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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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