Pooled Procurement

v1.0 researched and written by Elise Erickson, edited by Suerie Moon, last updated June 2018

INTRODUCTION

The literature around pooled procurement is thin*, and there appears to be no recent literature (in the last five years) on the topic.

SEARCH TERMS

Pooled procurement, joint procurement, group procurement, group purchasing, collective bargaining

SYNTHESIS OF THE LITERATURE

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The literature tends to focus on the key features and reported achievements and obstacles of different regional pooled procurement agencies such as the Pan American Health Organization (PAHO) EPI Revolving Fund, and the Gulf Cooperation Council (GCC) Group Purchasing Program, the Eastern Caribbean Drug Service (ECDS), or other institutions such as the Global Drug Facility (GDF).

Huff-Rouselle (2012) provides an informative overview of the purpose, benefits, and design aspects of various pooled procurement models (including price reduction, quality assurance, reduction in corruption, standardization, administrative burden, funding, etc.).A WHO meeting report outlined experiences, successes and challenges of several different agencies including GCC, PAHO, GDF, South African Development Community (SADC), etc., and also identified the key components for supporting pooled procurement such as shared political will; it also listed priority areas for collaboration (World Health Organization (WHO) 2007b).

Many agencies reported lower prices and increased drug quality with pooled procurement, but a study by Waning et al. (2009) found that bulk purchasing did not necessarily reduce antiretroviral prices.

While some studies reviewed an agency on its own (Arinaminpathy et al. 2015; Huff-Rousselle and Burnett 1996; Kumaresan et al. 2004; Khoja and Bawazir 2005; Lunte, Cordier-Lassalle, and Keravec 2015), others compared two or more agencies (Huff-Rousselle 2012; DeRoeck et al. 2006). For instance, DeRoeck et al. (2006) concluded that PAHO’s ‘central contracting’ model may be better suited for countries with less contracting and procurement capabilities, whereas GCC’s ‘group contracting’ model may be more suitable for countries with more developed capabilities.

Although the focus tends to be on regional agencies, some (although fewer) studies focused on national or sub-national pooled systems such as the pooled procurement system set-up as a result of Delhi’s 1994 Drug Policy in India (Roy Chaudhury et al. 2005); a study comparing pooled procurement models in Bihar and Tamil Nadu, India (Chokshi et al. 2015); Jordan’s public health sector joint procurement of pharmaceuticals (Al-Abbadi et al. 2009); New Zealand’s pooled procurement under the National Hospital Pharmaceutical Strategy (2002-2003) (Tordoff, Norris, and Reith 2005); or Thailand’s provincial collective bargaining system (Songkhla, Wibulpolprasert, and Prakongsai 1998). Examining the theory behind pooled procurement, Barbosa and Fiuza (2012) showed that public bodies in Brazil benefited from lower prices with pooled procurement, and also that the reputation of the actors in the pool mattered—that is, when a buyer in good standing is joined by a buyer with a poor reputation, the prices paid increased as a result of credit risk effects.

Some studies focused solely on vaccine procurement. For instance, Kaddar et al. (2013) examined MIC’s use of UN-pooled procurement systems for vaccines, including a graphical overview (see figure 8 in Kaddar et al. 2013), and a table listing all MIC vaccine procurement methods.

There are also a handful of feasibility studies and situational analyses for pooled procurement in various regions that outline specific considerations for pooled procurement (World Health Organization (WHO) 2007a; Southern African Development Community (SADC) 2012).

RESEARCH GAPS

Additional empirical studies on the impact, benefit and transaction cost of pooled procurement on drug prices, including mechanisms at international, regional and national levels, particularly in developing countries
Better understanding of the conditions under which pooled procurement is most effective
Further research to understand the specific needs of middle-income countries (MICs) in pooled procurement mechanisms
Data to compare quality, quantity and prices of drugs supplied inside vs. outside of pooled procurement institutions (e.g. Global Fund and Global Drug Facility - GDF)

CITED PAPERS WITH ABSTRACTS

Abbott, Frederick. 2016. “Excessive Pharmaceutical Prices and Competition Law: Doctrinal Development to Protect Public Health.” UC Irvine Law Review 6 (3): 281."

Abstract: Public health budgets and individual patients around the world struggle with high prices for pharmaceutical products. Difficulties are not limited to low income countries. Prices for newly introduced therapies to treat hepatitis C, cancer, joint disease and other medical conditions have entered the stratosphere. In the United States, state pharmaceutical acquisition budgets are at the breaking point -- or have passed it -- and treatment is effectively rationed. Competition/antitrust law has rarely been used to address “excessive pricing” of pharmaceutical products. This is a worldwide phenomenon. In the United States, the federal courts have refused to apply excessive pricing as an antitrust doctrine, either with respect to pharmaceutical products or more generally. Courts in some other countries have been more receptive to considering the doctrine, but application in specific cases has been sporadic, including with respect to pharmaceuticals. This remains a paradox of sorts. Competition law experts acknowledge that one of the principal objectives of competition policy is to protect consumers against the charging of excessive prices. The currently preferred alternative is to address the “structural problems” that allow the charging of excessive prices. That is, “fixing the market” so that the underlying defect by which excessive prices are enabled is remedied. There is a fundamental problem with the “fixing the market” approach when addressing products protected by legislatively authorized market exclusivity mechanisms such as patents and regulatory marketing exclusivity. That is, mechanical aspects of the market are not broken in the conventional antitrust sense. Rather, the market has been designed without adequate control mechanisms or “limiters” that act to constrain exploitive behavior. Political institutions, such as legislatures, that might step in are constrained by political economy (e.g., lobbying), and do not respond as they should. Competition law and policy should develop robust doctrine to address excessive pricing in markets lacking adequate control mechanisms. This article will focus specifically on the pharmaceutical sector because of its unique structure and social importance. This focus is not intended to exclude the possibility that development of excessive pricing doctrine would be useful in other contexts. This article is divided into two parts. The first addresses competition policy and why it is appropriate to develop the doctrine of excessive pricing to address distortions in the pharmaceutical sector. The second addresses the technical aspect of how courts or administrative authorities may determine when prices are excessive, and potential remedies. The policy prescription of this article is twofold: first, the United States should incorporate excessive pricing doctrine in its antitrust arsenal, and; second, other countries should maintain the status quo with respect to multilateral competition rules that allow them flexibility to develop and refine doctrine, including excessive pricing doctrine, that is best suited to their circumstances and interests. Link: https://scholarship.law.uci.edu/ucilr/vol6/iss3/3/
Heller, Peter S. “The Prospects of Creating ‘Fiscal Space’ for the Health Sector.” Health Policy and Planning 21, no. 2 (March 1, 2006): 75–79. https://doi.org/10.1093/heapol/czj013."

