Guide to the Global Fund's Policies on Procurement and Supply Management
Publication date: 2006
����������������������� ��������������� ��������������������������������������� PROCUREMENT AND SUPPLY MANAGEMENT Guide to the Global Fund’s Policies on November 2006 CCM Country Coordinating Mechanism CTD Common technical document EML Essential medicines list GLC Green Light Committee GMP Good manufacturing practices ICH International Conference on Harmonization INN International Non-proprietary Name LFA Local Fund Agent MDGs Millennium Development Goals MDR-TB Multidrug-resistant tuberculosis NDRA National Drug Regulatory Authority PIC/S Pharmaceutical Inspection Cooperation Scheme PR Principal Recipient PSM Procurement and supply management STG Standard treatment guidelines TRIPS Trade-Related Aspects of Intellectual Property Rights TCO Total cost of ownership WHO World Health Organization List of Terms & Abbreviations Table of Contents Introduction Procurement and supply management plan Procurement systems Quality assurance National and international laws Distribution and inventory management Appropriate use Monitoring and evaluation Annex: Countries with stringent regulatory authorities 4 7 9 12 16 16 17 17 18 Introduction The Global Fund to Fight AIDS, Tuberculosis and Malaria (hence- forth referred to as the Global Fund) was established to attract, manage and disburse additional resources through a new public/ private partnership that will make a sustainable and signiﬁcant contribution to the reduction of infections, illness and death, thereby mitigating the impact caused by HIV/AIDS, tuberculosis and malaria in countries in need and contributing to poverty re- duction as part of the Millennium Development Goals. Access to and availability of health products – medicines, diagnostics, and preventive technologies such as bed nets and condoms, among others – will be crucial in achieving this goal. In order to provide medicines and other health products to as many people as possible, the Global Fund has adopted a set of policies and principles on procurement and supply management (PSM) that aim to support the procurement of quality-assured medicines and other health products in sufﬁcient quantities, re- duce cost inefﬁciencies, ensure the reliability and security of the distribution system, encourage appropriate use of health products and continuously monitor and evaluate the procure- ment process. The purpose of this guide is to explain those poli- cies for the beneﬁt of Global Fund recipients. GLOBAL FUND PROCUREMENT POLICIES AND PRINCIPLES The central objective of Global Fund procurement policies is to procure quality-assured products at the lowest price and in ac- cordance with national and international law. Procurement must be conducted in a transparent fashion. The Global Fund Board has identiﬁed several guiding policies and principles with which recipients needs to comply. The Global Fund recognizes that the varied situations found in grant recipi- ent countries will result in programs being implemented differ- ently. To this end, this document does not present prescriptive procedures but minimum standards to which recipients must adhere. In many cases there are different ways to comply with such standards. Recipients may, therefore, choose the means that are most appropriate to their programs. RESPONSIBILITIES FOR PROCUREMENT AND SUPPLY MANAGEMENT Principal Recipients (PRs) are responsible for ensuring that all procurement and supply manage- ment conducted under its grant(s), including that conducted by other entities (such as sub-recipi- ents), conforms to Global Fund requirements. Hence PRs are required to have systems in place to monitor the performance of other actors conducting procurement or supply management under the program. Although PRs are the ones ultimately responsible, this guide is written for the beneﬁt of both PRs and other actors as all recipients (including sub-recipients) are governed by the same policies. Unless speciﬁc reference to either type of Global Fund recipient is required, the term “recipients” is used in these guidelines to refer to all actors involved in the procurement and sup- ply management process. DEFINITIONS OF KEY TERMS For purposes of clarity, this section provides the Global Fund’s deﬁnition of three key terms: “pro- curement and supply management”, “health products”, and “non-health products”. The Global Fund uses the following deﬁnition of “procurement and supply management”: The term “procurement and supply management” refers to all management activities required for getting sufﬁcient health products of assured quality procured at the lowest price and in accor- dance with national and international laws to the end users in a reliable and timely fashion. The following deﬁnition is used for “health products”: The term “health products” includes pharmaceutical products, diagnostic technologies and sup- plies, bed nets, insecticides, aerial sprays against mosquitoes, other products for prevention (e.g., condoms) or laboratory equipment and supportive products (e.g., microscopes and reagents). The following deﬁnition is used for “non-health products”: The term “non-health products” refers to all products other than “health products”, including vehicles, computers, construction materials, and services (including technical assistance). 4 5 6 7 NON-HEALTH PRODUCT PROCUREMENT Most of this guide focuses on policies on health products. However, the same general principles that apply to health products – namely that the PR is responsible for procurement, and is required to conduct competitive purchasing in order to obtain the lowest possible price for products of assured quality – are also applicable to the procurement and supply management of non-health products. HEALTH PRODUCTS OTHER THAN PHARMACEUTICALS The principles for procurement and quality assurance of pharmaceuticals, as described in this guide, also apply to diagnostics and other non-pharmaceutical health products (e.g., bed nets, insecticides, etc.): namely that the PR is responsible for procurement, and is required to conduct competitive purchasing in order to obtain the lowest possible price for products of assured quality. For durable products, the lowest possible price should take into account the total cost of ownership (TCO). TCO includes the cost of reagents and other consumables as well as costs for annual mainte- nance. Procurement methods for durable products may include either lease or purchase. The recipient should have a plan for service and maintenance of these products. TECHNICAL ASSISTANCE FOR PROCUREMENT Global Fund recipients may need technical assistance in order to successfully implement their propos- als. In the area of procurement and supply management, recipients may lack adequate capacity to conduct responsible procurement of the magnitude and complexity as ﬁnanced by the Global Fund. Recipients may therefore contract technical assistance in the area of procurement (where required) using funds budgeted in the grant. For instance, recipients could contract a supply chain manage- ment specialist to assist with strengthening the distribution system to safely and securely handle new products, or an intellectual property specialist for analysis of the effects of national and international laws on the procurement process. Procurement and supply management plan Once a proposal has been approved, a PR must describe how it will adhere to the Global Fund’s procurement requirements in a basic Procurement and Supply Management (PSM) Plan. The PR should obtain a full understanding of this Guide to the Global Fund’s Policies on Procurement and Supply Management before preparing the PSM plan. OBJECTIVE The objective of the PSM plan for health products is to outline how the PR will adhere to the Global Fund’s procurement poli- cies. The plan will also be used to measure performance during implementation. CONTENTS The PSM plan should: ° Indicate which entity or entities will implement relevant pro- curement and supply management activities; ° Describe how the PR will ensure adherence to each of the Global Fund’s procurement policies; ° Include a list of key health products with their respective esti- mated quantities, cost, registration status and patent status; ° Include details about technical assistance requested; ° Encompass two years of implementation. The plan should be no more than 20 pages long. TOWARDS DISBURSEMENT FOR PROCUREMENT Once a PR has completed its PSM plan, the Local Fund Agent (LFA) will conduct a PSM assessment (and may make recommen- dations on capacity building). If the LFA ﬁnds that the PSM plan is adequate, and if all other relevant requirements (not related to procurement and supply management) are met as well, the Global Fund Secretariat may decide to start disbursements of funds for health product procurement. 