Description     

The health sector in Ecuador is made up of 4 major institutions that have around 2800 public health establishments carrying out autonomous purchases. This traditional and fragmented purchase of medicine hurts planning, efficiency and control. How do we correct this problem? The solution prompted integrates the use of three types of procurement: corporative reverse auction, framework agreements and electronic catalogues as a means of management, planning, provisioning, programming, transport and disposition of medicines.

Organization(s)            National Institute of Public Purchases -INCOP-, Ministry of Public Health –MSP-, Army’s Social Security Institute –ISSFA-, Ecuadorian Institute of Social security –IESS- and the Police’s Social Security Institute –ISSPOL-

Organization Type(s) Government

Country(ies) Ecuador

Primary thematic focus - entry window   Managing procurement systems for enhanced performance

Sub-thematic focus Use of ICT to improve performance of procurement systems

Sector(s) Health

Innovation

E-public procurement usually involves the use of one type of tool to acquire products and services, for instance, inverse auctions, biddings, etc.

The innovative process carried out in Ecuador to acquire medicines integrates the use of 3 types of tools to get better commercial conditions and optimize the drug management.

Design

The National Institute of Public Purchases -INCOP – as the directing entity of Ecuador’s public purchases, promoted during 2010 and 2011, the Corporative Reverse Auction of Medicines so as to make electronic catalogues specialized in purchases, as a means of management, planning, provisioning, programing, transport and disposition, whose objective is to improve efficiency, transparency and management of Medicine purchases.

By integrating three procurement procedures we are looking to:

1. Get better commercial conditions: By consolidating the demand of the four institutions, we establish a better position in the market that will allow getting commercial advantages in prices, quality, delivery time, logistic services, storage, geographical coverage and availability.

2. To optimize the Drug management process: By having the electronic medicine catalogue, the health entities reduce the operational load to carry out procurement processes, the technical characteristics of the drugs are homogenized and the prices are frozen.

The logistics and provision is responsibility of the suppliers, allowing the entities to optimize their management of inventories, reducing storage infrastructure, eliminating the expiration date risk and shortage.

3. To improve service to the citizens in the health area: With an opportune, quick and agile access to medicines, the units that provide health care can concentrate their efforts in their main activity and eliminate distractions in management themes.

Implementation

The solution promoted by the INCOP integrates the use of three types of procurement:

1. Corporative Reverse Auction, is a mechanism through which once consolidated the demand of the participating entities and established the technical characteristics of the products to be purchased, those products with the best price are selected through electronic biddings towards the lowest, , this guarantees a fair competition, transparent and the most inexpensive prices of the market.

2. The suppliers that have won the auction sign with the INCOP a framework agreement where the commercial and technical conditions are established for the acquiring of medicines for a timeframe of two years.

3. With the awarded products, an electronic medicine catalogue is structured “Medicine Repertoire” accessible on the Web, which allows health establishments to optimize the processes of acquisitions and provisions.

How was the process carried out?

1. As an initial step it was necessary to establish the needs of drugs in the health sector, for this it was requested from the four participating entities the reference quantities of each drug and this way consolidating them in a big auction;

2. A RUPM – Only Record of Drug Suppliers was structured where only labs, drug distributors and representation houses that by law can provide drugs to the health public sector, were enabled;

3. Reference prices were established for the drugs using as a calculating formula the marked Price by the sanitation authority and historical data of drug auctions;

4. Processes of broadcasting were carried out with the potential suppliers making them participants of the methodology and the process to follow;

5. Through the web page www.compraspublicas.gob.ec the transactional procedures of the reverse auction were carried out;

6. The offers that qualified went to the bidding or negotiation in the case that there was only one qualified offer;

7. There were about 50 suppliers awarded, they signed framework agreements for a timeframe of 2 years, time in which the awarded price is kept. The items auctioned off are loaded to the electronic catalogue, a tool to which the health institutions have access. They can make a purchase order

Outcomes       

⁻ In the corporative reverse auction of medicines 524 processes were published for a reference amount of $948 million dollars of which 323 processes have already been awarded for $447 million, and so achieving a budget reduction of $327 which equals to 42%.

⁻ Budget reductions were higher (42%) to the general average of the processes of reverse auctions, traditional medicine purchase, (16%) carried out in the country.

⁻ There was a large participation of labs, representation labs and houses, which manifested trust in the process.

⁻ A characteristic of the corporative reverse auction of medicines was the preference awarded to the medicine of national origin as part of government policy. In fact, 41% of the awarded medicine was of Ecuadorian origin. The preferences were given with the purpose of improving working conditions, innovation, industrial development, commercial balance and making the best of existing capacities, etc.

Lessons Learned         

Due to the magnitude of the process and the amounts to be agreed upon it is important to have:

⁻ A high Commitment of the participating institutions in technical and political aspects;

⁻ To include in the process country’s institutions that are in charge of control, transparency and oversight;

⁻ To have a team of experts that are intended only and exclusively to the process;

⁻ To carry out market studies that are effective so as to ensure the reference prices of the medicines are real;

⁻ To have a database of trustable suppliers, amongst others.

Scalability

The process of Corporate Reverse Auction for medicines with its future cataloguing of them, it's a process that can be replicated in all the countries that have electronic systems of procurement, additionally this can be applied not only to medicines but to a great variety of products with all the benefits indicated.

Author's Organization  Instituto Nacional de Contratacion Publica (Ecuador)

Attachment(s): Innovative Approaches to Procurement Reform - Ecuador.doc

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