Procurement and Supply Management

Procurement and Supply Management

Procurement and Supply Management for pharmaceutical and health products exhibits specific challenges. On average procurement and supply chain management and related training activities comprise over half of every Global Fund grant, so building capacity in this area is of paramount importance to ensure the smooth implementation and sustainability of grants.

In addition, pharmaceutical and health product management is an area in which countries can work to ensure greater efficiency and value for money in the prices secured for certain drugs, allowing for a greater number of people to access treatment. Over the past decade, there has been a dramatic reduction in the prices of first-line ARV medicines, largely thanks to competition from generic equivalents.

Procurement and Supply Management refers to all activities required to ensure the continuous and reliable availability of sufficient quantities of quality-assured, effective products and services to end-users, procured at the lowest possible prices, in accordance with national and international laws. Pharmaceutical Products refers to products (intended for human use) that contain an active pharmaceutical ingredient in their finished dosage form, and Health Products refers to pharmaceutical products and other health-related products (such as bed nets, laboratory and radiology equipment) and single-use health products (such as condoms, rapid and non-rapid diagnostic test kits, insecticides and injection syringes).

Essential Capacities required for Principal Recipients

Capacity Area and Scope



Management and Coordination – to ensure adequate organisational structure, staffing and management for procurement functions; effective procurement monitoring and reporting; and appropriate oversight to ensure effective Sub-Recipient procurement.

·To conduct a functional analysis to identify the PSM structure required.

·To develop TORs for PSM specialists with clear accountability and reporting lines, and, if necessary, review the mix of consultant vs. staff civil servants.

·To develop a recruitment plan of key PSM positions, together with an oversight mechanism for the recruitment process, as well as the possibilities to enhance staff retention. 

·To develop a training needs analysis and deliver training programs for PSM specialists.

·To have in place a national PSM planning oversight and accountability system, including procurement committees and independent observers.

·To have in place a monitoring and verification role conducted on a quarterly basis.

·To have in place national structures to conduct PSM planning, risk management and quality assurance

·% of staff required in place.

·Percentage turnover per year.

·Availability of staff development plans.

·Percentage of staff who are on schedule with theirindividual staff development plan.

·Frequency of procurement plan oversight reviews and updates.

·Level of integration of procurement plans with budgets and management plans.

·Availability of Integrated procurement and supply chain results reports.

·National procurement management reviews and reports include tracking against plans and updates, based on supply chain information and health product demand.

·Level of integration of Global Fund procurement planning with national procurement planning processes.

Procurement Policies and Systems – ensuring adequate procurement policies and procedures; competitive, efficient and transparent procurement processes; a timely procurement cycle; appropriate intellectual property rights and policies for pharmaceutical products; national treatment guidelines in place and available, where needed; and mechanisms to encourage adherence to, and monitoring of, treatment.

·To ensure the procurement cycle is supported by a legal framework and guidelines, which meets international standards and is compatible with national requirements and Global Fund requirements.

·To ensure procurement and supply chain policies, guidelines and procedures meet international standards and are compatible with national requirements and Global Fund requirements.

·To implement a procurement process that is competitive, efficient and transparent.

·To have in place Procurement and Supply chain Management Manual(s) and Standard Operating Procedures that are compatible with international and national requirements.

·To roll out and provide training for the PSM guidelines, procedures and templates.

·% of PSM Manual and Standard Operating Procedures completed.

·% of staff trained in procedures.

·Existence of medicine procurement policies that specify the most cost-effective medicines, in the right quantities; open, competitive supplier bidding for good-quality products.

·Currency and comprehensiveness of procurement and supply chain management policies and procedures.

·Percentage of treatments following guidelines.

·Percentage of drug use adhering to treatment regimens.


Intellectual Property Rights – ensuring membership of the World Trade Organisation; patent laws covering pharmaceuticals; effective patent enforcement; ‘government use’ patent laws; allowance of ‘parallel importation’ of patented pharmaceuticals.

·To comply with patent law that allows for the patenting of pharmaceutical products.

·To incorporate and utilise TRIPS agreement flexibilities into National intellectual property legislation.

·To gain and maintain membership of regional organisation administering patent systems.

·To comply with Intellectual Property Rights (IPR) policies, procedures and guidelines.

·To implement approaches on how IPR flexibilities can be used to increase access to medicines.

·Number and type of public health flexibilities in national IPR laws and related legislation/regulations.

·Access to essential medicines/technologies as part of the fulfilment of the right to health, recognized in the constitution or national legislation.

·Existence of an up-to-date published national list of essential medicines.

·Legal provisions to encourage/allow for generic substitution in the private sector.


Quality Assurance Systems and Capacity – have in place an established national drug regulatory authority function; effective quality control and assurance procedures and responsibilities, adequate quality assurance procedures for non-durable products.

·To have in place quality assurance plans to monitor product quality throughout the in-country supply chain, guided by the WHO ‘Model Quality Assurance System for Procurement Agencies’ (MQAS)

·To utilise the optimal approach to procure and distribute pharmaceuticals, commodities and supplies, taking into account quality and frequency.

·To utilise a system of long-term arrangements for tenders for pharmaceuticals, commodities and supplies.

·To comply with processes, procedures and guidelines to conduct PSM planning.

·To have in place processes that are capable of identifying and implementing an appropriate duration of procurement cycle from, product selection until arrival of goods.

·To have a Value for Money process in place that is used efficiently and transparently.

·Availability of national drug regulatory authority.

·Percentage of pharmaceuticals received and distributed,with acceptable levels of quality.

