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18th October 2023 (9 Topics)

Centralised procurement as a powerful health idea


Pooled procurement by the central government when it comes to drug procurement can revolutionise the health-care system in India.

Missed Opportunities in Central Health Schemes

  • Neglect of Pooled Procurement: The Indian government overlooks pooled buyer models, despite their proven benefits for drug procurement efficiency.
  • Corporate Hospitals' Advantage: Corporate hospitals negotiate directly with pharmaceutical companies, securing substantial discounts, albeit passing higher costs to patients.
  • Potential for Buyers' Clubs: Hospitals collaborating in buyers' clubs can amplify bargaining power, yielding cost savings for not-for-profit institutions and patients.

Realizing Savings through Pooled Procurement

  • Exemplary Cancer Grid Initiative: National Cancer Grid's group negotiation for 40 drugs yielded ?13.2 billion in savings (up to 99%).
  • Inconsistent Coverage in Schemes: The central government lacks uniformity in covering beneficiaries under schemes like CGHS, ESI, and PMJAY, impeding procurement efficiency.
  • Need for Centralized Procurement: Government can establish benchmark prices through pharma PSUs, ensuring competitive prices and averting reliance on private manufacturers.

Advantages Extend Beyond Cost Savings

  • Quality Assurance through Buyers' Clubs: Independent testing by buyers' clubs, standard practice in developed nations ensures superior drug quality.
  • Empirical Validation for Centralized Procurement: Pooled procurement offers tangible benefits, from cost reduction to efficient allocation of healthcare funds and drug availability.
  • Immediate Implementation Essential: Centralized procurement is a potent solution that India should swiftly adopt on a large scale.
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