August 31, 2023
Unlocking savings through anti-corruption: insights from pharmaceutical procurement
Reducing the cost of medicines is a crucial step in improving healthcare access and outcomes. The logic is straightforward: savings on pharmaceuticals can be reinvested in more medicines or improved services, leading to a healthier global population. With pharmaceutical expenditure constituting a significant portion of healthcare budgets and playing a pivotal role in shaping health outcomes, improving affordability becomes even more critical.
Given this, our focus as an anti-corruption and transparency organisation naturally turned to the factors influencing these costs. We sought to answer two primary questions: What information is currently available on pharmaceutical procurement prices globally, and does corruption in procurement affect prices? To investigate, we collaborated with the Government Transparency Institute which spearheaded a comprehensive investigation.
Our research journey began with the task of assessing the existing data pool. We sifted through volumes of information on pharmaceutical prices in public contracts, focusing on crucial variables like product type, unit type, price, country, and year of procurement. A deep dive into over a million contracts followed by meticulous standardisation and cleaning resulted in a robust, streamlined database of 130,000 contracts spanning from 2004 to 2022.
This narrowed down our focus to nine countries across three continents that had data of sufficient quality for inclusion. The results have yielded one of the most comprehensive public databases of standardised pharmaceutical procurement, illuminating stark regional price differences, even for common drugs, and offering opportunities for further research into areas like risk mapping for substandard medicines.
A dashboard visualising the data can be found here
The next challenge was to quantify the effect of openness and integrity on unit prices. To tackle this, we developed a ‘corruption risk’ scoring system, assigning scores based on around ten indicators for each contract. Our risk-focused method only provides a glimpse of the intricate web of corruption. More difficult to measure issues such as medicine quality, diversion or even state capture mean that the true cost is almost certainly higher and more complex than we predict. But the approach offers a quasi-objective perspective that circumvents common limitations such as those associated with perception-based methods.
Harnessing statistical methods, we investigated the relationship between unit prices and corruption risk. The data pointed towards an alarming finding—corruption risk was associated with a 34.5% surge in prices. Given the unrealistic prospect of completely eradicating corruption risk, we further examined two more pragmatic scenarios: reducing corruption risk by one-third and two-thirds. These reductions could lead to a potential 14% and 25% decrease in prices respectively, highlighting how even modest reductions in corruption could result in significant savings.
Our research highlights four critical aspects of pharmaceutical procurement. Firstly, we found significant variations in pricing between countries, which present a considerable opportunity for policy intervention. By identifying and replicating the efficiencies of departments that manage to procure standard drugs at lower prices, we can achieve increased savings on a larger scale.
Secondly, our study provides robust data that enables serious conversations about corruption in pharmaceutical procurement. Far from being an abstract concept, we can now assert with empirical evidence that combating corruption and promoting transparency could lead to considerable monetary savings.
Thirdly, transparency is central to these findings. In pharmaceutical procurement, transparency is more than an ethical imperative; it’s a value-for-money proposition. Without transparency, it becomes difficult to identify targets for cost reduction like, as identified in the full report, specific costly practices or highly priced pharmaceuticals. The potential to realise its value is within reach since the necessary information is already being collected—it simply needs to be published.
Finally, the extensive financial impact of corruption in pharmaceutical procurement revealed in our study is noteworthy. Around $4 billion could have been saved just on the contracts in our dataset – a small proportion of all pharmaceutical procurement globally. It represents a substantial monetary drain that could be better invested in improving healthcare services and outcomes, fuelling innovation, or expanding access to essential treatments.
Our study represents a first step in comprehending the financial repercussions of corruption in pharmaceutical procurement. Yet, it also demonstrates the imperative need for policy transformation. In preparation for the World Health Summit in October, next month we will be releasing a policy brief, distilling these complex issues into clear and actionable recommendations. Stay tuned for this critical next step towards greater transparency and reduced corruption in pharmaceutical procurement.
A fact sheet summarising key stats can be found here.
The full report is available on GTI’s website here.
This article was written by our Research Manager, Tom Wright. Tom can be contacted via email@example.com