In summary, it seems that 6 categories of components''target group and service users' (the demand side), 'purchased interventions,' 'providers and suppliers of interventions' (the supply side), 'methods and motivations' (payment terms), 'price,' and 'structure and organization''have been effective on the strategic purchase of medicines in different countries. This final categorization was similar to conceptual World Bank framework and another study.
Granting pharmaceutical subsidies to particular population groups and rational use of medicines are considered as the proposed sub-variables in the field of 'target group and service users' or 'demand-side interventions.' Gilson believes that governments are obliged to subsidize medicines that these subsidies can be used for some target groups as discount or exemption from the payment.22 Other studies also mention that the success of discount project and subsidies subject is dependent on the existence of appropriate financing systems to compensate the lost revenue from the sale of medicines.6 For example, 1 study showed that community-based financing projects increase moral hazard and limit the granting of subsides to the poor people.21 These results emphasize the importance of granting subsides, with attention to some considerations about the way to assign subsidies to medicines, how to choose its appropriate financing method as well as how to select target groups.
Based on the present study, all purchasing structures and resource allocation consider the rational use of medicines to an optimized use of limited resources.7 Different studies have mentioned different forms of irrational use of medicines, including prescribing too much medicines, multi-treatments, excessive intake of antibiotics, misplaced injections, small amount use of effective and appropriate products such as oral rehydration, and use of dangerous medicines.24
Problems caused by the irrational use of medicines increase significantly in the case of oneness of prescribing and dispensing functions in time of economic pressures, information asymmetry, lack of education, poor monitoring and response, increased expectations of the people and sick persons, and motivation of earning more profit.7 It is obvious that irrational use of medicines as an important issue, that can face the demand for medicines with problem, is more pronounced in developing countries facing with economic pressures, stewardship and regulatory challenges, and lack of control levers of inner and outer motivations. Other evidences show that the poor tend to self-medication more than rich people. This tendency reduces the potential benefits arising from the use of medicines, and imposes a macroeconomic burden to the health system and can greatly worsen medicine resistance in the community.25 For this issue, it is necessary to reinforce the rational use of medicines and improve public awareness about the effects of indiscriminate use of medications on the people's health and the health care system.
Other findings indicated that financing the most effective medicines and selecting the strategic medicines for the poor are considered as the most important sub-variables discussed in 'purchased interventions.' In this regard, the evidence from Tanzanian insurance organizations represents the existence of pharmaceutical policy projects for using the selective contracts to purchase generic medicines available on the list of basic medicines of the World Health Organization. The relationship between above principles and payment system to physicians of the countries can lead to choosing the best and the most cost-effective interventions and essential medicines.26
Therefore, it is essential to take steps toward institutionalization of pharmaceutical economic methods in selection of the best, the most effective, and the most affordable medications. In this regard, the implementation of electronic prescribing is suggested to help the physician in prescribing medicines covered by insurance plan and pharmacopeia of the related insurance organization. This technology results in access to information about the insurance coverage at the place of care and creates an instant electronic relationship between physician office, pharmacy, and health insurances.27,28
The sub-variables of 'providers and suppliers of interventions' were identified in this research, including choosing the most reliable supplier of pharmaceuticals; choosing the best pharmaceutical provider in the public or private sector; promoting active competition between pharmaceutical drug providers on the quality, price, and volume of medicines; and making the basic medicine list and the rational policy of providing and purchasing medicines.
In this regard, the evidences also emphasize on this point that the selection process of the medicine suppliers is very important, so the active competition between public and private sectors on the price and volume of intended pharmaceuticals, in addition to decrease in prices and increase in the obtained value from money, has a great importance in this context.7
Other findings of this research imply that reducing the induced demand of pharmaceutical providers, payment system, bargaining, cash flow of medicines, behavioral motivations, and monitoring are considered as the most important sub-variables of the methods and incentives (payment method). Various evidences show that the nature of pharmaceutical market combined with inconsistency and combination of relatively competitive retail market and also low competition in the production and wholesale are associated with the risk of severe induced demand by the service providers.7
In addition, the various studies showed that behavioral changes have been known as an effective component for strategic purchasing that is possible through using financial incentives, penalties, and regulatory affairs and modifying the payment system in this market.29 All these studies emphasize on the necessity of creating a proper competition in pharmaceutical market to reduce market failures and to achieve the competitive price. The importance of the payment term is as far as some evidences indicating the impact and the positive correlation of payment system to physicians with dose of drugs. This issue in the countries like Korea, where physicians combined prescribing and distribution rules, is intensified.8
In this regard, evidence shows that 3 general payment methods to providers cause the creation of different motivations for prescribing medicines. For example, 'budget' method of payment allocates the medicines budget in a linear or allocated form to medicines and other consuming products. In fact, budget payment is a form of credit allocation to the medicines depends on conditions.
In addition, 'fee for service' is the base of private insurances and individual purchase. This method could increase the number of services and medicines consumption.
Regarding the 'per capita' method which is not so common in the developing countries, people seek treatment sooner and therefore need less medications. However, under prescription would be occurred to reduce the medicine expenditures and increase the remained fund for the health professionals in this method.
