Addressing the drug shortage problem

By John Seeram

Background

Recently the news media has been highlighting the issue of an emergency procurement by the Georgetown Hospital Cor-poration (GHPC) of drugs valued at $605 million from ANSA McAL Trad-ing Limited. Apparently there was no approval by the National Procurement and Tender Administra-tion Board (NPTAB).

There was also mention that four out the last five public tenders were cancelled due to procurement irregularities, through inside trading.

In addition to the issues at GPHC, there was also a report of a shortage of essential drugs and other medical supplies at the New Amsterdam Hospital in Region Six. The system of transferring drugs from the Materials Management Unit of the Public Health Ministry to this facility was criticized on the grounds that there are loopholes in the system for discrepancies, hence the shortages. A visit made by members of the Social Services Parliamentary Sectoral Committee in early March did confirm that the drug shortages are indeed a major issue.

It is the view that the management of the GHPC and the Public Health Ministry do not have a workable inventory management system in place so as to minimise a drug shortage situation at the health facilities across the country.

Governance, transparency and accountability functions are not being exercised, and this has come about since the core problem is inventory management. An effective system should identify the ‘red flags’ when it comes to drug shortages and the system followed to address the problem(s).

Hence, it serves no useful purpose complaining about the drug shortages and emergency tender for supply of same, if no emphasis is being placed on the core problem.

I will undertake to give some guidelines on what the management of GPHC (which includes its Board of Directors) and the Public Health Ministry should be focusing on in an inventory management system which will include, among others, the drug shortages issue.

Objectives

Inventory management of drugs and other medical supplies has the following major objectives:

1)     To maintain records concerning the ordering, receipts, storage, usage and on-hand status of the various items comprising the inventory.

2)     To select the most suitable supplier whenever items of inventory must be ordered.

3)     To assure that inventory costs are minimized, that is, to maintain a balance between the costs of ordering and holding inventory, as well as the opportunity costs arising from being out of stock when inventory is needed.

4)     To serve health care institutions by maintaining adequate stocks of drugs, and by promptly back-ordering whenever such stocks are temporarily depleted.

Key decisions

Three key decisions involving the inventory management function are (1) when to order, (2) how much to order, and, (3) with whom to place the order.

Deciding when to order an inventory item involves setting a recorder point, based on such factors as the expected usage or demand and the expected time between placing an order and receiving the goods. Deciding the supplier from whom to order involves weighing such factors as the price per unit charged by the supplier relative to other suppliers, the reliability of the supplier in meeting scheduled delivery dates, the lead time required in ordering from the supplier, and the quality of the drugs, etc. provided by the supplier.

Depending on the dollar amount, the preferred supplier can be determined by the procurement process, either by quotations or by the tender processes by the Public Health Ministry and/or the NPTAB.

System elements

Several documents and managerial reports are generally prepared in the process of maintaining inventories. A key document related to the acquisition of drugs is the Purchase Order. Managerial Reports may include the Inventory Status Report, the Report of Forecasted Demands, the Inventory Usage Report, the Inventory Reorder List, the Report of Items on Order, the Supplier’s Performance Report, and the Purchasing Performance Report.

These reports set the tone for good governance, transparency and accountability.

Based on the above, useful information such as the following could be provided easily and quickly to users such as the board directors, executive management, managers, and employees of both the GPHC and the Public Health Ministry:

1)     A list of purchase orders placed with a particular supplier.

2)     A list of purchase orders authorized by a particular buyer.

3)     A list of suppliers and their current account balances.

4)     A list of suppliers and their history, plus their current account balances.

5)     A list of payments made to a particular supplier.

6)     A list of drug(s) and/or medical supply(s) specified on a particular purchase order.

7)     A list of items (drugs) received during a specified period, together with differences from quantities ordered.

8)     A list of issues and purchases transactions pertaining to a particular inventory item.

9)     The total value of orders placed with a particular supplier during the past year.

In summary

In sum, it is the view that the Public Health Ministry authorities need to be looking at the core problem(s). It appears to me that there is no evaluated management inventory system in place. It is now time to urgently review and improve the present system in order to overcome this drug shortage problem.

Documentation of an Inventory Management System and Procurement of Goods and Services should be done in the form of manuals for users to be guided accordingly. The manual on procurement must follow the Procurement Act of 2004.

It is imperative that qualified and experienced personnel should be involved in this process. The Internal Audit Unit should also be involved, as part of the accountability and advisory functions. And last but by no means least, there should be intensive on-the-job training following the guidelines in the respective manuals.

In effect, there is urgent need for a team effort in having an effective inventory management system of drugs and medical supplies in operation at both the GPHC and the Public Health Ministry.

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