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  • Introduction

    This course gives you an introduction to inefficiencies in global health spending and how open contracting can intersect and mitigate issues. It provides case studies, statistics and explanations to help learning.

    The course, including this introduction, is in 6 parts.

    Please read through each section before continuing to the next section.

    Contents of this course:

    1. Introduction

    2. Inefficiency in Health Procurement

    3. The Impact of Inefficiency

    4. Open Contracting & Health Efficiency

    5. Corruption, Waste and Open Contracting in Health

    6. Medicine Prices and Open Contracting


  • Inefficiency in Health Procurement

    The World Health Organisation (WHO) research suggests that the healthcare sector spends trillions of dollars every year for little benefit concluding that...


    “20–40 per cent of total spending is consumed in ways that do little to improve people’s health”


    The WHO outlines ten leading causes of inefficiency and five are, fully or partially, procurement issues. These include:

    • Paying higher than necessary prices for medicines
    • Use of substandard and counterfeit medicines
    • Overuse or supply of equipment, which can be induced by suppliers
    • Inadequate health service infrastructure
    • Corruption and waste


              

  • The Impact of Inefficiency

  • Open Contracting & Health Efficiency

    Improving efficiency in health procurement is a difficult job.

    Healthcare providers need access to stocks of several hundred medicines and a wide range of non-durable goods, which are all continually depleted and renewed. Meanwhile, the technical complexity of medical devices and health facility construction processes create further challenges.

    Beyond this, good work of procurement officials is continually threatened by corruption and wastage; meaning, for example, that even if specifications for drugs were perfect, collusion and bid-rigging could undermine the quality of what was actually delivered. 

    Open Contracting gives the means to improve efficiency in each of the procurement related areas defined by the WHO. It enables access to information that fosters continual learning while at the same time tackling corruption and improving competition in health procurement.

    The next two section will explore in detail how two of the problem areas defined by WHO can be improved by open contracting. These are: 

    1. Corruption and waste
    2. Paying higher than necessary prices for medicines



  • Corruption, Waste and Open Contracting in Health

    Open contracting shows who is buying what, from whom and at what price, as well as provides information about unsuccessful bids and bidders. Quantitative analysis of these simple transactions shows supplier performance and activity over time.

    It can reveal patterns and anomalies, which might indicate over-pricing and kickbacks or collusion between competitors; linking this information to other datasets can confirm such suspicions. 

    Open contracting also helps to ensure that companies on watch-lists cannot win business when they are prohibited from competing.


    OPEN CONTRACTING IN ACTION

    In Indonesia, the Open Tender platform runs a rudimentary analysis based on the contract winner, budget, cost, date of award, and other variables to detect potential fraud. 

    In 2012, the algorithm detected a corruption risk in a contract to supply medical devices to hospitals in Banten province. 

    Investigative journalists worked with a CSO partner and uncovered an overpricing scam, which drew in several public officials. 



    • 6% of all spending on health, globally
    • 10 -25% of global spending on public procurement of medicines
    • 20–40 per cent of total spending is consumed in ways that do little to improve people’s health
    • Poor value for money in the medicine market is also driven by “widespread lack of public access to information about the pharmaceutical sector (e.g. medicines pricing, information on quality and suppliers etc)”, according to an eight-year study of 20 countries by the WHO


    • Romania: In 2016, a company selling sanitisers to over 150 Romanian hospitals was found to have watered down the substances by up to 90 per cent, rendering them medically useless.
    • Hungary: police are investigating a company for allegedly falsifying public procurement documents to win a health clinic construction contract. 
    • TBC



    Nigeria: civic monitoring helped to correct poor public policy.
                   
    • A CSO, a university and a newspaper collaborated to follow the money through the procurement cycle in the construction of 40 Primary Healthcare Centres (PHCs). They discovered that only 36 per cent of expenditure led to operational facilities. 
    • PHCs were bought for less than their budgets, which the Nigerian government claims are efficiency savings. But only five of the seventeen PHCs with the largest ‘savings’ (of 33 to 54 per cent) were operational, which suggests funds may have been misused. 
    • According to Nigerian law, bidders must participate in open and competitive tendering. But 26 of the contracts, won by 26 different companies, were all within one naira of 21,986,893, which suggests that tenders were not in line with procurement law.

    The Health Minister subsequently announced the construction of 10,000 new PHCs and the Nigerian government has pledged to use open contracting in their procurement.

  • Medicine Prices and Open Contracting

    Poor value for money in the medicine market is driven by “widespread lack of public access to information about the pharmaceutical sector (e.g. medicines pricing, information on quality and suppliers etc)”, according to an eight-year study of 20 countries by the WHO. Government bodies may not understand their own commercial positions and weaknesses, because they do not collect and analyse procurement data effectively.

    Open contracting enables government officials to have access to the information they need to make evidence based decisions within their procurement systems. If a supplier consistently under-performs or changes prices, for example, from county to county, Government can run simple analysis that would highlight this, meaning that contracts are awarded more on merit.
    OPEN CONTRACTING IN ACTION

    A non-profit organisation called Civio recently conducted “a journalistic investigation into access to medicines around the world”. The organisation sourced data on the prices of 14 essential, non-patented drugs in 61 countries and compared them against both international reference prices and the in-country daily wage of the lowest paid public servant - as an indicator of affordability. 

    This unorthodox methodology and country sample produced thought-provoking insights about the way global medicine markets operate. For example, “In Nigeria or Congo, 30 omeprazole (30 pills) can cost almost 13 working days. In Spain, Italy and Germany, the same treatment is paid with between 1 or 2 hours’ wages”.



    United Kingdom: A group of hospital trusts in the UK National Health Service (NHS) collated and standardised manufacturer and price data for generic products such as exam gloves and disposable aprons, which they were purchasing as individual trusts. The data was analysed and opportunities to aggregate demand and leverage collective purchasing power were identified. According to an independent review, “Results from this early work indicate savings of between 15 to 50 per cent beyond current best NHS prices and it reduced the variety of different products across manufacturers by up to 80 per cent”. 


    Ghana: the cost of Ciprofloxacin, an antibiotic used to treat pneumonia, is eight times the international reference price, according to data collected by Health Action International and analysed by Civio. Although price inflation of 800 per cent is hardly good value, it is preferable to the cost of the drug in Italy or Kuwait where it is respectively 30 times and 100 times the reference price.13 Price disparities affect high-income countries too. The same study shows a US$1000 pill in the United States costs US$320 in Spain and US$554 in France.14 While comprehensive price comparison should take into account multiple and complex factors such as the volume of the purchase, logistics costs and exchange rate fluctuations, poor value for money can also be driven by corruption.