Tender purchasing of medicines as strategy for medical services cost containment: in Health Insurance Corporation - Khartoum State

  Complementary research paper submitted for the award of the M.Sc. degree in Health Economics

    

Supervisor:Dr. Elwasila Saeed Elamin MohamedPhD in EconomicsDepartment of EconomicsUniversity of Khartoum

Submitted by:Ammar Osman AbdAlla AnnawM.Sc. Health EconomicsUniversity of Khartoum

University of KhartoumFaculty of Economic & Social

StudiesHealth Economics Centre

2

To understand the cost components of medical services in HICKS, an actuary

seminar on SHI was conducted in December 2010.

The main assumption was that “as judged by the Health Insurance Corporation,

the future tariffs of the benefit package in the following three to five years is expected

to increase by about 20-25% of the current price of the different medical services”.

This means that, on annual basis, cost will increase in a range from 3.7 to 7.7

per cent, the size being dependent on the specific medical service [9].

Accordingly, HICKS was advised to conduct a detailed evaluation of cost of

medical services under three scenarios, namely:

1. Low scenario: annual medical cost increase 3%.

2. Middle scenario: annual medical cost increase 5%.

3. High scenario: annual medical cost increase 7%.

Research Problem and Questions

3

The main question of this research arises from the cost scenarios

identified in the actuarial study, particularly the high one. However, the

cost of medical services i.e. the cost of the scheme raised from

115,337,901.33 SDG in 2010 to 127,093,043.43 SDG in 2011 equivalent

to an increase of 10.19%. Hence the cost exceeded the highest

scenario by about 3%.

The major part of this cost is the cost of medicines which was

50,560,762.50 SDG in 2011 i.e. about 40% of the total medical cost (see

figure 1-1).

Research Problem and Questions (cont..)

4

Figure 1- 1 Medicines cost vs. other medical costs

Source: Khartoum State Health Insurance, Opportunities and Challenges, WHO Health Finance consultant, Sep.2011

Research Problem and Questions (cont..)

5

A study about pharmaceutical management strategies of health

insurance systems that improve cost-effective use of medicines in

LMICs identified many factors affecting the cost of medicines in LMICs

particularly the medicines selection, purchasing mechanisms,

contracting and utilization management [10].

Accordingly, the research questions can be stated as follows:

1. How to analyze the components of HICKS’s total cost of

pharmaceuticals (TCPs)?

2. Is tender purchasing of medicines as strategy contains the total cost

of medical services in HICKS?

Research Problem and Questions (cont..)

6

The research hypotheses are the following:

1. Tender purchasing of medicines as strategy does not contain the

total cost of medical services in HICKS.

2. Tender purchasing of medicines as strategy contains the total

cost of medical services in HICKS.

Research Hypotheses

7

The research aims to reach the following objectives:

1. To analyze the TCPs provided by HICKS in 2011.

2. To investigate the possibility and liability of introducing tender

purchasing as a substitute strategy to contain increasing cost of

medicines in HICKS.

Research Objectives

8

The research methodology is a retrospective, comparative study, namely a cross

sectional study.

Thus we would study the medicines consumption during the year 2011

according to current way of purchasing.

We would also analyze the costs of medicines during that year by using

Microsoft Office Excel Worksheet.

A comparison between the current way of purchasing in HICKS and other way of

delivering the medicines services i.e. tender purchasing-which is the way of

medicines delivery system in National Health Insurance Fund in Sudan (NHIF) -

would be done.

Accordingly the main outcome is expected to be the possibility and validity of

adopting the tender purchasing as strategy or not.

.

Research Methodology

9

Data required would be of secondary nature and sources and would

be collected from HICKS, NHIF the head quarter and Revolving Drug

Fund (RDF).

Before using secondary data, we would examine the data in terms of

reliability, suitability and adequacy.

Data would be analyzed using SPSS. Since the data is paired, t-test

would be used if the data is normally distributed, otherwise

nonparametric test would be conducted.

Research Methodology (cont…)

10

Table 3-1 Distribution of HICKS medicines list according to therapeutics groups

12.43 % of medicines were antibacterials.

11.76 % medicines of nervous system &psychotropic agents.

11.36 % were cardiovascular agents.

The rest of therapeutic groups were below (10%).

Source: Researcher’s calculations.