8 9 However, if the LFA determines that the PSM plan is inadequate, the Global Fund will request that the PR revise the PSM plan; these steps are illustrated in the following ﬁgure: GRANT APPROVED QUALITY OF PROCUREMENT AND SUPPLY MANAGEMENT PLAN In the event that a PSM Plan is not of acceptable quality after two reviews by the LFA, the Global Fund may request that the PR contract technical assistance in preparing the plan. Grant funds may be used by the PR to pay for technical assistance from specialized entities. If, despite these measures, the PR fails to develop an acceptable PSM Plan, the Country Coordinating Mechanism (CCM) may be asked to identify an alternate PR. MODIFYING THE PROCUREMENT PLAN DURING IMPLEMENTATION Since the PSM Plan covers two years of implementation, modifying the plan, with respect to the selec- tion or the quantities of items to be procured, for example, may be necessary, especially in instances where there are changes in national or international treatment guidelines. For signiﬁcant changes, the PR is required to provide to the Global Fund a written rationale and highlight the proposed modi- ﬁcations. The LFA will assess the proposed rationale and provide its recommendations to the Global Fund, which will conﬁrm whether these changes are acceptable. Procurement systems The Global Fund requires that procurement conducted by or un- der the responsibility of PRs adhere to the Interagency Guide- lines:Operational Principles for Good Pharmaceutical Procure- ment1. Where practices differ from the Interagency Guidelines, recipients must demonstrate to the LFA that there are: compa- rable systems for competitive bidding, (e.g. within a group of pre-qualiﬁed suppliers), transparent and accountable practices and appropriate quality assurance mechanisms. The Interagency Guidelines and the Global Fund’s own guidelines are summarized below; for more details the reader should refer to the Interagen- cy Guidelines. PROCUREMENT SYSTEM MANAGEMENT CAPACITY As part of a comprehensive assessment of the PR’s capacities, the PSM plan and the PR’s procurement and supply management capacity is assessed by the LFA. The objective of this assessment is to verify whether the PR has the minimum required capacity to handle procurement and supply management in accordance with Global Fund requirements. This assessment is a combination of an off-site review of assessments previously conducted, and an on-site assessment, in which the LFA assesses relevant systems in-country. The assessment tool and reporting format used by the LFA are available at www.theglobalfund.org. SUBCONTRACTED PROCUREMENT AGENCY In the event that local procurement and supply management ca- pacity is insufﬁcient, recipients have three options: a) Start procurement and supply management activities only after appropriate capacity is established; b) Subcontract (certain) functions to specialized agencies; c) Subcontract (certain) functions to specialized agencies while simultaneously building internal capacity. 1 Interagency Guidelines: Operational Principles for Good Pharmaceutical Procurement. WHO, Geneva, 1999. WHO/EDM/PAR/99.5 http://www.who.int/medicinedocs/collect/ edmweb/pdf/whozip49e/whozip49e.pdf Grant approved PR submits PSM Plan to Global Fund LFA conducts assessment Global Fund approval & disbursementu uu u Revise Plan PRs are also free to subcontract PSM activities even if the assessment ﬁnds that adequate capacity ex- ists. The PR may subcontract PSM activities to an agency with acceptable capacity for the purposes of warehousing, procurement, quality assurance, or any other relevant function, provided the selection is conducted in a competitive and transparent manner. The Global Fund neither endorses nor recom- mends speciﬁc agencies and it will, through the LFA, determine whether the proposed agency has the capacity for procurement and supply management in accordance with Global Fund policies. Even where the recipient has adequate procurement capacity, the use of capable regional and global procurement services is encouraged wherever pooling of the recipient’s requirements with those of other purchasers results in lower prices for products of assured quality. TRANSPARENT AND FORMAL WRITTEN PROCEDURES Different procurement functions and responsibilities (selection, quantiﬁcation, product speciﬁcation, pre-selection of suppliers and adjudication of tenders) should be divided among different ofﬁces, com- mittees and individuals, each with the appropriate expertise and resources for the speciﬁc function. As stated, procurement procedures should be transparent, follow formal written procedures through- out the process and use explicit criteria to award contracts. Mechanisms should be put in place to ensure reliable ﬁnancing for procurement. Good ﬁnancial management procedures should be followed to maximize the use of ﬁnancial resources. Recipients should also, upon request of the LFA, demon- strate the existence of a full set of contractual documentation to govern each transaction. COMPETITIVE PROCUREMENT METHODS: LOWEST PRICE Procurement should be based on competitive procurement methods in order to achieve the lowest price, except in the case of small or emergency orders. In addition, procurement should be effected in the largest possible quantities reasonable under the requirements of the program in order to achieve economies of scale. PRODUCT SELECTION Global Fund resources may be used only to procure medicines that appear in current national, in- stitutional or World Health Organization (WHO) standard treatment guidelines (STGs) or essential medicines lists (EMLs). Unlisted products may be procured only if the PR states a speciﬁc rationale for doing so in its proposal to the Global Fund. Medicines should always be listed by their International Non-proprietary Name (INN) (i.e., their generic name). FORECASTING OF NEEDS Order quantities for health products procurement should be based on reliable estimates of actual need. The recipient must system- atically and regularly update forecasts of the quantities of phar- maceutical and other health products needed for the program. Initial forecasts for new activities must be based on morbidity, adjusting the potential demand in light of realistic estimates of the anticipated capacity to deliver services. Forecasts for ongoing activities should normally be based on past consumption data. 10 11 Quality assurance Quality assurance refers to the management activities required to ensure that the medicines (or other health products) that reach pa- tients are safe, effective and acceptable to the patient. These ac- tivities may include, but are not limited to, (medication) registra- tion, pre-qualiﬁcation and quality control. In addition to the quality assurance requirements for pharmaceuticals, this section outlines the requirements for non-pharmaceutical health products. ROLE OF NATIONAL DRUG REGULATORY AUTHORITY Pharmaceuticals procured with Global Fund resources are subject to authorization by the National Drug Regulatory Authority (NDRA) in the country in which they are used, following its standard prac- tices for drug registration (or other forms of authorization, such as authorizations for special use) for pharmaceutical products. MULTI-SOURCE PHARMACEUTICAL PRODUCTS Multi-source pharmaceutical products are pharmaceutically equiv- alent products that may or may not be therapeutically equiva- lent. Multi-source pharmaceutical products that are therapeuti- cally equivalent are interchangeable. Multi-source pharmaceutical products tend to be available from a wide range of manufacturers around the world. They are off-patent products with publicly available quality as- surance standards, analytic methods and reference substances for the ﬁnished dosage form; that is, for which there is monograph for ﬁnished dosage form publicly available in one or more Pharmaco- poeias (e.g., British Pharmacopoeia, United States Pharmacopoeia and others). Quality assurance standards are publicly available for most medi- cines necessary to the control of tuberculosis and malaria and to manage opportunistic infections in HIV/AIDS. For such multi-source products, there are no additional require- ments other than (as described above) that veriﬁcation of com- pliance with quality standards must be conducted in accordance with relevant requirements of the NDRA in the recipient’s country. SINGLE- AND LIMITED-SOURCE PHARMACEUTICAL PRODUCTS Single- and limited-source pharmaceuticals are products for which there are no publicly-available quality assurance standards, analytic methods, and reference substances for the ﬁnished dosage form; that is, for which there is no publicly available monograph for ﬁnished dosage form in the Inter- national Pharmacopoeia, the British Pharmacopoeia or the United States Pharmacopoeia. Grant funds may be used to procure a single- or limited-source pharmaceutical product provided that such product meets one of the following standards: a) Have been found to be acceptable by the UN Procurement Quality and Sourcing Project (also known as the WHO Prequalification Project2); or b) Have been authorized for consumption in their country by a stringent regulatory authority3; or c) Have been authorized by the NDRA in the recipient’s country, provided that this clause shall only apply until 30 April 2005. After 30 April 2005 grant funds may only be used to procure single or limited-source pharmaceutical products that meet the requirements of the two standards set out in a) and b), provided that: (1) Contracts entered into by the PR on or before 30 April 2005 with suppliers