How the New Medicines Procurement System Will Operate in Ukraine

09/ 10/ 2017

Dmytro Aleshko, partner at Legal Alliance Company Discussing medical reform, it is crucial to understand the new system of procurement of medicines and medical products in Ukraine, which will operate from 2019 onwards. The Ministry of Health of Ukraine started work on reforming this sphere back in 2015, creating a working group on reforming the system of procurement of medicines and medical products. The group was headed by Ihor Perehinets, the Deputy Minister. I worked in the Working Group together with representatives of government, public and international organizations, and thus had an opportunity to join the development of the new procurement system concept. We have passed a long way, having analysed the legal achievements and weaknesses in the field of public health in Ukraine, and having implemented the positive aspects of the important procurement experience with the help of international specialized organizations. In late August of 2017, the Cabinet of Ministers approved the Concept of Reforming the Mechanisms of Public Procurement of Medicines and Medical Products. WHAT DOES THIS CONCEPT DEAL WITH? The concept provides for the establishment of the Central Procurement Organization (CPO), which will procure medicines and medical products at national, local and international levels using long-term framework agreements and e-procurement tools. That is, customers can, at their own pleasure, authorize the CPO to carry public procurement of medicines and medical products for them. At the same time, the CPO must arrange and conduct procurement in accordance with the framework agreements for the benefit of customers. Thereupon, the customers will enter into procurement contracts with the tender winners and pay them for the procured goods directly. If successful, such an approach to procurement should significantly reduce corruption risks, facilitate transparent procurement and rational use of budgetary resources through professionalization and optimization of procurement activities and aggregation of procurement volumes. As part of such procurement, the identical needs of different customers in all regions of Ukraine which resorted to the CPO, should be combined for procurement purposes, and decision-making and reporting should be as transparent to the public as possible. Direct procurement from foreign and national producers should constitute an important part of such CPO activities. THE CENTRAL PROCUREMENT ORGANIZATION The CPO is formed upon decision of the Ministry of Health and is subordinated to it. The CPO is composed of the Supervisory Board, which will consist of representatives of central executive authorities, international and public organizations. Head of the CPO will be a person who has deep experience in the healthcare area and is selected by the contest commission composed of representatives of international and public organizations. We expect that the CPO will serve as a powerful factor of professionalization in the field of public procurement of medicines and medical products. This will be possible, first of all, thanks to personnel with in-depth knowledge of the legal and procedural aspects and needs of customers. The personnel of the CPO should include experts from both public procurement and the circulation of medicines and medical products areas, in particular pharmacists, lawyers and financial experts who will work for a decent salary. At the stage of formation and at the initial operation stage, the CPO will be subsidized by international donors. In the future, the CPO will act on the basis of service fees from customers who will use its services. Such fees will be calculated based on transparent tariffs. Despite the customers’ duty to pay for the services of the CPO, as a result, the savings in budget funds will significantly exceed the funds spent. At the same time, customers will not have to distract their employees from their immediate work duties. WHAT AND WHEN? STAGES OF THE CONCEPT IMPLEMENTATION The concept should come into operation by 2019. At the first stage of implementation, which will last till the end of 2017, institutional and regulatory frameworks for reforming public procurement mechanisms for medicines and medical products will be developed. It will ensure the process of establishing and operating the CPO in the framework of a pilot project and training of the CPO personnel. This will form the basis for the implementation of a pilot project for public procurement of drugs for needs of research institutions subordinate to the National Academy of Medical Sciences, institutions subordinate to the Ministry of Health and / or a pilot public procurement project to meet the needs of regional customers. At the second stage, which will begin in 2018, the staff and economic potential of the procurement organization will be developed and strengthened, the process of establishing its operational activities will continue, including arranging the exchange of experience with similar organizations in the EU member countries; training employees on international programs and conducting additional pilot public procurement of medicines and medical products. Of course, while setting the CPO activities, it is necessary to work out and take into account the issues which were discovered while carrying procurement the involvement of international specialized organizations, including ensuring the continuity and timeliness of the supply of medicines and medical products, the maximum reduction in supply time and the like. It should be noted that the final condition for setting legal grounds and the start of CPO operation at full capacity (and not as a pilot project) should be the approval and entry into force of the relevant regulatory act that will determine the specifics of the establishment and operation of such an organization. WHAT WILL THE REFORM OF MEDICINES AND MEDICAL PRODUCTS BRING? A qualitatively new approach to public procurement of medicines and medical products will help to: Maximize patient needs; Reduce bureaucracy. §Reduce corruption in the sphere of public procurement of medicines and medical products; §Build an effective system of reporting, control and accountability to the public; §Harmonize national legislation in the field of public procurement with the EU directives; §Build the confidence of business and the society in the system of public procurement of medicines and medical products; §Rationally use budgetary funds; Customers which will decide to use the services of the CPO at the central and regional level, will entrust procurement and their legal support to professionally trained experts. They will no longer waste their efforts on long procurement procedures, appeals against procurement by participants, and the like. Customers will have to evaluate the needs, monitor consumption and control residue only. At the same time, as mentioned above, customers are not obliged to apply to the CPO and have the right to carry procurement themselves. However, if the cost of medicines and medical products procured by customers independently exceeds the cost of similar goods procured by the CPO, the authorities should raise the issue of inefficient and irrational use of budgetary funds, as well as possible corruption component and the like. As for patients, the successful implementation of a new approach to procurement should ensure the uninterrupted and timely receipt by patients of the necessary quality medicines and medical products. By minimizing corruption risks to the maximum extent possible, by making the procurement process transparent by optimizing procurement activities and attracting specially trained professionals, the CPO should result in significant savings to budget funds that can be used to procure additional medicines and medical products in order to serve the needs of more patients. As the experience of procurement with the involvement of international specialized organizations shows, additional procurement of necessary medicines for the saved funds already is being carried in our country. Source: Ukrayinska Pravda

