Market Analysis of Medicines and Medical Supplies in Papua New Guinea
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USAID GLOBAL HEALTH SUPPLY CHAIN PROGRAM
PROCUREMENT AND SUPPLY MANAGEMENT
Market Analysis of Medicines and Medical Supplies in Papua New Guinea – Briefer
Introduction & Background
In 2016, Papua New Guinea’s (PNG) Senior Executive Management team of the National Department of
Health (NDOH) requested a review of the current market for medicines and medical supplies used in
the provision of health care services for the people of PNG. The objective of the study was to identify
whether the NDOH was making the most cost-effective use of its budget for medicines and medical
supplies and to analyze potential opportunities to increase efficiency. The analysis also evaluated
procurement timelines, product quality, and potential recommendations.
In October 2016, Elizabeth Wrench, a Chemonics consultant, travelled to Papua New Guinea to
conduct the report for the USAID Global Health Supply Chain Program – Procurement and Supply
Management (GHSC-PSM) auspices.
The consultant initially analyzed data from mSupply inventory management software of past orders in
order to select tracer items and to identify key suppliers to interview. Aggregate pricing information was
collected to provide a suitable reference price for each tracer item. Following this, the items were
disaggregated for various factors including where they were store, supplier, and freight transportation
method. These items were then compared against international pricing reference points, which averaged
several different international vendors. The international pricing points also included the increased costs
of shipping the goods to PNG.
In addition, the analysis also evaluated the quality of the goods through QA testing provided by FHI 360.
The testing measured various qualities such as expiration date, potency, pH levels, and physical
characteristics. This testing was conducted to ensure quality across suppliers internal to Papua New
• Steps for the procurement process currently in-country are:
o Request Received from AMS or National Program Request for Quotation issued
Quotations evaluated Purchase Order raised Purchase Order approved Purchase
Order issued Goods delivered Receiving Report submitted Supplier submits
claim Payment processed.
o It seems that the majority of orders are individual program or AMS requests that arrive
at random and are handled one by one with the procurement team approaching suppliers.
Often these requests are for a few lines and are deemed as urgent, so the procurement
staff may just see who has the items in stock or how quickly they can obtain them.
• Two suppliers were responsible for more than half of the total value of all purchase orders.
Many of the items procured were classified as non-stock items which had not been allocated a
catalogue number. This meant there was no way to track these items further down the supply
chain with mSupply. One supplier received a significant proportion of business from two Area
Medical Stores (Kokopo and Wewak). These numbers move against national trends.
• In general, the average price for commodities paid by the NDOH were far above prices on the
international market. The majority of local suppliers are not competitive to the international
market, inclusive of shipping costs.
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• Many suppliers within PNG were content with the NDOH payment terms; however, some
noted that these payment terms are not always adhered to by the purchaser, and noted late or
outstanding payments. They were supportive of payment after delivery, which most international
suppliers do not allow.
• There is a lack of routine quality control testing by either suppliers or by the NDOH. There
also lacks a sampling and QC testing plan in place. Two of the twenty-four samples tested under
the scope of this analysis were found to be out of specification.
• There is a lack of records of purchase order approvals. Furthermore, in half of the available
records, the date of receipt is prior to the date of purchase order approval. Timing of receipt to
approval ranged from 2 to 293 days.
Recommendations & A Way Forward
• Opening procurement up to the international market would provide better pricing and
• Improved procurement planning could promote adherence to the Government’s procurement
policies, guidelines, and regulations and improve relationships with the suppliers.
• A capacity assessment of MSPD may be undertaken to identify skill sets and experience within
No. Recommendation Responsible Priority Timeline
1 NDOH and MSPD should consider separating the cost of MSPD High Immediate
goods from the cost of freight, insurance, customs clearance NDOH
and transport to the final destination when suppliers are
preparing quotations or bids. This should be made clear to
suppliers in the request for quotation and tender documents.
2 The GoPNG health budget should separate the costs of NDOH Medium Long Term
medicines and medical supplies from the costs of freight, DOF
transport and in-country distribution.
3 NDOH should expand their annual tenders to international NDOH High Medium
suppliers and clarify the freight terms in the instructions to Term
bidders. In this way, NDOH may determine whether to pay
the supplier to arrange freight, customs clearance, and
delivery to final destination, whether to source their own
freight provider, or whether to engage a freight forwarder to
handle the consignments on arrival into POM or LAE ports.
4 In the medium term, NDOH may wish to consider NDOH High Medium
appointing a freight forwarder through competitive tender Term
for a fixed term contract.
5 NDOH would benefit from an overhaul of its procurement NDOH High Short Term
process and systems, beginning with development of an
annual procurement forecast and supply plan for all essential
medicines and medical supplies.
6 Some of the processes at MSPD need to be strengthened, MSPD High Medium
including but not limited to transparent approach to suppliers NDOH Term
when running an RFQ, strict adherence to GoPNG
procurement policies and thresholds, improved
documentation of evaluations decisions, maintenance of
complete and up to date files, streamlining of process for
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processing of receiving reports to enable supplier payment
processing and tender management.
7 NDOH should plan to tighten the procedures around MSPD High Immediate
placement of a purchase order so that an order may not be
placed without an approved PO stating the quantity, and the
unit price for procurement, which is issued to a named
supplier. POs should not be changed after issuance.
8 NDOH should plan to take steps to ensure that prices being NDOH Medium Medium
quoted by suppliers and resulting in Purchase Orders are MSPD Term
considered “reasonable”. This may require keeping a
database of maximum prices (perhaps in the Medical and
Dental Catalogue), which would require additional approvals
9 NDOH and the MSPD branch should review the items MSPD Medium Medium
procured as non-stock items and ensure they are either PSSB Term
aligned to an existing product from the Medical and Dental PAC
Catalogue, or provided a catalogue number so distribution
and consumption may be recorded in mSupply. This will
necessitate involvement of PSSB and the Pharmaceutical
Advisory Committee who oversee revisions to the
10 NDOH should develop and implement a plan to undertake PSSB Low Long Term
routine quality control testing of medicines. This should NDOH
include goods procured locally, and goods from the field to
see whether medicines are meeting and maintaining
adherence to stated pharmaceutical specifications. It is
acknowledged that implementation of this plan will have a
budget implication so this may be a long-term goal.
11 NDOH should share the results of the QC testing NDOH High Immediate
undertaken as part of this review with the supplier who Suppliers
provided the samples. In fact, this was a condition of
collection of the samples.
12 NDOH should streamline internal financial systems and NDOH Medium Medium
ensure that capacity for upfront payment through DOF MOF
exists, as this will be required by international suppliers or