The other studies show that in addition to the payment methods, cash flow is also effective on the prescription and consumption of medicines. For example, in India, patient pays the medicine cost directly to the pharmacy and then follows to return all or a part of his money from the buyer organization, whereas in Tanzania, the buyer organization pays directly to the provider.8 These differences can be followed by different motivations; for example, it could lead to corruptions, forging, and overreporting by the providers to receive more fund from the buyer organization.
Finally, the results indicated that medicines pricing methods, cost-price structure, and competitive, real, and negotiated prices are known as the most important sub-variables of price.
In this regard, the evidence shows that the increased ability to purchase medicines needs medicines purchased with the lowest price and the standard quality. To achieve this goal, there is no way only to use the competition benefits, replacing brand medicines with the generic ones and achieving the agreed prices.7 For example, in the Philippines, favorable price of basic medicines is obtained by negotiation with local producers,30 or in Tanzania, only the distributor of medicines can adjust medical bills based on the price list of generic medicines.8
On the other hand, evidence indicates that the price can be adjusted as the real cost (total amount), total amount plus percentage or fixed rate, and/or a fixed rate, for example, per prescription or per item that in case of using each item, we will face different options of behavioral requirements.31
In addition, evidence of various countries indicates that the lack of guidelines for price and the lack of a control mechanism, even in case of the proper use of medicines pricing, can lead to a lot of variations in the amount received from the buyers.3,32 So, attention to price adjustment strategies, reforming the pricing mechanisms, and control of price volatility to achieve competitive, agreed, payable, and real prices will help as an important underpin to perform strategic purchasing.
Finally, the present results showed that hierarchy, priorities, organizational structure (decentralization), and organizational chart are proposed as the most important sub-variables of 'structure and organization' in the strategic purchase of medicines.
In this regard, it was said that the organizational structures are the frameworks where purchasing and allocation of pharmaceutical resources are done, so efficacy of purchasing and allocating of resources depends on the characteristics and responsibilities for decision making and the level of risk.7 In other words, many governments in developing countries have approved the national pharmaceuticals rules and policies to ensure the efficacy, safety, and rational use with a comprehensive approach, and this issue includes competitive bidding, management control, distribution strategy, educational activities for rational use of medicines, licensing, and other regulatory requirements.23 Creation of decentralized structures in the purchase of medicines was another item which is pointed in developing countries in terms of organizational structure and its effectiveness in the purchase of medicines.7
This article was conducted by a protocol reviewed by a research team with expertise in reviews. To ensure a broad search of the literature, the search strategy included 8 electronic databases. Each article was reviewed by 2 independent reviewers. We did not contact any researchers or experts for additional information we may have missed. Scoping reviews are not intended to assess the quality of the literature analyzed. Thus, the conclusions of this review are based on the existence of studies rather than their intrinsic quality. Nevertheless, this scoping review provides a comprehensive overview of the existing research on the pharmaceutical strategic purchasing. Due to the diversity of studies in different countries, the accurate comparison would be very complicated. For concentrating on the objective of the study and preventing diversity, the keywords were limited by expert opinions. So it could be mentioned as a limitation of study. Another limitation is lack of research study on pharmaceutical purchasing in the underdeveloped countries. The current scoping review provides foundations for further discourse and research on components related to the effects of pharmaceutical strategic purchasing on the health care system. Finally, it is proposed that more scientific research on the impact of pharmaceutical purchasing strategy on health and health care should be performed especially in underdeveloped countries in the near future.
What is the 'country of origin' for the drugs you manufacture? This question arises every time a pharmaceutical company labels a drug, imports it, exports it, markets it, or sells it to the U.S. government. Unfortunately, the answer to this question is more complicated than many think. In fact, the correct answer often changes, depending on which government agency is asking.
Here are the Top 10 things pharmaceutical companies need to know before determining their products' country of origin (hereinafter 'COO'):
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1. A drug's COO often varies under different agencies' COO standards
U.S. Customs law requires all drugs to be marked with their COO (unless they are U.S.-made). For this purpose, a product's COO is the country where its various components are 'substantially transformed' into a new product with a different character and use. But, as discussed below, a different COO standard may apply when determining a product's eligibility for government procurement. A higher standard applies for 'Made in the USA' claims. And, when foreign trading partners request a 'certificate of origin' for goods exported to their country, COO standards vary by country of export and category of goods.
2. A drug's COO for Customs-marking purposes is usually the COO of its API
Customs views the active pharmaceutical ingredient ('API') as the 'essence' of any pharmaceutical product and, even though raw API must often undergo costly processing before it is suitable for human consumption, Customs does not consider such processing to result in a 'substantial transformation' unless it changes the character of the API. The necessary analysis is very fact-sensitive,
requiring the advice of counsel in collaboration with personnel who understand the specifics of the drug's manufacture.
3. Changes in API suppliers often require a change in product marking
Pharmaceutical companies sometimes change API suppliers to take advantage of lower prices and other business benefits. However, if the country of the API supplier changes, the proper COO marking for the finished product usually changes as well (see No. 2 above). Manufacturers also occasionally purchase the same API from multiple suppliers in different countries. As a result, the correct marking for a drug may vary over time, or from batch to batch. Despite the substantial logistical challenges involved, Customs requires each product, in the form it arrives to the 'ultimate purchaser,' to be marked with its actual COO.
