Procurement of Pharmaceutical Products Through International Organizations: Experience of the First Year of Operation
Public procurement of medicinal products and medical devices by the Ministry of Health of Ukraine faced a number of issues for many years. It was manifested in lengthy and non-transparent procurement procedures, high commodity prices, lobbying for the interests of various players in the pharmaceutical market, absence of a special legislative regulation of the procurement of such socially important goods, etc. As a result, the situation has negatively affected timely patient access to needed medicinal products and medical devices. In addition, then existing system of public procurement would not allow the Ministry of Health of Ukraine (hereinafter - the Ministry of Health), as the specialized ministry, to carry out systematic and comprehensive health system reforms in full, the need for which has long been due in Ukraine. Given the above, the need for the introduction of temporary (up to March 31st, 2019) mechanism with the involvement of tested global experience in procurement of medicinal products and medical devices for budget funds through international specialized organizations arose. The relevant Law of “On Amendments to Some Laws of Ukraine on the Provision of Timely Patient Access to Needed Medicinal Products and Medical Devices through Public Procurement Involving the Specialized Organizations Engaged in Procurement" No. 269-VIII was adopted by the Parliament of Ukraine on March 19th, 2015
The developed mechanism suggests that the Ministry of Health conclude agreements on cooperation with specialized international organizations, in accordance with which the latter holds tenders and procures pharmaceutical products. The Ministry of Health effects 100% pre-payment to international organizations, which also includes the payment for their services. Consequently, on the basis of identified needs and possibilities of the state, international specialized organizations procure medicines and medical devices from suppliers (manufacturers and distributors) in accordance with one or another government program.
Thereafter, the goods are handed to state enterprises of the Ministry of Health, which further supply them within the territory of Ukraine to certain medical institutions. At the moment, further alternative embodiment of supplying the procured goods, with the involvement of private logistics companies, is also considered. The level of logistics of such companies should be high.
In the course of the selection carried in 2015, pursuant to the criteria established by the legislation, the Ministry of Health have concluded agreements with three specialized international organizations, such as the United Nations Development Programme (UNDP), the United Nations Children's Fund (UNICEF) and the Crown Agents.
It is important to note that such centralized procurement is made in accordance with the internal rules and procedures of international specialized organizations. It guarantees transparency of the tenders. They are not subject to the Law of Ukraine "On Public Procurement".
Besides, in contrast to the decentralized procurement of medicinal products carried out pursuant to the list of international non-proprietary names (hereinafter – the INPN) approved by Resolution of the Cabinet of Ministers of Ukraine No. 1071 as of September 5th, 1996, centralized procurement through international organizations is carried out in accordance with the list of goods approved by Resolution of the Cabinet of Ministers of Ukraine No. 787 as of October 8th, 2015 (the budget program for 2015), and approved by Resolution of the Cabinet of Ministers of Ukraine No. 557 as of August 23rd, 2016 (the budget program for 2016). These lists of medicinal products are formed based on the INPN.
In order to provide patients with the possibility of timely access to quality, safe and effective medicinal products that are not yet presented at the market of Ukraine, Law of Ukraine No. 269-VIII has also simplified the procedure for their state registration. Registration of the mentioned medicines provides for the examination of authenticity of registration materials, where the expert body analyses only the authenticity of the translation of instructions for medical use and labelling, rather than all the materials of the registration dossier. The respective changes were made to the Law of Ukraine "On Medicinal Products" and to the relevant bylaws.
An element of the simplification of the procedure is also a possibility to register and supply within the public procurement medicines, labelling and instructions for which are made up in the original language. Here we should note that Resolution of the Cabinet of Ministers of Ukraine No. 622 as of July 22nd, 2015 stipulates that the Ministry of Health, if necessary, can arrange for translation of the instruction for medical use into Ukrainian.
It should be noted that for the importation of medicinal products within the framework of international procurement, it is necessary to have a batch quality certificate issued by the manufacturer. At the same time, to get state registration it is not necessary to obtain an official document confirming that manufacturing conditions comply with Good Manufacturing Practice (GMP), which as a general rule is issued by the State Service of Ukraine on Medicinal Products and Drug Control. In practice, international organizations can request the document on the quality as a part of their tender procedures.
As part of the simplification of the regulatory procedures for medicinal products and medical devices procured through international organizations, the Parliament has also adopted Law of Ukraine “On Amendments to the Tax Code of Ukraine on the Exemption of Certain Medicinal Products and Medical Devices from Taxation" No. 332-VIII as of April 9th, 2015. The law temporarily exempted relevant operations from VAT. Functioning system for such a mechanism has not been completely regulated as of today. It should also be noted that the legislation does not provide for exemption from customs duties within the framework of international procurement.
The first experience of the implementation of government procurement model with the participation of international specialized organizations has shown that the objectives that have been set have been achieved to a greater extent - the system is viable and working. At the same time, as of today implementation of this model is still at the stage of perfection.
Given the fact that the first agreements between the Ministry of Health and relevant international organizations were made only at the end of 2015, and at the same time, work on the legislative regulation of certain aspects of such procurement continued. In November 2016, supplies under the budget program for 2015 are at the final stage. According to the Ministry, as of October 31st, 2016 91.87% of production was supplied to Ukraine. It is expected that by the end of 2016 all the procured goods will be delivered.
It is important to note that the international procurement of medicinal products and medical devices has proven effective and has saved budgetary funds significantly. Most medicines under all programs were procured at much cheaper price than procured by the Ministry of Health at the tenders under the budget program for 2014 Thus, according to Patients of Ukraine charity foundation, USD 30 million budget funds was saved under the budget program for 2015 in comparison with the procurement in 2014.
Since the launch of international procurement mechanism, the possibility of additional procurement of goods for saved funds has not been provided for. In order to settle this situation, Resolution of the Cabinet of Ministers of Ukraine No. 557 as of August 23rd, 2016 envisaged that after the procurement of the necessary quantity of medicinal products and medical devices, as defined in the list, the Ministry of Health, based on the level of unused funds on the accounts of international organizations, can increase the number of units of goods within 100% of the needed volume.
In October 2016 the Ministry of Health selected specialized international organizations to cooperate in the field of procurement of medicinal products and medical devices under the budget program for 2016. As a result, in accordance with the established criteria, 4 following organizations were selected: UNDP, UNICEF, Crown Agents and Partnership for Supply Chain Management. As of the date of this article, the Ministry of Health concluded agreements on cooperation with the first three organizations.
In conclusion, it should be noted that the introduced mechanism of the medicinal products and medical devices procurement with the involvement of specialized international organizations is a temporary solution of urgent problems. In parallel with its implementation, Ukraine needs to develop and implement its local procurement mechanism that will be effective and will allow for achieving the set goals.
