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Mongolia: Improving Access to Affordable Medicines in Public Hospitals

Sovereign (Public) Project | 49194-001 Status: Closed

In order to improve access to medicines by ensuring availability, affordability and physical accessibility to quality generic essential medicines, there is a need to introduce a more cost-efficient and effective system of pooled procurement of medicines for public hospitals along with establishment of in-house drug retailers in public hospitals . The pooled procurement system will increase purchasing power of public hospitals, decrease cost of medicines by increasing number of competitive suppliers and reducing manufacturer's selling price as well as drug wholesale mark-ups. The system will also improve the quality of medicines. Public hospitals will be permitted to run in-house drug retail stores for their outpatient clinic patients and serve with medicines purchased under bulk contracts and with agreed minimal mark-ups. The new system will be designed based on comprehensive analysis of the pharmaceutical sector and piloted prior to nationwide implementation.

Project Details

Project Officer
Jigjidsuren, Altantuya East Asia Department Request for information
Country
  • Mongolia
Modality
  • Technical Assistance
Sector
  • Health
 
Project Name Improving Access to Affordable Medicines in Public Hospitals
Project Number 49194-001
Country Mongolia
Project Status Closed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8967-MON: Improving Access to Affordable Medicines in Public Hospitals
Technical Assistance Special Fund US$ 1.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Health / Health system development

Gender Equity and Mainstreaming No gender elements
Description In order to improve access to medicines by ensuring availability, affordability and physical accessibility to quality generic essential medicines, there is a need to introduce a more cost-efficient and effective system of pooled procurement of medicines for public hospitals along with establishment of in-house drug retailers in public hospitals . The pooled procurement system will increase purchasing power of public hospitals, decrease cost of medicines by increasing number of competitive suppliers and reducing manufacturer's selling price as well as drug wholesale mark-ups. The system will also improve the quality of medicines. Public hospitals will be permitted to run in-house drug retail stores for their outpatient clinic patients and serve with medicines purchased under bulk contracts and with agreed minimal mark-ups. The new system will be designed based on comprehensive analysis of the pharmaceutical sector and piloted prior to nationwide implementation. Substantial technical assistance is needed in a range of activities and technical areas, such as advocacy, human resource development, and public information education and communication campaign.
Project Rationale and Linkage to Country/Regional Strategy

Current pharmaceutical supply system for public health services in Mongolia is fully decentralized in which hospitals, including public hospitals, directly purchase medicines from private suppliers, establish prices for each procured item, and medicines are delivered directly by suppliers to hospitals. Public hospitals (accounting for 82.5% of outpatient consultations and 78% of inpatient hospitalizations in countrywide) mostly use open tender method under the Public Procurement Law, however, because of small size of procurement, hospitals cannot attract sufficient competitive suppliers and negotiate prices. Medical care is either subsidized by the government or funded from the social health insurance; but none of them cover the cost of medicines for outpatient patients. The Social Health Insurance Fund partially subsidizes cost of selected essential medicines prescribed by primary level doctors in its contracted only drug sellers; availability and physical accessibility of these medicines are very limited. There are no public pharmacies; people buy medicines from private pharmacies and retail drug outlets, or in rural soums from revolving drug funds, operated by private pharmacists. Main features of the current system are high cost and low quality of medicines, irrational use of medicines with extensive use of non-essential expensive brand products. One third (29%) of medicines in the market are substandard, illegal or counterfeit. Availability of essential medicines is low in public hospitals as well as in retail pharmacies (42.8-60%). Consumer prices for medicines are among the highest in Asia, 2.25-5.53 times higher an international reference price. Cumulative wholesale and retail mark-ups range from 37.5-115%; average add-on cost accounts to 30.4% of the medicine final price. Out-of-pocket health expenditures are also high (41% of the total health expenditures); in average one third of household's out-of-pocket spending on health is spent for purchasing medicines and this indicator is higher for low and middle income people.

ADB has supported the Government of Mongolia to mitigate the impact of the financial crisis of 2008/2009 by providing free health services, including medicines, to the poor in 2009-2014 under JFPR funded grant project (JFPR 9136). In parallel, ADB has supported strengthening the drug safety regime under the Fourth Health Sector Development Project (2010-2016) which resulted in (i) a revised National Medicines Policy (2014), (ii) improved medicines regulatory functions through establishment of a national medicines regulatory unit , (iii) upgraded national reference laboratory for drug quality control to international standards, and (iv) revised technical standards for medicines manufacturing, distribution and pharmacy practices.

