RFI: e-commerce in drug procurement (2)
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I am a health economist at Beijing Municipal Centers for Diseases
Prevention and Control. I want to know the advancement of e-commerce
in drug procurement in other countries. Could some one help me find
the related information in this field?
Dear Dr. Haichao Lei,
Thank you for clarifying your request. I apologize for the delay, but
I have to divide your request up into individual ones because it is
still quite huge for one e-mail. Also, please note that this response
does not include the myriad of situation-specific issues that are in-
volved in transferring such technology from a high-income country to
a mid-income country such as China. The effects on your labor force,
pressures on institutional capacity, quality assurance, etc., are all
issues that I trust you are looking at very closely before undertak-
ing such proposed reform. Please let me know if I have not answered
these first two questions to your satisfaction. You specified:
1. The international module of drug sales and procurement: how the
pharmaceutical products flow from manufacturers to the doctors and
consumers (the supply chain)?
2. How do they use E-commerce in drug sales and procurement?
The best example I could find is from Australia, where the Pharmaceu-
tical Electronic Commerce and Communication (PECC) project is intro-
ducing Internet Commerce into the pharmaceutical supply chain. Ini-
tially, the participants are six wholesalers (both domestic and in-
ternational) who supply to hospitals, and the 700 manufacturers that
they purchase from. The project is based on two important premises:
a) The use of common numbering for all products, based on an interna-
tional product numbering scheme; and
b) The use of the Internet to distribute orders by wholesalers and
receive acknowledgments from manufacturers.
The project is based closely on the supermarket model, where products
are bar-coded and scanned on purchase. In time, the pharmaceutical
supply chain will be extended to include end-users, namely hospitals,
so that pharmaceuticals can be scanned by the bedside on consumption.
This will reduce 'shrinkage' - theft and products going out of date.
Their overall goal over lower cost of health deliver is to be
achieved by following business objectives:
* reduce costs in logistics supply of pharmaceuticals to wards;
* reduce non-value added repetitive activties, e.g, accounts recon-
ciliation; and
* improve customer service.
PECC is funded by a number of government agencies and many industry
participants and associations. PECC has had coverage in the news dis-
cussing the benefits of the implementation of electronic commerce in
the pharmaceutical industry. An excellent overview of the Efficient
Healthcare Consumer Response (EHCR), a benchmark report prepared in
the United States provides an excellent introduction to the aims of
the PECC project. The objective of EHCR was to analyse the healthcare
delivery system - specifically supply chain management issues -- for
the purpose of reducing management and distribution costs and improv-
ing the quality of healthcare. The PECC project has a number of dem-
onstration projects showing the ability to implement electronic com-
merce in the healthcare industry today. You will find a plethora of
information, including your first question above, the international
model of how the pharmaceutical products flow from manufacturers to
the doctors and consumers (the supply chain) at:
http://www.noie.gov.au/projects/ecommerce/pecc.htm
One of the projects they list there is the Pharmaceutical Extranet
Gateway (PEG) Project <http://www.pecc.org.au/demosite.html>, which
is the result of a joint government and private sector initiative to
decrease costs from the healthcare supply chain. With this standard-
ized system, supplier or manufacturers can trade with wholesale cus-
tomers without the need to implement an expensive electronic data in-
ventory (EDI) system. There is virtually no implementation time and
the cost is minimal as information is transmitted on the internet.
Benefits are order processing accuracy, advanced delivery notifica-
tion, timely and accurate shared business information, and stream-
lined payments.
If you read the full report on the VHA/Ballarat hospital system at
<http://www.pecc.org.au/projectp.html>, it takes you through the full
cycle of developing the product, the teams and infrastructure neces-
sary and the technical specifications for each step of the process:
a) labelling and documents at both 'shipment level' and 'shipper'
level with code identifiers and bar labels;
b) electronic notification of hospital of each shipment in form of
electronic invoice, using above coding to identify;
c) automates order-delivery checking and stock 'put away' and payment
authorization;
d) improves methods of identification of shipment status, location,
incoming goods scanning, and contents;
e) uses open standards thus improving quality assurance, transpar-
ency, and accountability.
...the lists and process go on and on....You can see what the bene-
fits are such as drop in delivery errors, saved time in correction of
errors, reduced warehouse picking errors, improved stock management,
improved tracking of shipments (esp. those on the road), and facili-
tation of use of internet and web for reference and info access to
pharmaceutical info, the Centre for Disease Control, etc. The report
also has detailed evaluation criteria set against baseline benchmarks
such as...'reduction in overall picking errors by warehouse detected
by hospital', which is then measured by a pre- and post-implemen-
tation manual stock inventory in present card system, and manual
stock inventory and check against computer stock records, with the
predicted results being that there will be quantifiable improvements
in the accuracy of stock records because of the reduced reliance on
manual maintenance of stock info.
Next, for the full pharmaceutical purchasing and supply chain proc-
esses, see section 6.2 of the Scoping Study for in New South Wales
Central Coast Area Health Service (CCAHS), which was also done by the
PECC project: <http://www.pecc.org.au/nswreport.html>\. This report
also looks at IT infrastructure needed for a project of this size, as
well as the types of software applications that were most user-
friendly (Oracle, Trendstar, RxVision, etc.). There's a nice diagram
on page 24 of 106 of the supply chain. This is really an excellent
report that looks at costs, benefits, and outcomes for all the dif-
ferent institutions (including accounting) involved in pharmaceutical
supply chains for Australia. Important to note that the report ac-
knowledges that the pharmaceutical sector in Australia performs more
than just drug dispensing -- they are involved in patient counsel-
ling, clinical reviews, and other services, which are also taken into
account in the process of shifting to e-procurement. One dimension of
the sector is not analyzed in isolation from the others.
The report notes that it's a complicated process, whereby commitment
of all stakeholders (especially the human ones) must be taken into
account for the system to be implemented effectively. See p. 100 of
106.
More to come on your other questions.....
All the best,
Homira
The World Bank
1818 H Street, NW, Wash., D.C. 20433, USA
Tel: +1-202-473-2256
Fax: +1-202-522-3234
mailto:healthpop@worldbank.org
http://www.worldbank.org/hnp
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