Reform Index 127. Public Procurement of Medicines Via the Newly Established Medical Procurements Center

Main event of the round is launching procurement of medicines via the newly established the state-owned enterprise – Medical Procurements of Ukraine.

The main event of the round

Government resolution on launching public procurement of medicines via the newly created state-owned enterprise “Medical Procurements of Ukraine”, +4.0 points

Medicines and tools for diagnostics and treatment of a number of certain serious illnesses, blood donation and vaccination of the population are procured by the state on a centralized basis to be passed on to hospitals free of charge. The list of such illnesses includes hepatitis and tuberculosis, HIV infection, diabetes, heart attack, stroke, cancer and mental illnesses, and conditions requiring dialysis. The medicines for other illnesses not included in this list are purchased directly by the hospitals and health departments  using the ProZorro system.

Centralized procurement has been carried out by international organizations since 2015. In 2019, their medical purchases totaled about UAH 3.7 billion. At the same time, government agencies and hospitals independently purchased medicines via ProZorro amounting to UAH 5.6 billion.

Government order No.1172 of 27 November 2019 stipulates that, alongside international organizations, centralized purchases will be carried out by the state-owned enterprise Medical Procurements of Ukraine. The resolution also establishes clear procedures for assessing the needs for and distributing these medicines.

The function of centralized procurement of medicines passed to international organizations in 2015 was a temporary solution. Large-scale corruption in this sphere and the completely  failing of the Ministry of Health as a purchaser were reasons of a shortage of medicines and vaccines due to interruptions in the supply. Parliament then established that public procurement of medicines should be carried out by specialized international organizations having successful experience in providing such services to governments of different countries. The Law stipulates that such purchases should be made by UN agencies, the International Dispensary Association, Crown Agents, the Global Drug Facility, and Partnership for Supply Chain Management. The MOH determined which organization should purchase a particular type of medication, according to established criteria.

These organizations operated according to their internal procedures and not to general public procurement rules applicable in Ukraine. In many cases, that was justified not only by corruption reduction. The organizations have experience of cooperation with the manufacturers of the medicines in short supply even in the world markets and for the procurement of which it is necessary to conclude contracts for 3-5 years. Typically, the state had purchased such medicines through a large number of intermediaries charging high mark-ups. However, the international organizations can ensure the timely supply of such medicines thanks to a strategic partnership with such manufacturers.

Procurement function will now gradually be passed from the international organizations to SOE Medical Procurements of Ukraine as the capacity of this enterprise grows.