4. NAFTA employs its own COO marking standard
For goods from NAFTA countries (United States, Canada and Mexico), the COO for Customs-marking purposes is determined under special NAFTA Marking Rules'not the substantial transformation test. Application of the NAFTA Marking Rules can be complex, but generally, where a drug is manufactured with materials from various countries, the COO will be a NAFTA country if all of the 'foreign materials' incorporated in the drug (i.e., materials from non-NAFTA countries) undergo an applicable change in tariff classification. For example, if the tariff classification for API made in Germany emerges from processing in Mexico as a finished product with a different classification, a tariff shift has occurred that may render the drug a product of Mexico, assuming other applicable requirements are met.
5. Manufacturers of mismarked products are subject to high penalties
Customs can penalize a company that fails to mark its products with the correct COO, with duties equal to 10 percent of the appraised value of the finished products. Unlike penalties for most Customs violations, these penalties cannot be mitigated by filing a 'prior disclosure' of the violation to Customs. It is crucial, therefore, that manufacturers ensure their products are properly marked.
6. The FDA requirement to label drugs with the manufacturer's place of business is not a requirement to list the product's COO
The FDA requires each drug label to 'bear conspicuously the name and place of business of the manufacturer, packer, or distributor.' The 'place' identified for this purpose may or may not be in the same country as the COO marked for Customs purposes. For example, the FDA defines a 'manufacturer' as one who performs mixing, granulating, milling, molding, lyophilizing, tableting, encapsulating, coating, or sterilizing, as well as filling dispensing containers with aerosol or gas drugs. Thus, if a drug is manufactured into tablets in the United States, using API from India that is not substantially transformed in the United States, the label may include a 'Product of India' marking for Customs purposes and a U.S. 'principal place of business' for FDA purposes. It is important to note that a drug may be deemed 'misbranded' if 'its labeling is false or misleading in any particular,' and this includes representations about the product's COO.
7. When selling drugs to the U.S. government, a different COO standard may apply
The substantial transformation test is used under the Trade Agreements Act ('TAA') to determine whether a product is eligible for government procurement by virtue of being either U.S.-made or made in certain designated countries (China and India, for example, are not designated countries). However, the substantial transformation test does not apply to supply contracts for drugs valued below $202,000. Such contracts are subject to the Buy American Act ('BAA'), which gives preferences to products manufactured in the United States, using its own COO standard. Specifically, a drug is BAA-compliant when the cost of the components manufactured in the United States exceeds 50 percent of the cost of all its components.
8. Failure to comply with the TAA and BAA carries severe consequences
If a pharmaceutical company supplies drugs to the federal government and falsely represents them as TAA- or BAA-compliant, it faces not only the loss of a lucrative supply contract, but also the troubling prospect of penalties under the False Claims Act, suspension and debarment, and even criminal charges.
9. Drugs should not be marked 'Made in USA' unless they are entirely U.S.-made
When a drug is U.S.-made under the substantial transformation test, the manufacturer may be eager to emphasize the drug's U.S. origin on the packaging or marketing materials. However, a higher standard applies for 'Made in the USA' claims and similar statements. Under U.S. consumer protection laws administered by the FTC, only a product that is 'all or virtually all' made in the United States may be accompanied by express or implied representations that the product is U.S.-made. CBP only requires a drug to be marked with its COO when it is foreign-made. Therefore, drugs that are substantially transformed in the United States, but that are not 'all or virtually all' U.S.-made, can comply with both standards if they simply omit a COO marking.
10. When exporting drugs, 'certificates of origin' requested by foreign trading partners are subject to various COO standards
When pharmaceutical companies export their drugs, they often receive requests from foreign importers and customs authorities to provide a 'certificate of origin''usually to prove eligibility for preferential tariff treatment under a free trade agreement ('FTA'). Unfortunately, there is no uniform COO standard in this context. Where an FTA controls, different standards for various category of goods have been negotiated by the signatory countries. Where no FTA applies, the country of export may have its own COO standard. For example, many countries will accept a 'U.S. certificate of origin' if at least 50 percent of the product's production costs originate in the United States.
Pharmaceutical companies are especially vulnerable to making non-compliant COO determinations for several reasons. First, drug manufacturers are typically subject to the full range of regulatory regimes discussed above, creating a greater risk of error in applying the numerous divergent standards. Second, it is common for pharmaceutical manufacturers to purchase API from multiple sources in different countries, or to switch API suppliers with some frequency, which can make the COO something of a 'moving target.' It is vitally important, therefore, that pharmaceutical companies take a fresh look at the COO determinations they have made in the past and verify that their current determinations are correct and accurately reflected in the labeling, packaging, and marketing materials. Finally, companies must ensure that their compliance programs incorporate procedures that ensure the appropriate standards are applied, that they are applied correctly, and that they are applied on an ongoing basis to account for changes in the supply chain.
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