Why do we need a Prime Vendor System?
Stock-outs of medicines affect quality of care and discourage patients to enrol in the Community Health Fund (CHF) and other insurance schemes. Medical Stores Department (MSD) is the backbone for public medicines supply in Tanzania. But they face challenges in filling orders of health facilities.
In the last few years, this supply gap has been growing and reached over 40% of orders.
The supply gap of over 40% stemming from the out-of-stock situation and low order fulfillment rates for supplies by MSD needs to be complemented by medicines from other sources.
Normally, health facilities fill this gap with purchases using complementary funds such as from community health fund (CHF), national health insurance fund (NHIF), user fees and donor basket funds. Procurement is done from multiple private sources within and outside their district and region; incurring in the process high opportunity costs (travel and fuel, per diems, high prices of medicines they purchase). The procedure is uneconomic, bureaucratic, intransparent, and lengthy and supplies are of questionable quality.
To resolve this situation, the Dodoma Regional Administration and Local Government (RALG) embarked on a novel process to establish and engage, on a Public-Private Partnership (PPP) basis, one private sector pharmaceutical supplier, as the primary supplier to provide the supplementary medicines needed by public health facilities in the region.
How are medicines financed?
Health facilities (HF) have two main sources of funding for their supplies:
Direct funding deposited at MSD by the Ministry of Finance (MoF) through the MoHCDGEC;
Supplementary funds collected by and/or residing at health facility level. These include: CHF, NHIF, cost sharing/user fees and donor health basket funds. At health facility level, complementary funds are managed by the Health Facility Governing Committee (HFGC). 67% of CHF revenue is dedicated to the purchase of supplementary medicines by health facilities.
Health facilities (HF) formerly used these funds to purchase from multiple private sources. However, now this supplementary source is used for purchases exclusively from the appointed Prime Vendor (PV).
Districts pool their demand for supplementary medicine at the regional level, benefitting from lower prices (economies of scale). Prices from the contracted PV are fixed and comparable to MSD prices.
This allows health facilities to manage their own funds following standard operating procedures (SOP) hence enhancing fiscal decentralization. Funds are used for pooled purchase from the PV, based on a public-private-partnership (PPP) framework contract.
Medical Stores Department (MSD) is the backbone for public medicines supply in Tanzania. But they face challenges in filling orders of health facilities. The supply gap of more than 40% stemming from the out-of-stock situation and low order fulfillment rates for supplies by MSD needs to be complemented by medicines from other sources.
Districts may purchase from private suppliers in case of stock-out at MSD upon its approval. However, this procedure is lacking consistency and transparency, is bureaucratic and uneconomic, and it prolongs lead-time for delivery of supplies.
To tackle the problem of medicine stock-outs the Dodoma Regional Administration and Local Government (RALG) decided to pilot a new strategy establishing a Public-Private Partnership (PPP) with a private sector pharmaceutical supplier.
This unique Prime Vendor System (PVS) has the objective to ensure that health facilities have the medicines and medical supplies to meet the needs of the people. The PPP supplements the regular government supply with additional supplies from a single vendor in a pooled regional approach. All complementary purchases from health facilities are consolidated at the district level and forwarded to the Prime Vendor.
In principle, the PVS established in Dodoma region serves as a “one stop shop” intended to alleviate opportunity costs previously incurred by health facilities when they have to search for alternative sources of supplies they could not obtain from MSD.
PV supplies are of assured efficacy, safety and quality in accordance with MoHCDGEC and Tanzania Food and Drug Authority (TFDA) standards.
Developing a Jazia Prime Vendor System
Procedures to procure complementary supplies from a single vendor in a pooled regional approach were developed. The following description illustrates the process and practical steps followed to establish the system.
The region operates a Jazia PVS office represented by a PV coordinator, a dedicated pharmacist and support staff. The system is closely managed and supported by mandated administrative structures such as a Technical Committee and a Board appointed by the regional authorities.
Monitoring the Jazia Prime Vendor System
Operations of the Jazia PVS are managed and driven by Standard Operating Procedures (SOPs). A set of standard operating procedures are available to guide the process and the purchase of medicines from the Prime Vendor when these are either out of stock, short supplied or not stocked by MSD. A comprehensive and user-friendly handbook with SOPs for health facilities and districts was developed, covering the following 6 key operational areas:
Monitoring & Evaluation
A Monitoring & Evaluation (M&E) handbook provides the framework for evaluating the performance of both the Jazia system and the Prime Vendor.
Jazia PVS (system) performance is monitored on quarterly basis using 8 indicators covering 5 areas of the supply chain:
Prime Vendor (private supplier) performance is monitored on quarterly basis using the following indicators and standard scores: