Delivering medicines access for all
The Tamil Nadu model for state drug procurement
In the early 1990s, Tamil Nadu, a southern state in India suffered a widespread shortage of essential drugs in government hospitals. Irregularities in the medicine procurement system in the state were discovered and following widespread media attention, there was a huge public outcry. The crisis forced the government to review and analyse the failing system and recommend reforms.
Process of reform
Following the crisis, with financial support from the Danish International Development Assistance and the World Bank, Tamil Nadu succeeded in delivering significant, sustainable changes to the existing system for procurement of medicines. The Tamil Nadu Medical Services Corporation (TNMSC) Limited, was set up as an organisation independent of government, with the purpose of purchasing medicines for all government hospitals and public health services across the state. TNMSC, the first centralised medicines procurement agency in the country became operational in January 1995.
Making essential medicines available to all
The TNMSC’s the primary objective was to ensure uninterrupted availability of essential and lifesaving medicines. The new corporation developed systems and a streamlined process for pooled procurement, storage and distribution for medicines and other medical supplies. The new system ensured medicines and other items were supplied to government medical institutions across the state at reasonable cost. The success of TNMSC has led it to become a model for rational use and purchase of medicines not only in India, but worldwide.
Quality assured, affordable drugs
TNMSC buys essential drugs in bulk from quality assured manufacturers through a centralised tendering process which makes sure drugs are bought at the lowest possible price. The price the state government now pays to pharmaceutical makers is low – between one-sixth and one-tenth of retail prices. This is in a country that already has rock-bottom prices thanks to a big domestic generic drugs industry. For example, In Tamil Nadu, the government pays just 95 rupees (USD1.72) for 500 tablets of 500 milligrams of metformin, a diabetes treatment that would cost USD13.60-22.67 if bought through retail pharmacies in India, depending on the brand. Additionally, before issuing tenders for supplies TNMSC works out the cost of each medicine by taking into account the cost of raw materials, manufacturing, packing, duties and taxes while allowing for a reasonable profit.
Only those medicines on a state-specific essential medicines list, adapted from WHO’s essential drug list, are purchased by TNMSC. This list is made available to all public hospitals in the state. Development of handbook for pharmacists and regular publication of newsletter for healthcare professionals helps in promoting the rational use of drugs. Given that there are circumstances when drugs not on the essential drug list are needed, TNMSC releases 10 percent of its budget to healthcare facilities to use to purchase on essential medicines. This system gives some autonomy to health services and helps counter criticism that the drug list is restrictive or inadequate.
Efficient logistics and storage
Tendered drugs received at the central warehouse, are tested and on approval, released to TNMSC’s 25 district secure temperature controlled warehouses. Each warehouse is staffed with two pharmacists, one data entry operator and two stock handlers. On receipt of new stock, appropriate entries are made into a stock control system. Distribution schedules are then given to the hospitals to enable timely deliveries. TNMSC introduced the ‘first expiry first out’ (FEFO) practice for picking and dispensing process of medicines in their warehouses, significantly reducing waste and spoilage.
Sustainable, self financing
TNMSC contracts with manufacturers are stringent with penalties for non compliance and guarantee uninterrupted supply of ordered items to state health facilities.
TNMSC is self financing, charging a handling fee of 1.5 percent on all transactions. It has used its income not only to cover running costs but also to finance new initiatives and projects with the revenues it has generated.
In India where drug procurement in the public healthcare system is severely underfunded, an estimated 39 million Indians are driven into poverty every year because of ill-health, and where medicines constitute 72 percent of the total out of pocket payments, the TNMSC model is a harbinger of change.
Widening access for all
Several reports and articles have recorded the success of the TNMSC. According to a report of the working group on drugs and food regulation for the 12th Five Year Plan in India, all the patients visiting government health facilities have received all their medicines for free in Tamil Nadu.
Critical success factors of the TNMSC model included:
- strong political will
- administrative commitment,
- a centralised tendering, with pre qualification criteria and tight contracts and penalties
- trained personnel
- well designed infrastructure
- efficient IT systems to procure, store and distribute supplies.
Building confidence with suppliers
The transparency in the system, along with timely payments, positively influenced the behaviour of suppliers. Further, there was a significant budget to cover the fixed costs involved in setting up the TNMSC. Tamil Nadu spends the most on drugs of all states in India.
National and international recognition
The Tamil Nadu model has gained widespread respect and recognition in government circles both in India and internationally. The model has been discussed as a possible role model for the central government’s scheme for universal coverage of health care. The central government also plans to learn lessons from the TNMSC model to run its ‘Jan Aushadhi Scheme’ to make available quality generic medicines at affordable prices to all, especially the poor.
In 1996, TNMSC was bestowed with Rajiv Gandhi National Quality Award and in 2004 it received the World Bank’s appreciation for beating inefficiencies in medicines procurement and improving rural health services.
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