The Ministry of Health and Sport and the Ministry of Finance have both requested support from the Asian Development Bank (ADB) to continue assist the Government in maximizing access to health care through optimizing the procurement of medicines in public hospitals, promoting public supply system and increasing the availability of affordable and good quality medicines.

Impact

Household's health expenditure reduced, especially among the poor.

Efficiency of the medicines procurement and supply system increased.

Continuous and equitable access to essential medicines ensured.

Project Outcome
Description of Outcome Affordability and availability of good quality generic medicines in public hospitals increased
Progress Toward Outcome The TA successfully achieved its objective to introduce the new method in procurement of medicines for public hospitals. The pilot procurement of medicines, organized by the government using the FA in 2018, was conducted in line with the WHO operational principles and international best practices. The whole procurement process, including the tender evaluation, signing of FAs with suppliers and purchase of medicines by hospitals through the government e-shopping website was fair, open and transparent, and resulted in price reduction up to 38.5%. The government is committed to continue the pooled procurement of medicines for public hospitals and expand the list of medicines by inclusion of the most-commonly used essential medicines.
Implementation Progress
Description of Project Outputs

1. New system for pooled procurement of medicines for public hospitals introduced at the national level

2. Public hospital pharmacies reorganized to supply medicines for ambulatory patients

3. Medicine regulatory functions strengthened

Status of Implementation Progress (Outputs, Activities, and Issues)

Output 1.

The TA made good progress in piloting of a new method in procurement of medicines in 2018. The TA proposed a group contracting using a framework agreement (FA) and pre-qualification of suppliers (PQ). The consultants developed the Manual for Procurement of Medicines , draft sample bidding documents for FA and PQ and the criteria for selection of medicines to be procured under the pilot. The MOF was responsible for the adaptation and approval of regulatory instruments, such as the revision of the public procurement law (the bill was submitted to the parliament and undergone the first round of discussions), revision of the regulation on use of FA (updated and approved in 2017) and sample bidding documents for PQ (approved in 2018). The SPPCC was responsible for the management of the procurement process including advertisement, tender evaluation, agreement signing, and contract monitoring. The MOH was responsible for defining the selection criteria and selecting the medicines, defining the quantity, quality criteria and the technical specifications.

In November 2017, the SPPCC organized the pilot group procurement using the revised MOF regulation on FA (2017), but without the PQ. Both the FA and PQ are new concepts in Mongolia and none of them had ever been used in the public sector of the country. The pilot covered procurement of 17 medicines with a budget of MNT4.5 billion. The consultants reviewed the pilot procurement and acknowledged that the whole procurement process, including the selection of medicines, tender evaluation, signing of FAs with suppliers and purchase of medicines by hospitals through the government e-shopping website was successful

Output 2. The TA aimed to re-organize pharmacies in public hospitals to supply low-cost generic medicines, obtained through group contracting, to ambulatory patients. As part of the preparatory works, the consultants (i) reviewed the current legislation and regulations related to establishment of the hospital outpatient pharmacies; (ii) conducted the perception survey among public hospital managers; (iii) recommended two options for setting up the outpatient pharmacies - the MOH supported the option, where outpatient pharmacies are become an integrated part of the existing hospital inpatient pharmacies; (iv) developed technical reports to provide guidance to MOH, health departments and public hospitals in re-organization and establishment of the outpatient pharmacies; and (v) prepared technical note for hospitals on how to manage patient complaints and establish a grievance redress mechanism when operating the outpatient pharmacy.

12. The 17 medicines that have been chosen to be procured under the pilot are not the most-commonly used medicines and only four are medicines that can be dispensed to ambulatory patients. This was caused by MOH's concern about the risks of potential shortages of essential medicines in case of the pilot procurement failure. On the other hand, it prevented and delayed the re-organization of hospital pharmacies, as outpatient pharmacies cannot sustain themselves by selling out only four items. During the mission, the MOH confirmed its intention to issue a ministerial order on establishing the outpatient pharmacy in 2019 along with expansion of the group contracting covering more commonly-used medicines.

