to ensure to the extent possible that price information is based on a consistent set of definitions. It is understood that price comparisons are indicative and must include special “add ons”/conditions included in the price and that actual prices will vary.
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E. BUDGETING AND FINANCE
17. Direct payment to suppliers upon delivery
Prompt payment in compliance with the terms of payment of the contractual provisions encourages timely delivery of products and reduces transaction costs. Direct payment to suppliers by the Trustee, on confirmation of delivery, will be allowable upon request of the Secretariat if, as confirmed by the LFA, such payment arrangements are expected to reduce costs and to be consistent with necessary accounting requirements.
18. Exemption from duties, tariffs and taxes
a) The Fund strongly encourages the relevant national authorities in the Primary Recipient’s country to exempt from duties and taxes all public health products financed by the Fund to NGOs, groups of NGOs, or national authorities, or any other PRs.
b) In any case, Fund resources may not be used to pay duties, tariffs, local or national taxes on public health products procured with Fund resources. If payment of such fees is required by relevant national authorities, such payment is the responsibility of the Recipient.
19. Additionality of Fund resources and contribution to sustainability
a) The Fund encourages Recipients to manage and to apply Fund resources as part of a sustainable long-term plan for local public health financing. Recipients will be required to declare in the original proposal to the Fund other international financing and product donation programs being utilized by Recipients. Ongoing indicators must show the magnitude of product financing supported by domestic versus international financing.
b) Programs which include consumer cost recovery mechanisms are eligible for funding by the Fund when such programs are part of a pre-existing healthcare financing policy, which should be specified in the proposal to the Fund; in these cases, the budget request to the Fund must not duplicate costs to be reimbursed by consumers.
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21. Prices used for budgeting proposals
a) For budget requests for pharmaceutical products, proposals to the Fund must use the lessor of current procurement prices, firm offers from suppliers, or existing public price information sources specified by the Secretariat in the Guidelines for Proposals. A rationale for budgeting using prices other than those specified above should be described in the proposal. All prices should be expressed in standard trade terminology to allow transparent comparison.
b) During implementation, these budgeted prices will not act as a defined reimbursable ceiling or floor to the full cost of products paid by the Recipient, provided that products are of assured quality and that procurement practices adhere to the policies of the Recipient and Fund.
F. MONITORING AND EVALUATION
22. Monitoring the performance of procurement and supply systems
a) Prior to disbursement, Recipients must prepare a plan for monitoring the performance and sustainability of procurement and supply management systems. The monitoring plan should include tracking of procurement prices, distribution costs, additionality of Fund resources to domestic and other international sources, and other measures of procurement and supply system performance and sustainability. Indicators for monitoring should be agreed with the Fund and included in the Grant Agreement. The Secretariat of the Fund will make available a menu of existing international indicators with agreed methodology to support this process.
b) Baseline data for agreed “core” indicators must be gathered before Fund-supported services and products may be delivered. The baseline survey should be done prior to the Grant Agreement as part of the Procurement and Supply Management assessments undertaken by the LFA.
23. The Board also approved several follow-up items to be considered by the Portfolio and Procurement Committee (Reference numbers refer to the Report of the Task Force on Procurement and Supply Management) :
a. Reference 2.1: Diagnostics and other major categories related to provision of medications;
b. Reference 4.2.c): A study of the degree of intensity, the frequency, monitoring, and how frequent the testing and monitoring should be done, along with the costs involved;
c. Reference 6.1: A study of :
• the need to decide on how to make a judgment on NDRA capacity to proceed with analysis of multi-source products, and if required make a recommendation on this topic to the Board;
• the potential conflicts of interest involved when products are manufactured in a state-owned laboratory and the Principal Recipient is a public entity;
• the potential conflicts of interest involved when products are manufactured or purchased in a state-owned structure and the state is responsible for quality;
d. Reference 8.1: Review the feasibility and options for partnering relevant global bidding mechanisms;
e. Reference 8.2: Review the feasibility or necessity of global or regional procurement or bidding mechanisms for product categories for which such mechanisms do not currently exist. The Fund will not, in any case, take on such procurement responsibilities itself;
f. Reference Annex IV, p. 7: Review specific recommendations on capacity building;
g. Reference 10.1: Perform a feasibility study, including a full cost analysis, to develop a pricing reporting mechanism as outlined in the pricing section that will require that information on prices paid by Recipients is made publicly available through existing international pharmaceutical pricing services or be made public by the Fund. This includes determining who will publish the pricing information. Taking into account that it is a difficult matter, the Portfolio Management and Procurement Committee will study the best way of achieving this objective;
h. Reference 12: Study and make recommendations regarding the issue of domestic production;
i. Reference 18.1: Study the impact of the policy on duties, tariffs, and taxes, including specifically the impact on NGOs, and make appropriate recommendations to the January 2003 Board meeting;
j. Explore the necessity for the continuation for a special Procurement and Supply Management Task Force and review the memberships of such a Task Force.