Corruption in the health sector

Management of medical supplies

CONTENT ON THIS PAGE:

The Problems

• Availability
• Registration of medicines and pharmacies
• Drug selection
• Procurement
• Distribution and misappropriation
• Promotion

What can be done

• Registration of medicines and pharmacies
• Drug selection
• Procurement
• Distribution
• Promotion

The Problems

Availability
In developing countries, pharmaceutical expenditures and drug procurements account for 20 to 50 % of public health budgets. [1] Making essential drugs available for everyone at affordable prices is a key condition for improving national health indicators. Inadequate provision of drug and medical supplies has a direct bearing on the performance of the health system. Corruption in procurement and distribution of pharmaceutical and medical supplies reduces access to essential medicines, particularly for the most vulnerable groups.

Registration of medicines and pharmacies
Market approval (or registration) of pharmaceutical products is usually granted on the basis of efficacy, safety and quality. It is a regulatory decision that allows a medicine to be marketed in a given country. Compliance with regulations affecting drug licensing, accreditation and approvals can be costly for pharmaceutical companies wanting to market their products. Some of them may try to bribe or influence the regulator to get their product registered or simply to speed up the approval process. One form of influence is to offer lucrative industry jobs or consulting assignments to regulatory officials, rewarding them for decisions that are favorable to industry. Such conflict of interest can also affect the setting of user fees for drug registration, which are often set well below true cost. Thus, government is effectively subsidizing costs of private industry for little public benefit [1a]. The concept of conflict of interest is not always well understood.

Pharmacies and drug stores also require approvals to operate. The process of licensing pharmacies for operation can be corrupted by bribes, leading to unfair decisions (favoring kin or political contacts of government agents), geographic inequities, and facilities that do not adhere to government regulations. As with the registration process, conflict of interest is also a concern if national experts receive compensation from pharmaceutical companies that could influence their judgement.

Drug selection
Once a pharmaceutical product has received market approval, most public procurement systems and insurance schemes have mechanisms to limit procurement or reimbursement of medicines, based on comparison between various medicines and on considerations of value for money. This step leads to a "national list of essential medicines" [2] . The selection of essential medicines in a given country needs to use defined criteria and consultative and transparent process. The inclusion of any pharmaceutical on this list will lead to increased market share and if the process is not transparent, special interest groups may offer bribes to the selection committee members to get their product on the list [3]. Interested parties may also bribe the committee responsible for deciding which products are reimbursed through government social insurance programs.

Procurements
Providing health facilities with drug and medical supplies is a very complex process that involves a large variety of actors from both the private and public sectors. Governments health ministries often lack the management skills required to write technical specifications, supervise competitive bidding, and monitor and evaluate the contract performance. Corruption can occur at any stage of the process and influence decisions on the model of procurement (direct rather than competitive), on the type and volume of procured supplies, and on specifications and selection criteria ultimately compromising access to essential quality medicines.

Common corrupt practices in the procurement process include collusion among bidders resulting in higher prices for purchased medicine, kickbacks from suppliers and contractors to reduce competition and influence the selection process, and bribes to public officials monitoring the winning contractor‘s performance.  All of these practices lead to cost overruns and low quality. Other forms of abuse, fraud and mismanagement can occur due to insufficient management and monitoring capacity. In some cases, supplies do not meet the expected standards, or they are only partially delivered or not delivered at all. In a context where quality controls are difficult to exercise, an increasing lack of funds results in opportunities to sell low quality, expired, counterfeit and harmful drugs at cheaper prices. Corrupt procurement officers can also purchase sub-standard drugs in place of quality medicines and pocket the difference.  

Distribution and misappropriation
Due to under-financed and badly managed systems, poor record-keeping and ineffective monitoring and accounting mechanisms, large quantities of drugs and medical supplies are stolen from central stores and individual facilities, and diverted for resale for personal gain in private practices or on the black market [4].

This involves a variety of practices such as record falsification, dispensing drugs to "ghost patients", or simply pocketing the patient's payment. Patients are directly affected in this process as they are forced to supply their own medications or, in the case of hospital inpatient stays, linens and food. This results in considerable leakage of public resources. Distributing medical supplies to the healthcare facilities also involves managing an effective transportation system and preventing misappropriation of fuel and vehicles for private or non-health related uses.

Promotion
Aggressive marketing strategies can also lead to the unethical promotion of medicines or to conflicts of interest that influence a physician's judgement. A range of practices are commonly used by pharmaceutical companies as incentives to encourage the use of their product such as distributing free samples, gifts, sponsored trips or training courses. Although it is sometimes delicate to draw the line between marketing and corruption, such practices are likely to generate conflict of interest whereby a decision on treatment is no longer made in the patient's best interest. Interactions between physicians and the pharmaceutical industry can lead to non-rational prescribing and increased spending on medicines with little or no additional health benefit [5] . Perverse incentives and "money warped behavior" can endanger patients' health, as doctors enroll unqualified patients in trials or prescribe unnecessary and potentially harmful treatments, in order to maximize profit [6]. Some countries have banned, by law, direct financial incentives by prescribers [8] .