Output 3. The TA aimed to strengthen the government's medicine regulatory functions through developing a medicine pricing policy, monitoring the price and strengthening capacity of the MOH and Medicines Regulatory Division of the Center for Health Development. The TA consultants developed the technical report on the medicine pricing policy, which includes pricing-related interventions to control and monitor the price of medicines such as (i) introducing the maximum mark-ups for wholesalers and retail pharmacies, (ii) exemption of essential medicines from import and value added taxes, (iii) introducing the reference pricing system in health insurance, and (iv) establishing the Medicine Pricing Observatory to monitor the price and affordability of medicines. Based on the proposed recommendations, the MOH prepared a draft government resolution on introducing the mark-ups. The TA consultants are also supporting the MOH in preparing the draft medicines bill to improve the medicine regulation, quality and price control and establishment of a government regulatory agency on medicines and medical devises. As of today, two CBISs were organized by HERA team on medicine regulations, proposed medicine pricing options and proposed revisions of the Medicine Law.

The TA extended technical support to MOH in conducting the studies on (i) prevalence of counterfeit and substandard drugs, and (ii) medicine prices, affordability and availability. The study reports are finalized and are ready for dissemination.

Geographical Location Nation-wide
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design Consultation with stakeholders were carried out during the project design, including officials of the Ministry of Finance, the Ministry of Health and Sports, the Ministry of Population Development and Social protection, the Government Procurement Agency, and the Social Insurance General Office. Processing team also met with representatives of the Mongolian Pharmaceutical Association and the Mongolian Hospital Association.
During Project Implementation

The TA consultants developed the project stakeholders' communication plan; implementation of the plan started in January 2017. The communication plan incorporates the capacity building, information sharing sessions (CBIS) and training. As of today, several CBISs were carried out by the HERA team: on medicine procurement, on hospital outpatient pharmacy to review options for pharmacies reorganization at hospitals, on medicine regulation to review proposed medicine pricing options and on proposed revision of the medicine law.

The TA organized a study tour to New Zealand, with participation of members of the Parliament and officials from MOH and MOF. The goal of the study tour was to learn and gain first-hand experience from how New Zealand has developed its drug regulatory functions, MRA legislation and how it has set up its organizational and management system, including the medicine procurement. The TA also organized an external training on medicine procurement at SPMS- Portugal Medicine procurement agency from May 7-May 11, 2017, for the technical officers from the MOH, MOF and GAPCST. The participants highlighted the importance of this training to have better understanding of electronic procurement using framework agreements and importance of pre-qualifications, and visual picture of full functioning e-procurement system, and the opportunities to discuss the pilot procurement in Mongolia. It was stressed the importance that the Mongolian group consisted from key officers from main stakeholders on this pilot process and how this training served as a platform to build interpersonal communication and strengthened professional relationship between the participants.

Business Opportunities
Consulting Services The TA will engage 44 person months of consulting firm (22 person months of international and 22 person months of national consultants) specialized in medicines and public procurement systems, medicines supply and medicines regulatory functions. The MOHS will establish a project implementation unit (PIU) to manage day-to-day activities of the project. The PIU will comprise health specialist - project coordinator (36 person months) and finance and administrative coordinator (36 person months). The two project coordinators will be recruited by the executing agency through an individual consultant selection process. International and national consultants will be selected and engaged in accordance with ADB's Guidelines on the Use of Consultants (2013, as amended from time to time).
Procurement The project coordinator will be responsible for procuring the office equipment for PIU under the supervision of the executing agency in accordance with ADB's Procurement Guidelines (2013, as amended from time to time). The executing agency will retain the equipment upon TA completion.
Responsible ADB Officer Jigjidsuren, Altantuya
Responsible ADB Department East Asia Department
Responsible ADB Division Mongolia Resident Mission
Timetable
Concept Clearance 02 Jul 2015
Fact Finding 11 May 2015 to 15 May 2015
MRM -
Approval 29 Sep 2015
Last Review Mission -
Last PDS Update 18 Sep 2018

TA 8967-MON

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
29 Sep 2015 28 Dec 2015 28 Dec 2015 31 Oct 2018 31 Dec 2018 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
1,000,000.00 0.00 100,000.00 0.00 0.00 0.00 1,100,000.00 29 Sep 2015 986,148.23

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Evaluation Documents See also: Independent Evaluation

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Related Publications

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Tenders

No tenders for this project were found.

Contracts Awarded

Contract Title Approval Number Contract Date Contractor Contractor Address Executing Agency Contract Description Total Contract Amount (US$) Contract Amount Financed by ADB (US$)
Capacity Development Technical Assistance 8967 11 May 2016 Health Research for Action (HERA) (Belgium) in Association with Gerege Partners (Mongolia) LAARSTRAAT 43, B-2840 REET BELGIUM Ministry of Health and Sports 656,956.00

Procurement Plan

None currently available.