Results & Discussions

Therapeutic group Frequency Percent Antibacterials 93 12.43 Antimalarials 14 1.87 Cardiovascular Agents 85 11.36 Git&Git Related Agents 57 7.62 Anti (Fungal+Protozoal+Viral) Agents 27 3.61 Respiratory Agents&Antiallergies 41 5.48 Antiinflammatory Agents &Analgasics 46 6.15 Hormones & Endocrine Agents 32 4.28 Sera &Immunoglobulins &B.Products 4 0.53 Nervous System &Psychotropic Agents 88 11.76 Anaesthetics & Related Agents 15 2.01 Sensory Organs Agents 58 7.75 Dermatological & Topical Agents 70 9.36 Vitamines & Trace Minerals 33 4.41 Iv-Fluids 11 1.47 Paramedicals & Antiseptics 59 7.89 Miscellaneous 7 0.94 Protocols 8 1.07 Total 748 100

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Table 3- 2 Distribution of total costs of HICKS medicines in 2011 according to therapeutic groups

Antibacterial medicines represent (36.77%) of total costs.

Hormones and endocrine agents represent (13.33%).

Cardiovascular agents represent (11.99%).

The rest of therapeutic groups were below (7%).

Results & Discussions

Therapeutic group No Sum % of Total Sum

Antibacterials 93 27,908,017.84 36.77 Antimalarials 14 545,560.60 0.72 Cardiovascular Agents 85 9,102,259.97 11.99 Git&Git Related Agents 57 4,028,727.70 05.31 Anti (Fungal+Protozoal+Viral) Agents 27 994,389.10 01.31 Respiratory Agents&Antiallergies 41 4,370,517.30 05.76 Antiinflammatory Agents &Analgasics 46 4,556,714.39 06.00 Hormones & Endocrine Agents 32 10,119,865.76 13.33 Sera &Immunoglobulins &B.Products 4 332,091.00 0.44 Nervous System &Psychotropic Agents 88 1,898,890.25 02.50 Anaesthetics & Related Agents 15 63,520.20 0.08 Sensory Organs Agents 58 2,415,671.10 03.18 Dermatological & Topical Agents 70 1,506,251.45 01.98 Vitamines & Trace Minerals 33 4,278,108.96 05.64 Iv-Fluids 11 1,606,602.60 02.12 Paramedicals & Antiseptics 59 1,691,975.64 02.23 Miscellaneous 7 464,959.34 0.61 Protocols 8 7,735.50 0.01 Total 748 75,891,858.70 100

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Table 3- 3 Distribution of medicines that represent 80% of total costs of HICKS in 2011 according to therapeutic groups

Table 3-3 shows medicines that represent 80% of total costs i.e.116 items.

About (33.62%) were antibacterial medicines.

13.79% were cardiovascular agents.

9.48% were hormones and endocrine agents.

Other therapeutic groups were below (7%).Source: Researcher’s calculations.

Results & Discussions

Therapeutic group Frequency Percent Antibacterials 39 33.62 Antimalarials 1 0.86 Cardiovascular Agents 16 13.79 Git&Git Related Agents 6 5.17 Anti (Fungal+Protozoal+Viral) Agents 3 2.59 Respiratory Agents&Antiallergies 6 5.17 Antiinflammatory Agents &Analgasics 7 6.03 Hormones & Endocrine Agents 11 9.48 Sera &Immunoglobulins &B.Products 1 0.86 Nervous System &Psychotropic Agents 5 4.31 Sensory Organs Agents 5 4.31 Dermatological & Topical Agents 2 1.72 Vitamines & Trace Minerals 7 6.03 Iv-Fluids 4 3.45 Paramedicals & Antiseptics 2 1.72 Miscellaneous 1 0.86 Total 116 100

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Table 3- 4 Distribution of the costs of medicines that represent 80% of total costs of HICKS according to therapeutic groups

Antibacterial medicines lead the list with (43.56%) of the costs.

Hormones and Endocrine agents with (14.75%).

Cardiovascular agents with (11.61%). Source: Researcher’s calculations.