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What can be done

A World Bank research team working in Latin America has identified indicators to measure compliance with standardized processes and decision-making criteria in the sub-systems of drug registration, selection, procurement, and distribution [9]. For example, using locally collected data researchers measured performance against the indicators in Costa Rica. Overall, Costa Rica received a rating of 7.7 out of 10, indicating "marginal" vulnerability to corruption. The procurement function was rated as "moderately vulnerable (5.4 out of 10), due to problems such as lack of documentation of prices paid and criteria used for awards. The indicators helped health managers to have a more precise idea of specific interventions needed to reduce vulnerability. Based on this research, WHO recently developed a new Manual for Measuring Transparency to Improve Good Governance in the Pharmaceutical Sector (January 2006, draft). It covers the functions of registration, promotion, inspection, selection, and procurement. The manual provides instructions to collect and calculate 51 indicators to monitor transparency.

Registration of medicines
National regulatory authorities need to ensure transparency and accountability. Regulatory policies, procedures and criteria for decision-making need to be published and made easily accessible. A formal committee responsible for registration of medicines needs to be established, with clear terms of reference, and whose members will be selected based on clear and technical criteria. Regulatory officials need also to be trained how on to manage conflict of interest [10].Table 2 gives additional guidance on components of effective health laws and regulation of private sector providers.

Drug selection
A set of practical measures can be implemented to limit opportunities for corrupt behaviour. The first important step consists in adopting lists of essential medicines that are based on standard evidence-based treatment guidelines at national and sub-national levels. 156 countries have already adopted an Essential Medicines List [11] of generically named products based on WHO principles, with a view to limiting the selection of products to a smaller number of appropriate drugs. Here also, government officials need to ensure that the selection of these essential medicines is based on clear criteria and a transparent process, with an expert committee responsible for this exercise that will operate according to published terms of reference, whose members will be selected based on technical expertise, and whose decisions will be based on the latest scientific evidence. Training in managing conflict of interest is also valuable.   

A recent paper documents experience with implementation of an Essential Drugs Programme in Delhi, India [12]. The paper describes how implementation of an essential medicines list and transparent procurement processes helped to lower costs and improve quality of drugs.

Procurement
The prerequisite for curbing corruption in the procurement process consists in defining clear and transparent procurement rules and guidelines that reduce discretionary powers where they are likely to be abused and to increase the probability for corrupt practices to be detected and sanctioned.  The WHO Operational Principles for Good Pharmaceutical Procurement [13] can assist governments in developing procedures that increase transparency and efficiency of procurement processes. Promoting transparency in the procurement process can be achieved by publishing the lists of supplies offered in tenders, offering clear documentation and public access to bidding results, if possible using an electronic bidding system as was tried in Chile [14] , involving civil society at all stages of the process. Establishing lists of reliable and well-performing suppliers as well as making price information widely available, using a tool similar to as the WHO’s drug price information service, [15] or the MSH/WHO International Price Guide [16] can help reduce prices and opportunities for corruption. Establishing price reporting systems can allow comparisons for basic medical goods and services and result in a decrease in input prices as demonstrated in an anti-corruption crackdown in Argentina [17] . Technical assistance and training for procurement officers can also improve the capacity of governments to manage competitive bidding.

Distribution
Measures to reduce illegal practices at the distribution stage of medical supplies include establishing efficient inventory control systems, improving record keeping and control procedures, fortifying security against robbery in central warehouses, etc. These are actions to be taken by the ministry at national and/or provincial/district level. The means of promoting a competitive market or using it, where it exists, are other avenues to improve efficiency and reduce corruption in distribution. The USAID-funded DELIVER Project [18] has provided many tools for improving drug distribution systems, including guidelines for forecasting, supply chain management, process mapping for improved health logistics system performance, and warehousing of health commodities. A complete library of DELIVER publications is available on CD Rom [19] .

Promotion
Other possible measures include banning practices of gift and sponsorship, following WHO ethical guidelines on medicines promotion [20], and promoting codes of ethics in marketing through trade and professional organisations. Training physicians and students on how to critically read and analyse promotional materials from the pharmaceutical industry and raising their awareness on conflict of interest can also be effective. Better delivery of the "powerful medicine of information" on the benefits, risks, and cost-effectiveness of specific drugs is critical to influencing how drugs are used and protecting patient interests [21]. The practice of "academic detailing" or user-friendly educational outreach programs sponsored from a medical school base can help provide noncommercial sources of drug information and has been proven effective at influencing prescribing patterns in a way that benefits public health objectives [22].

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References