·Number and frequency of quality assurance and quality control reviews.

·Adherence to pharmacovigilance policies.

·Consistency of quality assurance and control procedures with international standards.

·Schedule of external reviews of quality assurance and control procedures and activities.


Product Selection – to ensure appropriate responsibilities and procedures for product selection, effective procedures for procurement, service and maintenance of durable products.

·To ensure awareness of policies on product selection in line with Global Fund requirements, with acceptable levels of compliance.

·To have clear roles and responsibilities for product selection, and maintenance or servicing of health products.


·Number and percentage of non-standard and emergency procurements

·Percentage of bids advertised nationally and internationally

·Percentage of solicitations with comprehensive documentation

·Average number of bid responses per advertisement

·Average number of complaints per bid


Management Information Systems – to have effective systems for tracking stock levels and consumption data; reliable, complete and accurate reporting to allow for the revision of orders.

·To have national Management Information Systems that are able to keep track of stock levels and consumption data.

·To ensure the MIS can provide reliable and regular reports to central level to enable appropriate quantities to be ordered.

·Timeliness and accuracy of procurement and supply chain information.

·Number and cost of stock-outs per year.

Forecasting – to ensure effective systems and procedures for forecasting; reliable and timely forecasting data; and procedures for validating forecasts.

·To have national systems and procedures in place for forecasting of health products to meet Global Fund and national requirements.

·To have national systems with up to date consumption methods for quantities of drugs distributed and dispensed.

·To have national quality control systems to systematically draw random samples for all pharmaceutical batches, with acceptable levels of compliance.

·To have in place systems and procedures for managing forecasting data, with sufficient quality assurance in place.

·To have in place systems and procedures for managing buffer stocks, with sufficient quality assurance in place.

·Availability and currency of procurement forecasting reports.

·Availability and use of forecasting information in updating procurement plans.

·Accuracy levels of forecasts compared to actual levels.

Distribution, Receipt and Storage – to have in place effective systems and procedures for distribution, receipt and storage of goods; sufficient staff and vehicles; reliable inventory control systems; adequate physical space, storage equipment, security and insurance; systems for physical inventory and identification and disposal of expired products; effective management of shelf life, and appropriate accounting systems for tracking and verifying products dispatched and received.

·To have distribution processes that can handle the requisition of supplies to avoid treatment and programme disruptions. 

·To set up PSM arrangements and systems including the level of outsourcing warehousing and transport or providing these facilities and services in house.

·To design and utilise a distribution plan for supplies, dispatches and transportation.

·To ensure defined security measures for transportation.

· To have a Logistics Management Information System (LMIS) with requisitions and stock reporting tools.

·To implement storage capacity plans to manage and upgrade storage, to meet the storage conditions (including ventilation) and equipment needed for the type and quantity of the products to be stored.

·To manage and improve central and regional storage conditions and equipment management, to meet requirements, including facilities with temperature monitoring and controlling mechanisms.

·To utilise national entities systems for inventory control and the management of inventory check mechanisms to meet requirements.

·To have in place systems and procedures for security measures for theft and damage, to meet requirements throughout the supply chain.

·To have systems and procedures for managing expired stock.

·Average time from receipt to delivery point.

·Percentage of goods received confirmed to delivery point.

·Annual data on availability of tracer medicines and Commodities in public and private health facilities.

·Distribution costs per year, by product volume.

·Percentage of goods lost in distribution.




Key Considerations when assessing Procurement and Supply Management

Procurement Regulatory Framework Many countries have a robust legal and regulatory framework for compliance, yet compliance can be weak. Look for evidence of compliance, and verification of adherence to regulations.
Decentralisation In an organisation that has a decentralised procurement function, consider the integration of information and plans between locations as well as the oversight functions ensuring compliance with organisational guidelines.
Quality Assurance Quality assurance is a wide-ranging concept covering all arrangements made to ensure that pharmaceutical products are of the quality required for their intended use. QA also refers to a set of international standards to be met by suppliers of certain products to ensure that the supplier is capable of manufacturing safe and effective products, and by procurement agents and logistics service providers along the supply chain. Therefore procedures for verifying quality at various stages should be considered.
Procurement and Budgeting Consider the level of integration of procurement planning and forecasting with budgeting processes, ensuring the availability of funds to meet prospective needs.
Intellectual Property Rights Procurement and supply focal points should be trained to understand the impact of IPR on access to medicines and how to work with relevant national actors to improve access and secure better value for money.
Logistics Management Information Systems These systems are fundamental to provide accurate and timely information essential to effective stock management at all levels of the national supply chain system. They provide information required for accurate quantification, procurement and distribution, and are the basis for regular monitoring of the performance of the national procurement and supply chain system.
Supply Chain Issues Management of the supply chain of products from receipt to point of delivery is often an area requiring strong capacity strengthening.  The degree of geographical distribution involved, number of actors and partners, need for detailed tracking and information, opportunities for fraud, and storage requirements for pharmaceuticals all play a part in providing effective supply chain services.
Procurement and Transition As PR, UNDP uses long-term agreement contracts for procurement of pharmaceuticals and other health products, while government procurement functions typically do not have such arrangements.  In these situations, capacity interventions should investigate alternate contractual options that governments can adopt.
Value for Money UNDP defines value for money as the optimal combination of quality and cost appropriate to the requirements of the organisation. Cost is defined as the 'total cost of ownership’; i.e. including not only the purchase price of a product or service, but also costs related to installation, maintenance/running costs and residual value after a pre-defined life span.