Making the Case for Open Contracting in Health – World Health Summit 2017

This post was written by Stephanie Rogers & Ana Kubli about the Transparency International session at the World Health Summit. Both authors are students from the Hertie School of Governance in Berlin.

Public procurement within healthcare is highly vulnerable to corruption, with severe implications for overall global health and economic development. Nigeria owes over 17mil USD to GAVI due to government misuse of funds, whilst financial losses from healthcare fraud in the US amounted to tens of billions of dollars in 2016.[1] In an attempt to combat this corruption, governments, civil society and private sector stakeholders are now advocating for open contracting. Open contracting refers to the open, transparent and accessible publishing of procurement process information. This improves healthcare procurement by ensuring fair prices for goods and services, strengthening service delivery of healthcare systems and enabling diversification of economies by supporting competitive tendering processes.

At the 2017 World Health Summit, Transparency International brought together experts from Ukraine, Honduras and Nigeria to explore the complexities of open contracting in terms of instigating and ensuring stakeholder support, the importance of accountability and monitoring mechanisms, and the negative economic and health consequences of corruption within the healthcare sector.

The session Making the Case for Open Contracting in Health: Tackling Corruption in Procurement was chaired by Transparency International Founder, Dr. Peter Eigen, who whilst working on behalf of the World Bank in Sub-Saharan Africa and Latin America was witness to many instances of corruption in procurement, particularly in the health sector. Joining Dr. Eigen were the speakers Viktor Nestulia, Director of Innovation Projects at TI Ukraine, Abram Huyser-Honig, Data Analyst with TI Honduras, and Edwin Daniel, Policy Manager, Transparency and Accountability from the ONE Campaign in Nigeria.

 

THE SIGNIFICANCE OF OPEN CONTRACTING: UKRAINE, HONDURAS AND NIGERIA           

Fighting corruption in healthcare is the overarching issue; moving forward, impetus must be on bringing together diverse stakeholders to support existing open contracting measures, and ensure that adequate accountability mechanisms exist and are enforced.

Open contracting has been an effective tool in significantly reducing cases of bribery and mitigating corruption in different countries, ensuring equal treatment for private and public stakeholders, as well as ensuring a high quality of goods and services for citizens. The cases of Nigeria, Honduras and Ukraine elaborate the important insight that transparency alone does not automatically result in accountability. There is a significant need for joint initiatives from the public and private sector with a committed citizenry able to monitor and critically assess institutional performance. Investing in transparency is expensive but it has been proven that corruption has a direct impact on the economic performance of the public sector. Furthermore, the most critical outcome of investing in transparency is the restoration of public trust in government and private institutions.

Corruption in the healthcare sector is an especially critical problem in developing and transitional economies where public resources are scarce. Corruption reduces the resources available for health, lowers the quality, equity and effectiveness of health care as well as increases the cost of services. A study carried out by the International Monetary Fund (IMF, 2000) using data from seventy one countries, shows that countries with high levels of corruption have higher rates of infant mortality. Therefore, preventing abuse and reducing corruption is important in order to increase resources available for health, to make more efficient use of existing resources, and ultimately to improve the general health of the population.

 

UKRAINE

Rebuilding trust in the decision-making process for public and private institutions after the 2013 Revolution of Dignity was the most important aim of the ProZorro System. This e-procurement system was developed in response to the discovery that through the privatisation of national healthcare the Ministry of Health was overpaying for medicines by up to 40% due to the monopolistic structure of the market, price fixing practices and other strategies. As Viktor Nestulia mentioned in response to an audience question regarding funding and obligatory participation in ProZorro, as a hybrid collaboration model between public and private institutions, the ProZorro system was transferred to the government in order to mandatorily enforce it in all government procurement entities, from national to municipal levels. Regarding the funding mechanism, as ProZorro is a collaboration model it is financed by bidders. Every entity that wants to participate in a tender must pay a fee in order to submit a bid. Part of this fee goes to support ProZorro as a state-owned enterprise for administration and further development of the system. It is important that all information is available without registration and fees. Furthermore, Nestulia mentioned that all monitoring tools belong to Transparency International and are partly funded by donors and businesses.

 

HONDURAS

The Government of Honduras operates many hospitals and clinics with a budget of approximately 40mil USD per year to purchase medicines. There are eight million residents in Honduras and this translates to just five dollars per person, per year for healthcare. With such a tight budget, any waste of funds means even less money is available for sick people with limited financial resources. Medicamentos Abiertos (Open Medicines) is an e-procurement platform that compiles information about medicine purchases in the public sector. This procurement data serves as a base for investigation into the medicine supply chain, and has uncovered widespread fraud, theft and bribery.

 

NIGERIA

The case example of Nigeria focused on correcting poor public policies in primary health centres. Primary healthcare provision in Nigeria is among the poorest in the world and it faces serious issues of misappropriation of resources and lack of accountability in service delivery. In 2014, a Nigerian civil society organisation called the Public Private Development Centre and other research centres began to monitor the procurement for the development of new Primary Healthcare Centres (PHCs) to link and analyse data from the budget, contract and service delivery phases of the procurement process. Their results showed that the construction of PHCs was extremely ineffective, the tendering procedures were uncompetitive and only 36% of the expenditure led to operationally active facilities.