Results & Discussions

Therapeutic group Sum % of Total Sum Antibacterials 26,584,312.60 43.56 Antimalarials 185,312.00 0.30 Cardiovascular Agents 7,086,576.80 11.61 Git&Git Related Agents 2,470,751.90 4.05 Anti (Fungal+Protozoal+Viral) Agents

554,477.00 0.91 Respiratory Agents&Antiallergies

3,302,330.90 5.41 Antiinflammatory Agents &Analgasics

3,069,148.80 5.03 Hormones & Endocrine Agents 9,002,418.85 14.75 Sera &Immunoglobulins& B.Products

206,668.00 0.34 Nervous System &Psychotropic Agents

904,330.40 1.48 Sensory Organs Agents 857,284.50 1.40 Dermatological & Topical Agents

533,015.00 0.87 Vitamines & Trace Minerals 3,687,402.10 6.04 Iv-Fluids 1,385,483.40 2.27 Paramedicals & Antiseptics 880,587.40 1.44 Miscellaneous 325,920.00 0.53 Total 61,036,019.65 100

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Table 3-5 Comparison between HICKS & NHIF’s TENDER according to therapeutic groups

Out of (405) consumed medicines; the highest percentage was of the

antibacterials, (13.83%) of medicines consumed.

Nervous system and psychotropic agents with (12.60%).

Cardiovascular agents with (11.60%).

.

Results & Discussions

Therapeutic group Frequency Percent

Antibacterials 56 13.8 Antimalarials 8 2.0 Cardiovascular Agents 47 11.6 Git&Git Related Agents 30 7.4 Anti (Fungal+Protozoal+Viral) Agents 17 4.2 Respiratory Agents&Antiallergies 23 5.7 Antiinflammatory Agents &Analgasics 25 6.2 Hormones & Endocrine Agents 24 5.9 Nervous System &Psychotropic Agents 51 12.6 Anaesthetics & Related Agents 7 1.7 Sensory Organs Agents 29 7.2 Dermatological & Topical Agents 28 6.9 Vitamines & Trace Minerals 23 5.7 Iv-Fluids 10 2.5 Paramedicals & Antiseptics 23 5.7 Miscellaneous 4 1.0 Total 405 100.0

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Table 3- 6 Cost statistics of HICKS total cost and NHIF total cost scenarios

HICKS total cost’s mean was the highest (160,369.51) and the lowest mean (99,310.17) was of tender total cost. The highest median (34,254.40) was of HICKS total cost and the lowest (21,004.25) was of tender total cost. The sum of HICKS total cost was (64, 949,650.97), tender total cost was (40,220,620.16), tender total cost +20 was (48,264,744.20), tender total cost +30 was (52,286,806.21) and tender total cost +40 was (56,308,868.23). 25% of HICKS total costs were below (5,628.50) comparing to (3,377.10), (4,052.52), (4,390.23) and (4,727.94) as in tender total cost, tender total cost +20, tender total cost +30 and tender total cost +40 respectively. 75% of HICKS total cost were below (136,221.25) in contrast to (83,559.70), (100,271.64), (108,627.61) and (116,983.58) as in tender total cost, tender total cost +20, tender total cost +30 and tender total cost +40 respectively.

.

Results & Discussions

HICKS total cost Tender total cost Tender total cost +20%

Tender total cost +30%

Tender total cost +40%

Mean 160,369.51 99,310.17 119,172.21 129,103.23 139,034.24

Median 34,254.40 21,004.25 25,205.10 27,305.53 29,405.95

Sum 64,949,650.97 40,220,620.16 48,264,744.20 52,286,806.21 56,308,868.23

Percentiles

25% 5,628.50 3,377.10 4,052.52 4,390.23 4,727.94

50% 34,254.40 21,004.25 25,205.10 27,305.53 29,405.95

75% 136,221.25 83,559.70 100,271.64 108,627.61 116,983.58

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Table 3- 7 Medicines consumed in both HICKS & NHIF according to suppliers’ type

108 medicines items represented 26.7% were uni-suppliers’ and 297 medicines items

counted for 73.3% were multi-suppliers’. Among all therapeutic groups, there were only two

groups totally uni-suppliers’, namely; anesthetics& related agents and Iv-fluids. There was

no totally multi-suppliers’ medicines group. There were 12 groups -out of 16 groups- more

than 60% of their items were multi-suppliers’ medicines.