Dmytro Aleshko, partner at Legal Alliance Company

Discussing medical reform, it is crucial to understand the new system of procurement of medicines and medical products in Ukraine, which will operate from 2019 onwards.

The Ministry of Health of Ukraine started work on reforming this sphere back in 2015, creating a working group on reforming the system of procurement of medicines and medical products. The group was headed by Ihor Perehinets, the Deputy Minister.

I worked in the Working Group together with representatives of government, public and international organizations, and thus had an opportunity to join the development of the new procurement system concept.

We have passed a long way, having analysed the legal achievements and weaknesses in the field of public health in Ukraine, and having implemented the positive aspects of the important procurement experience with the help of international specialized organizations.

In late August of 2017, the Cabinet of Ministers approved the Concept of Reforming the Mechanisms of Public Procurement of Medicines and Medical Products.

WHAT DOES THIS CONCEPT DEAL WITH?

The concept provides for the establishment of the Central Procurement Organization (CPO), which will procure medicines and medical products at national, local and international levels using long-term framework agreements and e-procurement tools.

That is, customers can, at their own pleasure, authorize the CPO to carry public procurement of medicines and medical products for them.

At the same time, the CPO must arrange and conduct procurement in accordance with the framework agreements for the benefit of customers. Thereupon, the customers will enter into procurement contracts with the tender winners and pay them for the procured goods directly.

If successful, such an approach to procurement should significantly reduce corruption risks, facilitate transparent procurement and rational use of budgetary resources through “professionalization” and optimization of procurement activities and aggregation of procurement volumes.

As part of such procurement, the identical needs of different customers in all regions of Ukraine which resorted to the CPO, should be combined for procurement purposes, and decision-making and reporting should be as transparent to the public as possible.

Direct procurement from foreign and national producers should constitute an important part of such CPO activities.

THE CENTRAL PROCUREMENT ORGANIZATION

The CPO is formed upon decision of the Ministry of Health and is subordinated to it.