for products that qualified for purchase under clause c) may be honoured until such contracts expire or other- wise terminate. (2) After 30 April 2005, the PR may not enter into any new contracts, nor extend any existing contracts, for the supply of products that would have qualified for purchase under clause c) prior to 30 April 2005. (3) If the PR determines that there is only one or no equivalent pharmaceutical product that meets the standards of either a) or b), or if the PR determines that the products that meet these standards are unavailable (a product is defined as “unavailable” when its manufacturer is unable to supply a sufficient quantity of the finished product within 90 days of the date of order) and represents the same to the Global Fund, and the Global Fund does not object, then grant funds may be used to procure another equivalent pharmaceutical product, pro- vided that such product is selected in accordance with the following, in order of priority: 2 See: www.who.int/medicines and http://mednet3.who.int/prequal/ 3 For the purposes of this policy, a “stringent drug regulatory authority” is deﬁned as a regulatory authority participating in the Pharmaceutical Inspection Cooperation Scheme (PIC/S) and/or the International Conference on Harmonization (ICH) of Technical Requirements for Registration of Pharmaceuticals for Human Use. See the Annex for a list of these countries. 12 13 i) the manufacturer has submitted an application for approval of such product to the WHO Prequalification Program or a stringent regulatory authority and such product is manufac- tured at a site that is compliant with the standards of good manufacturing practices (GMP), as certified (after inspection) by the WHO or a stringent regulatory authority; or ii) if the manufacturer of such product has not submitted an application for approval of such product to the WHO Prequalification Program or a stringent regulatory authority, such product is manufactured at a GMP-compliant manufacturing site, as certified (after inspection) by the WHO or a stringent regulatory authority. If the PR intends to procure products pursuant to the criteria in clause 3 (i) or (ii) above, the PR shall promptly notify the Global Fund in writing, prior any delivery of such products. (4) Procurement of products according to criteria in clause 3) (i) or (ii) above should be time- limited and the PR should procure products meeting the criteria in clauses a) or b) above as soon as possible. For products that have passed the WHO Prequaliﬁcation Project review, NDRAs are encouraged to expedite registration by accepting this WHO pre-qualiﬁcation inspection and supporting dossiers in lieu of national requirements. For products that have been authorized by stringent drug regulatory authorities, NDRAs are encour- aged to expedite registration by accepting, in lieu of national requirements, the Executive Summary of the Common Technical Document (CTD) or summary parts for quality, safety and efﬁcacy together with all necessary information to perform quality control testing of products and necessary reference standards. QUALITY CONTROL REQUIREMENTS FOR PHARMACEUTICALS For all pharmaceutical products As an element of quality assurance, quality control refers to the testing of samples against speciﬁc standards of quality. The entity responsible for quality assurance under a grant must systematically draw samples of each pharmaceutical batch purchased with Global Fund resources. Samples should randomly be subjected to quality control testing in order to monitor compliance with quality stan- dards. The cost of such testing may be included in the Global Fund grant budget. For pharmaceutical products meeting criteria described in clause 3 (i) or (ii) The Global Fund is responsible for contracting an independent third party to conduct random quality analysis of products being procured pursuant to the criteria in clause 3) (i) or (ii) in the sec- tion above to ensure the quality of such products. The location of the sampling will be exclusively conducted at the manufacturing site and only if the results of the quality test are favorable will the products be released for delivery. In case a product fails the test, the Global Fund will reject the product for procurement with Global Fund resources. NDRA laboratories or laboratories recognized by the NDRA should be used for quality monitoring. To ensure the respective laborato- ries have adequate capacity for full pharmacopoeial testing, they must meet one of the following criteria: a) Acceptance for collaboration with WHO Prequalification Project4; b) Accreditation in accordance with ISO17025 or EN45002; c) Acceptance by a stringent authority. PRE-QUALIFICATION AND MONITORING OF SUPPLIERS Prospective suppliers should be pre-qualiﬁed, and selected suppli- ers should be monitored through a process that considers product quality, service reliability, delivery time and ﬁnancial viability. QUALITY ASSURANCE OF NON-PHARMACEUTICAL HEALTH PRODUCTS For all other non-durable products, the same principles as for pharmaceuticals should be followed, namely that a PR is required to select from lists of pre-qualiﬁed products (where they exist) or products accepted by stringent regulatory authorities or products accepted by national standards. 