Market Analysis of Medicines and Medical Supplies in Papua New Guinea

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  • About

    A review by USAID Global Health Supply Chain Program 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.

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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.

    Methodology
    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
    Guinea.

    Findings
    • 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
    coverage.
    • 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
    the branch.
    No. Recommendation Responsible Priority Timeline
    Entity
    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
    to exceed.
    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
    Catalogue.
    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
    procurement agents.

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