Results & Discussions

Therapeutic group Suppliers

Total N (%) Uni supplier N (%) Multi suppliers N (%)

Antibacterials 9 (16.1) 47 (83.9) 56 (100) Antimalarials 2 (25.0) 6 (75.0) 8 (100) Cardiovascular Agents 11 (23.4) 36 (76.6) 47 (100) Git&Git Related Agents 3 (10.0) 27 (90.0) 30 (100) Anti (Fungal+Protozoal+Viral) Agents

1 (5.9) 16 (94.1) 17 (100) Respiratory Agents&Antiallergies 5 (21.7) 18 (78.3) 23 (100) Antiinflammatory Agents &Analgasics

4 (16.0) 21 (84.0) 25 (100) Hormones & Endocrine Agents 14 (58.3) 10 (41.7) 24 (100) Nervous System &Psychotropic Agents

16 (31.4) 35 (68.6) 51 (100) Anaesthetics & Related Agents 7 (100) 0 (0) 7 (100) Sensory Organs Agents 9 (31.0) 20 (69.0) 29 (100) Dermatological & Topical Agents 5 (17.9) 23 (82.1) 28 (100) Vitamines & Trace Minerals 7 (30.4) 16 (69.6) 23 (100) Iv-Fluids 10 (100) 0 (0) 10 (100) Paramedicals & Antiseptics 3 (13.0) 20 (87) 23 (100) Miscellaneous 2 (50.0) 2 (50.0) 4 (100)

Total 108 (26.7) 297 (73.3) 405 (100)

17

Figure 3- 1 Distribution of HICKS total cost

The majority of items cost was in the cost range (0-5000000 SDGs), by other words the

total cost of more than 250 items was below 5000000 SDGs.

There were very few items lay in the upper two cost ranges (55000000-60000000 SDGs)

and (60000000-65000000 SDGs), not more than 5 items.

The rest of items i.e. less than 150 items lay in the cost ranges between what mentioned

upper.

Results & Discussions

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Figure 3- 2 Distribution of tender total cost

The lower cost range (0-5000000 SDGs) contained the majority of the items, more than 290

items.

The upper two cost ranges were (35000000-40000000 SDGs) and (40000000-45000000

SDGs), both of them contained only two items.

The rest of items i.e. less than 110 items lay in the cost ranges between what previously

mentioned.

Results & Discussions

19

Table 3- 10 Test of normality

Table 3-10 showed the test of normality for HICKS total cost, tender total cost and

other suggested cost scenarios.

The significance values of both Kolmogorov-Smirnova and Shapiro-Wilk were all less

than 0.001.

Results & Discussions

Kolmogorov-Smirnova Shapiro-Wilk

Statistic df Sig. Statistic df Sig.

HICKS total cost .338 405 <.001 .428 405 <.001

Tender total cost .368 405 <.001 .311 405 <.001

Tender total cost+20% .368 405 <.001 .311 405 <.001

Tender total cost+30% .368 405 <.001 .311 405 <.001

Tender total cost+40% .368 405 <.001 .311 405 <.001

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Table 3- 11 Wilcoxon Signed Ranks test of consumed medicines in both HICKS & NHIFRegarding the ranks of “Tender total cost minus HICKS total cost”, the negative ranks were 351 and the sum of them was 69,134 and the positive ranks were 31 and the sum of them was 4,019. The ranks of “Tender total cost+20% minus HICKS total cost” were 308 negative ranks summed for 60,964 and 70 positive ranks summed for 10,667. Concerning the ranks of “Tender total cost+30% minus HICKS total cost”, the negative ranks were 263 and the sum of them was 55,957.50 and the positive ranks were 121 and the sum of them was 17,962.50. The last situation “Tender total cost+40% minus HICKS total cost” ranks were 241 negative ranks summed for 50,021 and 142 positive ranks summed for 23,515. P.value of all situations was less than 0.001.

Results & Discussions

N Sum of Ranks

Tender total cost – HICKS total cost Negative Ranks 351a 69134.00 Positive Ranks 31b 4019.00 Ties 23c Total 405

