Improving the efficiency, effectiveness, equity and responsiveness of supply chains and procurement processes for pharmaceuticals, vaccines and other health products, which make up a large share of total health expenditure in low and middle-income countries (LMICs), has important implications for health system performance and population health. Decentralised governance of health services provides greater autonomy in planning, management and decision making from national to sub-national level and has occurred in many LMICs largely as a response to the primary healthcare approach promoted by international agencies. Evidence suggests that procurement is more efficient when centralised because of economies of scale and improved purchasing power whilst other health system functions such as financing and planning/budgeting benefit more from local context-specific implementation. Nepal is embarking on a process of decentralisation after adopting a federal approach to local governance. This helpdesk report looks at other countries to summarise key findings and lessons learnt from decentralised procurement.
- Health system decentralisation can be implemented in different forms and to different extents depending on the existing political and public administrative structure of the country and the organisation of the health system itself. Most effective programmes that improve supply chain and procurement processes address the root causes of inefficiencies in the system and provide context-specific interventions.
- Centralised procurement/tendering can achieve cost savings across multiple contexts by creating economies of scale and improved purchasing power.
- A mixed procurement model can benefit health system performance with some functions decentralised, e.g. financing and planning/budgeting (as it is likely that these functions requires greater flexibility to respond to local information and can therefore benefit from greater local choice), and other functions centralised or at a higher level, e.g. inventory control, storage, logistics management information systems, transportation to transfer medicines (as these functions can benefit from oversight, storage capacity, etc.).
- A mixed procurement model can also serve national and subnational programmes with the central level playing an essential role in the procurement, warehousing and distribution of select public health commodities e.g. contraceptives and vaccines.
- The central level can also provide a useful vehicle to serve as the first in-bound warehouse for storing and breaking bulk orders from donors into smaller orders for downstream distribution to facilities.
- Decentralisation can lead to a loss of drug quality oversight and regulation in procurement and across the supply chain. Petty collusions and corruption at the local purchasing level can also be an issue.
- E-procurement can achieve savings and help overcome management concerns and corruptions issues when enabled by political support, pressures from citizens and groups for greater transparency and efficiency, and acceptance by suppliers. However, technological factors and legislative delays can be a challenge.
- The health workforce must be recognized as an important and adaptive factor contributing to the success or failure of health system reforms.