PHARMACY PRACTICE II

PROCUREMENT

BY
MR. OPIYO SUNNY
 Procurement
• Refers to the process of acquiring medicines
and health supplies from manufacturers or
suppliers.
• Ways of acquiring medicines or medical
commodities includes;
Purchase
Manufacture
donations
 Effective Procurement process

• An effective procurement method should

procure the right medicines in the right
quantity with acceptable quality at the lowest
possible purchase price in a timely manner.
 Good procurement practices (GPPs)

Maintenance of proper records

Licensed suppliers
Generic names
Procure in bulk
Only drugs on essential drug list
Competitive procurement preferred
Reliable payment and audit
 Procurement cycle
Collect consumption data
Review and make relevant adjustments
Determine order quantities
Reconcile needs using available funds/budget
Choose procurement method
Locate and select supplier
Agree on contract terms
Place order
Monitor order status
 Procurement cycle
Receive and check medicines
Make payments
Update records, store and distribute supplies
Collect consumption data
 FACTORS INFLUENCING PHARMACEUTICAL
PRICES AND TOTAL COSTS
Unit prices
The fundamental principle is that increasing
competition among suppliers and products
usually decreases pharmaceutical prices.
Reorder frequency and total cost of purchasing
Several cost such as acquisition costs, costs
associated with holding inventory, cost of
operating purchasing system, cost incured
when stock out occurs(shortage costs).
FACTORS INFLUENCING PHARMACEUTICAL
PRICES AND TOTAL COSTS

• So to reduce the total purchasing cost, one

should choose an optimal reorder frequency
model; based on the following factrs;-
 Interval between orders
 Safety stock targets, lead times, patterns of
consumption, and service level
 Visible and Hidden costs
Total procurement cost has four components-
• Pharmaceutical acquisition prices
• Inventory holding costs
• Purchasing operation costs
• Shortage costs
 Visible and Hidden costs
• Poor supplier performance
• Replacement costs when goods are lost or
must be discarded due to poor quality, poor
packaging, improper shipping conditions,
rapid spoilage, or short shelf life.
• Replacement costs for short shipments,
incorrect concentrations of liquid
preparations, wrong dosage forms.
 Procurement methods
Open tender
Formal competitive bidding where quotes are invited
from any supplier or representative on a local or
worldwide basis, subject to the terms and conditions
specified in the tender invitation.
Restricted tender/selective
Interested suppliers must be approved in advance, often
through a formal prequalification process that
considers adherence to GMPs, past supply
performance, financial viability and related factors.
 Procurement methods
Used mainly in;
 Emergency
 When only one vendor is qualified to fulfill
the requirements
 Continuation of previous work which another
supplier cannot do due to patent.
 Item is only available from a specific source
 There is a clear advantage of using the
method over the other competitive methods.
 Procurement methods
Single source tender
Non-competitive method where goods are
acquired from a sole supplier. Mgt conducts a
strict approval process.
Competitive negotiation
The buyer approaches a limited number of
selected suppliers typically 3 for price
quotations.
 Procurement methods
 Direct procurement
Buyer approaches a supplier’s outlet and makes
purchase.
 E-procurement and reverse auction
Is internet based tendering. In the reverse auction
approach, qualified bidders submit an initial offer;
the lowest offer received is posted publicly without
mentioning the bidder after the first round; then
qualified bidders are invited to offer lower prices
than that posted low price.
 E-procurement
• The process continues round by round until no
more prices are submitted; then the lowest
posted bid wins the contract.
 Steps involved in Ordering
Prepare a list of items to be procured
From the list, include quantities, unit costs
and total costs of entire supplies to be ordered
Adjust list according to available budget
Finalize the list of items to be ordered
Submit the list to the supplier basing on
agreed terms
Thank you