4 Currently three laboratories have been pre-qualiﬁed: the Research Institute for Industrial Pharmacy and the Centre for Quality Assurance of Medicines (both in South Africa) and the Laboratoire National de Contrôle des Produits Pharmaceutiques, LNCPP (in Algeria). 14 15 National and international laws Recipients must procure their products in accordance with nation- al and international laws. The Global Fund encourages recipients to apply the ﬂexibilities provided within national laws and in the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (as interpreted in the Dec- laration on the TRIPS Agreement and Public Health [the Doha Dec- laration]) in a manner that achieves the lowest possible price for products of assured quality. In the event that a PR does not have the requisite capacity to assess the national and international intellectual property rights issues that apply to the desired products in their country, it may, using funds budgeted in the Global Fund grant, contract the neces- sary expertise. Distribution and inventory management The recipient should minimize the risk of stock-outs through ef- fective management of procurement and logistics systems, which should include (but are not limited to) appropriate economic order quantity, buffer stock, procurement period, storage capacity and conditions and product demand. In addition, the recipient must implement and ensure that sub-recipients implement procedures that will avoid the diversion of Global Fund-ﬁnanced health prod- ucts from their intended and agreed-upon purpose. These proce- dures should include the establishment and maintenance of re- liable inventory management, ﬁrst-expiry/ﬁrst-out stock control systems, internal audit systems, and good governance structures. Appropriate use It is strongly recommended that recipients implement mechanisms to encourage adherence to treatment (including but not limited to the use of ﬁxed-dose combinations, once-a-day formulations, blister packs, and peer education and support), to monitor and contain resistance and to monitor adverse drug reactions accord- ing to existing international guidelines. The cost of such activities may be included in the Global Fund grant budget. TREATMENT OF MULTIDRUG-RESISTANT TUBERCULOSIS To help limit resistance to second-line TB drugs and to be consis- tent with the policies of other international funding sources, all procurement of medications to treat multidrug-resistant tubercu- losis (MDR-TB) must be conducted through the Green Light Com- mittee (GLC) of the Stop TB Initiative. More information on the GLC can be obtained from the WHO repre- sentative in the recipient country or from: www.who.int/tb/dots/ dotsplus/management/en/index.html. Monitoring and evaluation The PRs are required to submit the prices that were paid for phar- maceuticals with Global Fund resources for publication on the website of the Global Fund, under the Price Reporting Mechanism page. The speciﬁc format is available on the Global Fund’s website (www.theglobalfund.org/prm). 16 17 Annex: Countries with stringent regulatory authorities PHARMACEUTICAL INSPECTION COOPERATION SCHEME (PIC/S) PARTICIPATING REGULATORY AUTHORITIES www.picscheme.org/ Australia Greece Norway Austria Hungary Portugal Belgium Iceland Romania Canada Ireland Singapore Czech Republic Italy Slovak Republic Denmark Latvia Spain Finland Liechtenstein Sweden France Malaysia Switzerland Germany Netherlands United Kingdom PARTICIPATING REGULATORY AUTHORITIES TO THE INTER- NATIONAL CONFERENCE ON HARMONIZATION OF TECHNICAL REQUIREMENTS FOR REGISTRATION OF PHARMACEUTICALS FOR HUMAN USE (ICH) www.ich.org European Union member states Japan United States 18 The Global Fund to Fight AIDS, Tuberculosis and Malaria Chemin de Blandonnet 8 1214 Vernier Geneva, Switzerland +41 22 791 1700 (phone) +41 22 791 1701 (fax) www.theglobalfund.org firstname.lastname@example.org ISBN 92-9224-066-8
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