With pooled procurement, drugs cost 82% less

Pooled procurement of 40 drugs by 23 cancer centres resulted in savings of Rs.1,320 crores
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In 1995, Tamil Nadu pioneered the centralised procurement and distribution of drugs and medicines to government hospitals across the State. This helped in buying drugs at a far cheaper rate due to the sheer volume of drugs procured. Other States have replicated the model with varying levels of success. Like all vaccines supplied to the national immunisation programme at a very low cost, during the pandemic, the Central government was able to procure COVID-19 vaccines at about Rs.150 per dose from Bharat Biotech and Serum Institute due to centralised procurement. The COVID-19 vaccines were priced many times more when State governments and private hospitals were asked to procure them directly from the companies.

For the first time, a private entity — the National Cancer Grid — has been able to replicate the model and hammer down the cost of high-value, high-volume cancer and supportive care medicines through a pilot pooled procurement programme. The pooled procurement of 40 drugs by 23 cancer centres resulted in savings of Rs. 13.2 billion (Rs. 1,320 crores), according to a paper published in 2023 in the Bulletin of the World Health Organization. Savings on individual drugs ranged from 23% to 99% (median savings of 82%) from the maximum retail price. Besides anticancer drugs, the list of medicines included antibiotics, antifungals, antiemetics and growth factors. The drugs included both generic and patented medicines, and the participating cancer centres — small, mid-size and large-volume — included both private and public cancer hospitals from across the country. There were eight private centres, and the rest were public/charitable/trust hospitals. Nine centres were from major cities/metros and the remaining 14 were outside major cities/metros. Cost savings were most for generic drugs and less for patented drugs.

Once the list of drugs to be purchased through pooled procurement was drawn up, the demand for each drug was determined from the participating centres. Prior to tendering, the reserve price of each drug was determined by requesting the participating centres to share the cost of procurement of each drug for the previous year. The lowest price for every listed drug was used as the reserve price for each drug. The reserve price list was shared with all participating centres and it served as the maximum price at or below which the centres agreed to buy the drugs. All participating centres also agreed to a minimum purchase commitment based on the reserve price. The minimum purchase commitment helped in communicating to the drug companies the likely annual volumes required for each drug. This was followed by online tendering. The technical evaluation of the drug companies prior to financial evaluation ensures that only quality drugs will be supplied.

Once the drug companies were selected, an agreement was signed between the companies and each cancer centre. The agreement ensured that “vendors did not breach the terms and conditions established with the network”. For instance, the companies were required to supply drugs to all cancer centres immaterial of their location. 

The entire process began in 2019 and finalised in 2020. “Rate contracts were valid for two years and then they were extended by another year. They are still valid as supplies began in 2020,” Dr. C. S. Pramesh, Director of the Tata Memorial Hospital, Mumbai says in an email to The Hindu. 

With the success of the pilot programme, more centres have now evinced interest in participating in the pooled drug procurement. “We have received requests from more than 40 centres and several state governments for bulk procurement for their state hospitals,” says Dr. Pramesh. “[For the second round of the pooled procurement] the tender has been published and the bids are undergoing prequalification (completed) and technical evaluation (in final stages).”

The pooled procurement programme was conducted through the National Cancer Grid price discovery cell with a governing body. The Tata Memorial Hospital was the coordinating centre, and functioned as the Secretariat, explains Dr. Pramesh. 

The drastic reduction in drug cost can in turn greatly decrease the out-of-pocket adherence to treatment even in private hospitals, and increased access and affordability by patients at small cancer centres in smaller cities. “[This is] a model that can (and should) be replicated in other disease areas and geographies,” Dr. Pramesh who is also the corresponding author of the paper tweeted. “This must rank as one of our most satisfying and fulfilling efforts at democratizing access to cancer medicines.”