 

WHAT ARE THE IMPLICATIONS FOR POLICY MAKERS?

The case studies of Ukraine, Honduras and Nigeria highlight the differing roles of governments, private sector and civil society stakeholders in tackling corruption in healthcare procurement processes.

Foremost, it is imperative that political will exists in order to support open contracting measures and ensure their sustainability. This can only be achieved via collaboration between stakeholders in order to create pressure on governments to adhere to regulations. The case of Ukraine demonstrated the benefits of utilising international organisations to privatise state responsibility and allow civil society to realise the extent of corruption; however, sustainable change can only take place at a systemic level through government action. This clearly presents a challenge. Working together, however, civil society, businesses and international pressure can be utilised to ensure governments adhere to their open contracting responsibilities.

Secondly, adequate mechanisms of accountability and consequences for corruption must exist and be enforced by the judicial sector in order to ensure open contracting measures successfully tackle broader systemic corruption. Open contracting provides transparency, yet no incentive exists for governments to adhere to these regulations if they are not held to account. Whilst introducing stricter laws punishing bribery and wrongful procurement of medicinal products by imprisonment (as in the case of Germany in 2016) [2] is an option, independent oversight authorities provide an alternative approach. The establishment of these independent bodies (consisting of national authorities or civil societies) as implemented within several EU countries including Bulgaria, Italy and Poland, involve a third party overseeing procurements (dependent upon the contracting authority permitting this external monitoring)[3]. This has not only prevented and deterred corruption in procurement, but increased accountability and trust in government authorities as well as improved competition among service providers.

Information and voice-based strategies that involve the community in decisions affecting them, as well as in monitoring activities, have proven to be very effective in regulating health services. According to Abram Huyser-Honig (Honduras Speaker), community participation can be achieved through social media campaigns, in which civil society becomes aware of the situation.

Other citizen participation strategies that have been used in other contexts, for instance in Participatory Budgeting in Brazil, are the creation of local boards or committees in which civil society is represented and involved at all levels of the decision-making process, as well as in monitoring activities (Cabannes, 2004). Effective citizen oversight boards and complaint mechanisms must be in place to provide opportunities to report and prosecute abuse and restore public trust in institutions.

 

TOWARDS A MULTI STAKEHOLDER RESPONSE TO PROCUREMENT CORRUPTION IN HEALTHCARE

The three experiences from Ukraine, Honduras, and Nigeria demonstrate the importance of a collaborative approach to combating corruption in the procurement of healthcare good and services. Open contracting is crucial in creating awareness amongst civil society; this in turn encourages government accountability and systemic change. One question from the audience asked what new challenges such as the digitisation of healthcare present for anti-corruption efforts; Viktor Nestulia from TI Ukraine argued that digitisation has in fact presented new opportunities for private and public sector collaboration, and will continue to do so.

Above all, it is imperative to advocate globally and increase awareness of the vulnerability of procurement in the health sector to corruption. This is a topic that is not given enough attention; but has immense negative impacts on the overall effectiveness and sustainability of health systems and the achievement of global health goals. In fact, World Health Summit President, Dr. Detlev Ganten who attended the session confirmed there are global health professionals that have never considered the importance of corruption in healthcare procurement.

In response, Transparency International’s global Pharmaceuticals and Healthcare Programme will commence the ‘Open Contracting in the Health Sector’ initiative in January 2018. It aims to facilitate open contracting in sub-Saharan Africa and South Asia by creating alliances and fostering capacity building between national governments, medical services providers and civil society organisations. The three case studies discussed within this session demonstrate the complexities and successes of open contracting, and highlight the importance of utilising these measures in order to tackle broader processes of corruption within the healthcare sector.

 

REFERENCES:

Cabannes, Y. (2004). Participatory budgeting: a significant contribution to participatory democracy. Environment and urbanization, 16(1), 27-46            http://pubs.iied.org/pdfs/G00471.pdf

European Commission 2014, Voluntary Oversight of Procurement Procedures http://ec.europa.eu/regional_policy/sources/good_practices/GP_fiche_14.pdf

Germany’s 2016 Healthcare Sector anti-Corruption Law https://united-kingdom.taylorwessing.com/synapse/ti-new-anti-bribery-law-german-healthcare-sector.html

Gupta, S., Davoodi, H., and Tiongron, E. (2000) “Corruption and the Provision of Health Care and Education Services” IMF Working Paper 00/116, Appendix Table 9 p.27 http://www.imf.org/external/pubs/ft/wp/2000/wp00116.pdf

ENDNOTES:

[1] Coalition Against Insurance Fraud http://www.insurancefraud.org/statistics.htm

[2] https://united-kingdom.taylorwessing.com/synapse/ti-new-anti-bribery-law-german-healthcare-sector.html

[3] http://ec.europa.eu/regional_policy/sources/good_practices/GP_fiche_14.pdf

The Pharmaceuticals & Healthcare Programme is an international programme of Transparency International, based in the London office of Transparency International UK.

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