A GCC Pooled Procurement Approach – Focus on the Kingdom of Saudi Arabia

The Kingdom of Saudi Arabia and many of its neighboring countries in the Arab world (e.g. the UAE), are experiencing an exciting era in their development where the political terrain is becoming more fortified, modern and open to international collaboration.

Changes in the Political Terrain

In Saudi Arabia alone, the last few years have been marked by a series regulation changes aimed at expanding the role of private investment/participation and making the local business environment more open to international collaboration projects.

The growing commonality of joint international projects is happening across a variety of sectors: political, economic and social (e.g. the Gulf Cooperation Council GCC). The healthcare sector is no exception to this trend.

The Health Ministers Council for the GCC

A good example that illustrates the type of successful collaboration happening in the middle east is the establishment of the “Health Ministers Council” for the GCC. Members of the Health Ministers Council are: The UAE, Bahrain, Saudi Arabia, Oman, Qatar, Kuwait and Yemen.

Headed by a director general, with headquarters in Riyadh, and an extensive executive board, the Health Ministers Council promotes collaboration, alignment and process efficiency among GCC countries, specifically in the area of healthcare.

According to Qatar’s Supreme Council of Health (SCH), the responsibilities of the executive board include: the expansion and development of: technical programs, central registration programs, expat medical check-up programs, information and e-commerce and of course, the GCC’s Group Purchasing Program (GPP).

According to an article published in the Annuals of Saudi Medicine Journal, the GCC created the GPP to with the additional goal of increased efficiency and cost minimization in medical procurement.

The Benefits of Pooled Procurement Entities

The study of different purchasing models has shown that traditional procurement schemas has several weak points, including:

  • Less leverage during negotiations resulting in increased prices. This is especially true of smaller countries.
  • Decreased levels of transparency, increasing the possibly of unfair or corrupt practices
  • Increased incidences of inefficiencies and stock problems

On the other hand, pooled procurement allows the buyer to: have more negotiating leverage through greater purchase orders and enjoy the benefits of lower transaction costs.

Aware of the benefits of this type of practice, a variety of regions (aside from the GCC) have begun to adopt this purchasing model (some successful and some not):

  • The Southern African Development Community (SADC) made up of: Angola, Botswana, Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe (http://www.sadc.int).
  • The East African Community made up of Tanzania, Kenya, Uganda, Rwanda and Burundi (http://www.au.int/en/recs/eac).
  • The “Association Africaine des centrales dáchats de medicaments essentiels (ACAME) made up ofGuinea, Mali and Niger. This organization started out as a group purchasing entity, but eventually changed its aim to the promotion more effcient pharmaceutical regulations and policies (http://www.acame.net/).
  • Organization of Eastern Caribbean States (OECS) Pharmaceutical Procurement Service (http://www.oecs.org/).

The GCC’s Group Purchasing Program (GPP)

The main function of the Group Purchasing Program is to pool the procurement of drugs and medical supplies for the Ministries of Health of the seven GCC countries. This program has been active for about 30 years and has managed many successful centralized tendering projects for pharmaceuticals and medical supplies, at reduce costs and enhanced efficiency ().

According to the WHO, the GPP follows a “contracting approach” meaning that each member must standardize formularies and product specifications to one uniform listing. Products that are not under this standard formulary must be procured separately by the member country. Additionally, member countries are not required to pay any procurement fees because the costs covered through the country’s GCC membership contribution fees.

According to the Health Ministers Council website, tenders are performed by four technical committees that meet annually. Each committee is made up of three representatives from each of the participating GCC states, with the exception of Saudi Arabia, which is represented by five delegates.

The four committees are:

  • The Tender Preparation Committee
  • The Envelopes Opening Committee
  • The Bids’ Vetting Committee
  • The Complaints’ Vetting Committee.

Participation in the GPP has led to the following advantages and improvements:

  • Lower prices: As time goes by more companies (especially international ones) will participate in GPP tenders. More competitions leads to lower prices and better deals.
  • Improved product quality: An increasingly competitive market will lead to companies with improved products participating in the tenders.
  • Growth of local industry: although increased competition might initially have a slowing effect on local sales, it will also lead to a “survival if the fittest” approach in which only the best and strongest local companies will survive.
  • Increased transparency: The participation of a wide array of foreign companies requires a high degree of transparency.

The GCC’s Group Purchasing Program is still in a stage of development and with the increasing participation of international firms in the tendering process, the outlook for future growth is optimistic. Future plans include expanding the program to include more countries and in so doing increase leveraging power.

As expansion plans proceed and the influence over regional purchases increases, the GPP will serve as a model for other regional purchasing entities and will be an interesting organization to follow in future years.

 

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