Procurement and Supply Chain Management Roadmap Helps Implement UHC Law in the Philippines
By Armando Enriquez and Gashaw Shiferaw, USAID MTaPS
Strong pharmaceutical procurement and supply chain management (PSCM) that can ensure access to health commodities is indispensable to achieving successful implementation of universal health coverage (UHC). In the Philippines, providing the critical system component of PSCM is thus enshrined in its UHC law. The UHC Act, a piece of landmark legislation enacted in 2019, mandates health coverage for all Filipinos and ushered in a slew of reforms to the health system to ensure their access to quality health services, including enhancing the performance of PSCM. As part of the reform, the UHC Act devolves the national health system and places the responsibility for financial management and supply chain authority on local government units (LGUs) for select health commodities.
To implement the UHC Act, the Philippine Department of Health (DOH) has embarked on a journey to devolution with small but steady steps, including the creation of a devoted PSCM team and a roadmap, developed with support from USAID MTaPS, in coordination with central and regional DOH stakeholders, to guide the decentralization of the health system and financial resources from the DOH to LGUs.
The effort to transform comes with some challenges. The centralized procurement services were able to procure only 80% of the orders it received, which is below DOH’s target of 95% procurement. Further, an analysis in 2018 revealed that almost 50% (in value) of health products for family health, degenerative diseases, and infectious diseases stayed at the central warehouse for more than 180 days without moving—a portion of the inventory expired shortly, indicating that a significant opportunity for optimizing resources and distribution was missed.
USAID MTaPS has been working with DOH since 2019 to institutionalize an integrated and effective PSCM system for TB, family planning, and other health program commodities. The roadmap is a follow-up to and aligns with the UHC reform and the National Strategic Plan for PSCM, developed by DOH’s PSCM team with technical support from MTaPS through a consultative process with a wide range of stakeholders. Earlier, MTaPS had successfully mobilized buy-in from stakeholders to identify and incorporate PSCM components in the Implementing Rules and Regulations of the UHC Act, ensuring continued support for a high-performing PSCM in the Philippines, which is foundational to sustainable UHC and better health outcomes for all.
Development of the Roadmap
The UHC PSCM implementation roadmap communicates the vision for future state PSCM system and its relationship to central, regional, and local supply chain entities. It serves as a guide for DOH, the Centers for Health Development, and LGUs in monitoring the progress of the complete devolution of PSCM functions to the local health system across the country. To that end, MTaPS developed the future state PSCM roadmap with active engagement from the DOH as well as regional and local partners. The development exercise closely considered current states, government edicts, and guidelines as well as opportunities to enhance the PSCM system based on industry best practices from other countries.
The current state analysis included an informal national survey of over 400 respondents from across the country, including local health system representatives. The results of the analysis identified interventions needed to achieve a functional and integrated PSCM system that promotes and embodies UHC, which were presented to the DOH technical and executive-level staff.
The current state analysis of PSCM showed performance gaps, including duplications in the procurement of health commodities from different sources and at different levels, poor storage capacity and practices, and fragmented distribution/delivery of health commodities to service delivery points, all contributing factors that affect the future overall PSCM architecture. The newly devolved health system is driven by new mechanisms for health financing, the Special Health Fund, and strategic purchasing that revolves around framework contracting and pooled procurement.
The key recommendations for the UHC PSCM implementation roadmap include adhering to the three phases, as prescribed by the UHC Act in creating integrated local health systems, and an additional fourth phase to recognize the planning and preparation that needs to occur at all levels of the supply chain to prepare for future integration: UHC implementation planning and the preparatory, organizational, and functional phases.
Based on the current state analysis, four essential supply chain building blocks were identified as foundational to the success of the future PSCM system:
- Master list of inventory with standard stock-keeping units (SKUs) that contains all approved health products based on the health care service package to streamline planning and enable system reporting
- End-to-end inventory visibility so that everyone playing a role in PSCM can track products to avoid stock imbalances throughout the entire system
- Integrated procurement frameworks to pool procurement orders for bulk purchases, which creates economies of scale and flexibility around managing lead times, enabling consolidation of needs, and allowing suppliers to plan better
- Cost-effective warehousing and last-mile distribution through potential outsourcing opportunities so responsibilities are distributed appropriately between central, regional, provincial, city, and private supply chain actors to optimize performance across PSCM functions
Further, the technical discussions and survey identified enhancement opportunities in the six key functioning areas of the health supply chain system: human resources, finance and budgeting, forecasting and demand planning, procurement, inventory and storage management, and transportation and distribution management. MTaPS identified industry-leading best practices and in-country examples from around the world for each one of them.
The dissemination of the roadmap is mobilizing interest and buy-in from stakeholders within DOH and local and regional entities. DOH offices, which manage and oversee the supply chain and are in charge of developing the integrated annual procurement program, have been working with MTaPS on institutionalizing and implementing the PSCM roadmap and have ensured that its activities for PSCM reforms encompass all the key elements of the PSCM roadmap. The reforms list is incorporated into DOH’s UHC devolution transition plan.
MTaPS continues to engage and coordinate with DOH on related PSCM governance activities, including the standardization of product selection, quantification, strategic purchasing, price negotiation, master SKUs, warehouse management, distribution policy, and implementing the recently introduced electronic Logistics Management Information System (eLMIS), which are all essential to the future PSCM state.
The eLMIS procurement—an outcome of MTaPS’ ongoing engagement and support to the DOH—will provide end-to-end visibility in tracking supplies and will enable better demand planning and procurement and efficient management of health commodities in the country.
These developments in decentralizing PSCM are moving the Philippines toward a transformative change that will enhance the performance of its medical supply chain and create sustainable gains in improving access to medicines for all Filipinos.