Abstract: Not Available Link: https://academic.oup.com/heapol/article/21/2/75/554947
Lexchin, Joel. 2015. “Drug Pricing in Canada.” In Pharmaceutical Prices in the 21st Century, 25–41. Adis, Cham. https://doi.org/10.1007/978-3-319-12169-7_2."

Abstract: Not available Link: https://link.springer.com/chapter/10.1007/978-3-319-12169-7_2
Love, James. 2012. “Affidavit: Natco Pharma Limited versus Bayer Corporation.” https://www.keionline.org/sites/default/files/aff-jameslove_13Feb2012_as_Filed.pdf."

Abstract: Not available Link: https://www.keionline.org/sites/default/files/aff-jameslove_13Feb2012_as_Filed.pdf
Ottersen, Trygve, Riku Elovainio, David B. Evans, David McCoy, Di Mcintyre, Filip Meheus, Suerie Moon, Gorik Ooms, and John-Arne Røttingen. 2017. “Towards a Coherent Global Framework for Health Financing: Recommendations and Recent Developments.” Health Economics, Policy, and Law 12 (2): 285–96. https://doi.org/10.1017/S1744133116000505."

Abstract: The articles in this special issue have demonstrated how unprecedented transitions have come with both challenges and opportunities for health financing. Against the background of these challenges and opportunities, the Working Group on Health Financing at the Chatham House Centre on Global Health Security laid out, in 2014, a set of policy responses encapsulated in 20 recommendations for how to make progress towards a coherent global framework for health financing. These recommendations pertain to domestic financing of national health systems, global public goods for health, external financing for national health systems and the cross-cutting issues of accountability and agreement on a new global framework. Since the Working Group concluded its work, multiple events have reinforced the group’s recommendations. Among these are the agreement on the Addis Ababa Action Agenda, the adoption of the Sustainable Development Goals, the outbreak of Ebola in West Africa and the release of the Panama Papers. These events also represent new stepping stones towards a new global framework. Link: https://www.cambridge.org/core/journals/health-economics-policy-and-law/article/towards-a-coherent-global-framework-for-health-financing-recommendations-and-recent-developments/32B84686FD13D7CB340643D798832095
Wirtz, Veronika J., Hans V. Hogerzeil, Andrew L. Gray, Maryam Bigdeli, Cornelis P. de Joncheere, Margaret A. Ewen, Martha Gyansa-Lutterodt, et al. 2017. “Essential Medicines for Universal Health Coverage.” The Lancet 389 (10067): 403–76. https://doi.org/10.1016/S0140-6736(16)31599-9."

Abstract: Not available Link: https://www.thelancet.com/action/showPdf?pii=S0140-6736%2816%2931599-9
World Health Organization. n.d. “Essential Medicines.” WHO. http://www.who.int/medicines/services/essmedicines_def/en/.

Abstract: Not available Link: http://www.who.int/medicines/services/essmedicines_def/en/
Xu, Ke, David B Evans, Kei Kawabata, Riadh Zeramdini, Jan Klavus, and Christopher J L Murray. 2003. “Household Catastrophic Health Expenditure: A Multicountry Analysis.” The Lancet 362. http://www.who.int/health_financing/documents/lancet-catastrophic_expenditure.pdf."

Abstract: Not available Link: http://www.who.int/health_financing/documents/lancet-catastrophic_expenditure.pdf

* For the purposes of this review, we have established three categories to describe the state of the literature: thin, considerable, and rich.

- Thin: There are relatively few papers and/or there are not many recent papers and/or there are clear gaps

- Considerable: There are several papers and/or there are a handful of recent papers and/or there are some clear gaps

- Rich: There is a wealth of papers on the topic and/or papers continue to be published that address this issue area and/or there are less obvious gaps

Scope: While many of these issues can touch a variety of sectors, this review focuses on medicines. The term medicines is used to cover the category of health technologies, including drugs, biologics (including vaccines), and diagnostic devices.

Disclaimer: The research syntheses aim to provide a concise, comprehensive overview of the current state of research on a specific topic. They seek to cover the main studies in the academic and grey literature, but are not systematic reviews capturing all published studies on a topic. As with any research synthesis, they also reflect the judgments of the researchers. The length and detail vary by topic. Each synthesis will undergo open peer review, and be updated periodically based on feedback received on important missing studies and/or new research. Selected topics focus on national and international-level policies, while recognizing that other determinants of access operate at sub-national level. Work is ongoing on additional topics. We welcome suggestions on the current syntheses and/or on new topics to cover.