p.value <.001

Tender total cost+20%– HICKS total cost

Negative Ranks 308d 60964.00 Positive Ranks 70e 10667.00 Ties 27f Total 405

p.value <.001

Tender total cost+30%– HICKS total cost

Negative Ranks 263g 55957.50 Positive Ranks 121h 17962.50 Ties 21i Total 405

p.value <.001

Tender total cost+40%– HICKS total cost

Negative Ranks 241j 50021.00 Positive Ranks 142k 23515.00 Ties 22l Total 405

p.value <.001

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Table 3- 12 Wilcoxon Signed Ranks test of multi-suppliers’ medicinesThe ranks of “Tender total cost minus HICKS total cost” were 272 negative ranks summed for 39,344 and 14 positive ranks summed for 1,697. Regarding the ranks of “Tender total cost+20% minus HICKS total cost”, the negative ranks were 254 summed for 37,004 and the positive ranks were 29 summed for 3,182. The negative and positive ranks of “Tender total cost+30% minus HICKS total cost” were 224 summed for 35,078.50 and 62 summed for 5,962.50 respectively. “Tender total cost+40% minus HICKS total cost” ranks were 208 negative ranks summed for 31,919 and 77 positive ranks summed for 8,836. P.value throughout the table was less than 0.001.

Results & Discussions

N Sum of Ranks

Tender total cost – HICKS total cost Negative Ranks

272a 39344.00 Positive Ranks 14b 1697.00 Ties 11c Total 297

p.value <.001

Tender total cost+20% – HICKS total cost Negative Ranks

254d 37004.00 Positive Ranks 29e 3182.00 Ties 14f Total 297

p.value <.001

Tender total cost+30% – HICKS total cost Negative Ranks

224g 35078.50 Positive Ranks 62h 5962.50 Ties 11i Total 297

p.value <.001

Tender total cost+40% – HICKS total cost Negative Ranks

208j 31919.00 Positive Ranks 77k 8836.00 Ties 12l Total 297

p.value <.001

22

Table 3- 13 Wilcoxon Signed Ranks test of uni-suppliers’ medicinesRegarding the ranks of “Tender total cost minus HICKS total cost”, the negative ranks were 79 and the sum of them was 4,060 and the positive ranks were 17 and the sum of them was 596. The ranks of “Tender total cost+20% minus HICKS total cost” were 54 negative ranks summed for 2,453 and 41 positive ranks summed for 2,107. The negative and positive ranks of “Tender total cost+30% minus HICKS total cost” were 39 summed for 1,831 and 59 summed for 3,020 respectively. The last scenario, “Tender total cost+40% minus HICKS total cost”, ranks were 33 negative ranks summed for 1,473 and 65 positive ranks summed for 3,378. P.value for all scenarios was less than 0.001.

Results & Discussions

N Sum of Ranks Tender total cost – HICKS total cost Negative Ranks 79a 4060.00

Positive Ranks 17b 596.00 Ties 12c Total 108

p.value <.001

Tender total cost+20%– HICKS total cost Negative Ranks 54d 2453.00 Positive Ranks 41e 2107.00 Ties 13f Total 108

p.value <.521

Tender total cost+30%– HICKS total cost Negative Ranks 39g 1831.00 Positive Ranks 59h 3020.00 Ties 10i Total 108

p.value <.035

Tender total cost+40%– HICKS total cost Negative Ranks 33j 1473.00 Positive Ranks 65k 3378.00 Ties 10l Total 108

p.value <.001

23

HICKS’ medicines list was massive with large number of medicines.

Only 15% of medicines in the list incurred 80% of HICKS pharmaceutical costs.

Antibiotics and chronic non communicable diseases (CNCDs) medicines took the biggest share of this 15%.

HICKS’ pharmaceuticals cost was the highest comparing to NHIF’s pharmaceuticals tender cost and the three suggested tender costs scenarios.

Pooled procurement or tender purchasing mechanism was suitable for purchasing of medicines that produced by many or multi suppliers.

Negotiation, not tender purchasing, was right purchasing mechanism regarding medicines produced by single or uni suppliers.

Conclusions

24

Annual revision of HICKS’ medicines especially in terms of prescribing

levels.

Periodic analysis of HICKS’ pharmaceuticals cost and other medical

cost elements.

Direction of pharmaceuticals cost containment interventions towards

the percentage of medicines that incurred most of pharmaceuticals’

cost, especially towards antibiotics and chronic non communicable

diseases (CNCDs) medicines.

Adoption of tender purchasing as procurement strategy for medicines

that produced by multi suppliers.

Negotiation in procurement of monopolized medicines.

Recommendations

25

The prescribing pattern is different between HICKS and

NHIF as a result of differences in the demographic

aspects and diseases map.

The study was cross-sectional which is known to be

weak in verifying causal association, longitudinal and

interventional studies are necessary to build up a

valuable regression and trends.

Study Limitations