The CPO is composed of the Supervisory Board, which will consist of representatives of central executive authorities, international and public organizations.

Head of the CPO will be a person who has deep experience in the healthcare area and is selected by the contest commission composed of representatives of international and public organizations.

We expect that the CPO will serve as a powerful factor of professionalization in the field of public procurement of medicines and medical products. This will be possible, first of all, thanks to personnel with in-depth knowledge of the legal and procedural aspects and needs of customers.

The personnel of the CPO should include experts from both public procurement and the circulation of medicines and medical products areas, in particular pharmacists, lawyers and financial experts who will work for a decent salary.

At the stage of formation and at the initial operation stage, the CPO will be subsidized by international donors.

In the future, the CPO will act on the basis of service fees from customers who will use its services. Such fees will be calculated based on transparent tariffs.

Despite the customers’ duty to pay for the services of the CPO, as a result, the savings in budget funds will significantly exceed the funds spent.

At the same time, customers will not have to distract their employees from their immediate work duties.

WHAT AND WHEN? STAGES OF THE CONCEPT IMPLEMENTATION

The concept should come into operation by 2019.

At the first stage of implementation, which will last till the end of 2017, institutional and regulatory frameworks for reforming public procurement mechanisms for medicines and medical products will be developed. It will ensure the process of establishing and operating the CPO in the framework of a pilot project and training of the CPO personnel.

This will form the basis for the implementation of a pilot project for public procurement of drugs for needs of research institutions subordinate to the National Academy of Medical Sciences, institutions subordinate to the Ministry of Health and / or a pilot public procurement project to meet the needs of regional customers.

At the second stage, which will begin in 2018, the staff and economic potential of the procurement organization will be developed and strengthened, the process of establishing its operational activities will continue, including arranging the exchange of experience with similar organizations in the EU member countries; training employees on international programs and conducting additional pilot public procurement of medicines and medical products.

Of course, while setting the CPO activities, it is necessary to work out and take into account the issues which were discovered while carrying procurement the involvement of international specialized organizations, including ensuring the continuity and timeliness of the supply of medicines and medical products, the maximum reduction in supply time and the like.

It should be noted that the final condition for setting legal grounds and the start of CPO operation at full capacity (and not as a pilot project) should be the approval and entry into force of the relevant regulatory act that will determine the specifics of the establishment and operation of such an organization.

WHAT WILL THE REFORM OF MEDICINES AND MEDICAL PRODUCTS BRING?

A qualitatively new approach to public procurement of medicines and medical products will help to:

Maximize patient needs;
Reduce bureaucracy.

§Reduce corruption in the sphere of public procurement of medicines and medical products;

§Build an effective system of reporting, control and accountability to the public;

§Harmonize national legislation in the field of public procurement with the EU directives;

§Build the confidence of business and the society in the system of public procurement of medicines and medical products;

§Rationally use budgetary funds;

Customers which will decide to use the services of the CPO at the central and regional level, will entrust procurement and their legal support to professionally trained experts.

They will no longer waste their efforts on long procurement procedures, appeals against procurement by participants, and the like.

Customers will have to evaluate the needs, monitor consumption and control residue only.

At the same time, as mentioned above, customers are not obliged to apply to the CPO and have the right to carry procurement themselves.

However, if the cost of medicines and medical products procured by customers independently exceeds the cost of similar goods procured by the CPO, the authorities should raise the issue of inefficient and irrational use of budgetary funds, as well as possible corruption component and the like.

As for patients, the successful implementation of a new approach to procurement should ensure the uninterrupted and timely receipt by patients of the necessary quality medicines and medical products.

By minimizing corruption risks to the maximum extent possible, by making the procurement process transparent by optimizing procurement activities and attracting specially trained professionals, the CPO should result in significant savings to budget funds that can be used to procure additional medicines and medical products in order to serve the needs of more patients.

As the experience of procurement with the involvement of international specialized organizations shows, additional procurement of necessary medicines for the saved funds already is being carried in our country.

Source: Ukrayinska Pravda