Privatization and Utility Sector Reform Project: Consultancy Services for Restructuring of National Medical Stores
(2005 - 2006)
Medical Care Development International with its sub-contractor SEREFACO carried out a consultancy for Restructuring of National Medical Stores (NMS) under contract to the Privatization & Utility Sector Reform Project with funding from the World Bank. MCDI conducted a diagnostic review of the NMS within the context of a general review of Uganda's health sector and made recommendations aimed at strengthening health sector performance via improvements in the efficiency of the NMS in particular.
MCDI provided advice on the role and organizational constitution of the NMS and the way that it should be financed in order to ensure that it can fulfill its mandate within the Ugandan health care system. MCDI's analysis included a comprehensive diagnostic review of the laws and policies governing drug supply, a review of private sector companies engaged in drug supply, and a functional assessment of the NMS within the overall drug supply system of the country.
MCDI's performance review and recommendations were vetted with stakeholders within the health sector in Uganda at a national workshop held in February 2007.
The study concluded:
"The overarching objective of the National Drug Policy is to ensure distributive equity - ensuring effective distribution and affordable access to essential drugs. In doing so, however, the Policy seeks to maximize economic efficiency. This involves not only minimizing the costs of providing essential drugs to the extent possible while achieving distributive equity, but also to structuring the drug supply system so that it effectively addresses inefficiencies associated with a number of prevalent forms of market failure. These include accounting for externalities associated with the treatment of communicable and transmissible diseases, providing subsidies to ensure production when economies of scale and scope require a scale of production that is not economically viable otherwise, and investing in and managing problems of inadequate or asymmetric information.
In order to promote the attainment of this dual objective of distributive equity with efficiency, the National Drug Policy calls for the attainment of the highest possible quality drug supply system that reliably supplies the desired quantities of drugs at the times necessary, via a system that is accountable to its owners and beneficiaries (i.e., to the people of Uganda and the Government they have elected to serve as their agent), that is adaptable and ultimately that is sustainable.
The attainment of the goals and objectives of the National Drug Policy is not self-evident and requires real trade-offs between competing objectives in order to achieve the best possible outcome. In particular, it is clear that the objectives of distributive equity are not completely convergent with those of economic efficiency and that a certain trade-off is required in the efficiency domain in order to maximize the possibility and ultimately the reality of achieving the overarching distributive equity objective. In addition, it is inevitable that a certain level of inefficiency above and beyond that required by the trade-off for distributive equity will also be inevitable at least in the short to medium term as the health sector in Uganda develops. Even where feasible avenues for improving efficiency have been identified and where the resources have been allocated to enhance systems performance in a way that is consistent with attaining these efficiency improvements, it is likely that time will be required to actually realize the efficiency gains. These "persistent" or longer term sources of inefficiency plus the base level inefficiency that is due to the trade-off for distributive equity represent the cost of achieving the goals and objectives of the National Drug Policy. And since this cost is not a cost that can or will be borne by either the private sector or the donor or NGO community, it must be the responsibility of Government to finance them. As such, it is an incontrovertible reality that the national drug supply system must in a very fundamental way remain a publicly financed and publicly provided system.
This does not mean that there is no scope for the infusion of private sector market principles that are by their very necessity efficiency-enhancing. It only means that the application of the private market principles must be circumscribed in a very real way so that they do not compromise the primary objective of distributive equity."
