Product Distribution & Storage

During the distribution of products from manufacturers to storage facilities the primary risk is the theft and diversion of products. As many individuals are involved in this process there are numerous opportunities for theft.

The loss of products increases the cost of healthcare for payers. If a significant number of medicines are stolen at medical stores this can lead to insufficient medicines reaching health facilities, leading to a medicine stock-out with no medicines available. As patients are unable to access the medicines they require they can either seek the medicine privately, probably at a higher cost, or they can simply forgo treatment.

To prevent theft and diversion, distribution systems must be well designed with adequate resources for operation. Secure containers in storage facilities, tracked deliveries and centralised record systems can all reduce loss. Similarly, improving working conditions and wages for individuals involved in the distribution and storage process may lessen the danger of theft and diversion.

Weak distribution and storage systems increase the risk of falsified and substandard products entering the health system. The proliferation of these products is also linked to ineffective regulatory processes for product approval and controlling manufacturing quality. Despite falsified and substandard medicines being an issue for all countries, the effects are disproportionately felt in low-and middle-income countries that lack the resources to identify them and the channels used for their distribution.

A challenge for regulatory agencies is that falsified and substandard products are often produced in other countries and they are therefore dependent on the actions of other regulatory agencies. Furthermore, as patients increasingly turn to the internet to purchase products, regulatory authorities face new challenges in tackling the flow of these potentially dangerous medicines. A number of technological measures can be applied to product packaging by regulatory authorities including specialised barcodes, holograms or scratch panels, to better allow users to identify genuine products.

Unauthorised re-packaged, non-sterile and expired products may also enter the health system at this stage. The more products move back and forth between wholesalers, distributors and providers, the greater the chance that products can be re-packaged and sold as new.

A Colombian doctor and health care manager told me that corruption was systemic in his country and that it involved criminal cartels. He described schemes involving drugs in public hospitals that were about to expire and should have been destroyed. Instead, shell companies would purchase these drugs at a huge discount and then take them to a warehouse, relabel them with expiration dates for a year later, and then sell them back to the public sector.

— William Savedoff - Senior Fellow, Center for Global Development

Corruption Types

  • Theft and diversion of products
    Officials, healthcare providers or other individuals and groups steal medicines, medical devices and supplies during the distribution and storage process.
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    Products can be stolen at any point in the distribution and storage process after being dispatched by a manufacturer. For instance, drivers of delivery trucks or custom officials at ports and airports may steal cartons of medicines. This corruption type is more common when security systems and record keeping are poor.

    Products may be stolen for personal use, be sold on to private pharmacies, or if stolen by healthcare workers may be used in their own private practices. Drugs are vulnerable to theft as they can be sold for a higher price privately.

  • Infiltration of falsified and substandard products
    Officials, healthcare providers or other individuals and groups introduce fake and poor quality medicines and medical devices into the health system.
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    Falsified and substandard products are hard to differentiate from real products as they are made to look identical to a legitimate product. They often will be ineffective as they may contain the wrong active ingredient or the incorrect amount of the correct active ingredient. This could potentially lead to serious public health threats such as anti-microbial resistance. In some case they may even cause deadly reactions in patients, due to fatal levels of the wrong active ingredient or the inclusion of toxic chemicals.

    Similar to the theft and diversion of medicines and medical devices, the infiltration of falsified and substandard products can involve a wide range of individuals and groups in the health system. For example, customs agents at ports may receive bribes to turn a blind eye to their import or export.

  • Re-packaged non-sterile and expired products
    Officials, healthcare providers or other individuals or groups re-package products in order to sell them as new.
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    National and regional officials set regulations for repackaging products. However, individuals such as medicine wholesalers may abuse these regulations and re-package expired medicines in order to offset their losses. Alternatively, pharmacies may pay health facilities to provide expired drugs that are then repackaged and sold as new, receiving payment for dispensing them directly from a patient or from the payer.

Case Study