Cost Containment Through Pharmaceutical Procurement: a Caribbean Case Study

This article discusses the potential for health sector cost containment in developing countries through improved pharmaceutical procurement. By describing the specific example of the Eastern Caribbean Drug Service (ECDS), which provides a pooled procurement service to nine ministries of health in the small island nations of the Caribbean, it examines the elements of the procurement operation that allowed ECDS to reduce unit costs for pharmaceuticals by over 50 per cent during its first procurement cycle. The analysis of ECDS considers: (1) political will, institutional alliances, and the creation of a public sector monopsony; (2) pooling demand; (3) restricted international tendering and the pharmaceutical industry; (4) estimating demand and supplier guarantees; (5) reducing variety and increasing volume through standardizing pack sizes, dosage forms and strengths; (6) generic bidding and therapeutic alternative bidding; (7) mode of transport from foreign suppliers; (8) financing mechanisms, including choice of currency, foreign exchange, and terms of payment; (9) market conditions and crafting and enforcing supplier contracts; and, (10) the adjudication process, including consideration of suppliers' past performance, precision requirements in the manufacturing process, number of products awarded to suppliers, and issues of judgment. The authors consider the relevance of this agency's experience to other developing countries by providing a blueprint that can be adopted or modified to suit other situations.