Operating Principles

1. Background

To achieve equitable delivery of health care services, access to affordable quality medicines and medical supplies is required. Access to quality medicines and health supplies can be facilitated if the selection process takes into consideration factors of quality, efficacy and cost, if transparent price information is available, if procurement mechanisms promote competition, and if planning systems ensure sustainable delivery.

To assist Member States in the acquisition of quality essential public health supplies at affordable prices, the Director of the Pan American Health Organization (PAHO) established the Regional Revolving Fund for Strategic Public Health Supplies (the Strategic Fund) during the 42nd Directing Council of the Pan American Health Organization, Washington DC, 25th - 29th September 2000.

The Strategic Fund aims to build capacity in drug supply management and procurement programming and planning at the national level. One-third of PAHO Member States have signed agreements for participation in the Strategic Fund, and even if the use of the Fund as a procurement mechanism has been limited to a few countries to date, the potential of the fund as a regional supply mechanism for priority public health commodities is recognized within the context of PAHO support to Global Fund beneficiaries.

As a procurement mechanism, the Strategic Fund allows participating members to utilize a common fund for payment of authorized purchases of essential public health commodities. Members make reimbursement to the fund for the cost of each purchase within a specified period of time. The Fund is capitalized through the allocation of a portion of the 3% procurement service charge to the Fund's capital account. As countries purchase through the Fund, the purchasing power of the Fund will increase resulting in lower product prices for participating countries. As at the end of 2005, countries participating in the fund have used the mechanism to purchase $35 million of essential public health supplies.

In September 2004, the 45th Directing Council of PAHO adopted a resolution to promote access to medicines and public health supplies in the Region. As a key element of the strategy Member States endorsed the proposal to strengthen regional procurement mechanisms, including the PAHO Strategic Fund. The Directing Council noted that 'the development of the Fund will strengthen capacity in procurement, programming and planning at the country level, lead to economies of scale through the consolidation of requirements, and promote continuity in supply through the development of the cyclical procurement system'.

This document has been developed to present the basic framework of the Strategic Fund to PAHO Member States. It has been elaborated based on the Model Agreement between Member States and the Pan American Health Organization for the participation of a Member State in the Regional Revolving Fund for Strategic Public Health Supplies, and Operating Procedures for the Regional Revolving Fund for Strategic Public Health Supplies. It aims to:

• present Strategic Fund objectives
• outline the scope of PAHO technical cooperation through the Fund
• explain how PAHO Member States and Global Fund Principal Recipients in the Region may participate
• present the list of Strategic Public Health Supplies that can be purchased by participants
• detail the Strategic Fund product quality assurance system in procurement
• present the management structure for the Strategic Fund as well as the mechanism which will guide its future development.

2. Objectives

The Strategic Fund builds on the principle of 'Pan-Americanism' where countries in the Americas address together common issues, and provide support to one another, in this case, in procurement and supply management of quality essential public health products. The Fund provides a means of ensuring the constant flow of pharmaceuticals and supplies at reduced cost to priority public health programs through a procurement process that links demand forecasting, procurement and supply.

The Fund's objectives are:

• to facilitate the acquisition of strategic public health supplies by PAHO member states at reduced cost by taking advantage of the potential savings offered by economies of scale;
• to further the continuous availability of public health supplies within PAHO Member States;
• to encourage member states to improve planning capabilities and use of public health supplies;
• to strengthen member states' public health programs and the application of pertinent PAHO/WHO normative mandates.

3. The Contribution of the Strategic Fund to PAHO Technical Cooperation

PAHO technical programs have recognized the importance of promoting the continuous availability and affordability of key medical products to achieve reductions in disease mortality and morbidity within PAHO Member States. This work is not new to PAHO but has been developed and integrated within the technical work program for some time (Box 1).

The Strategic Fund aims to build on past achievements and ongoing efforts to improve access to Strategic Public Health Products. It aims to provide added value to participating countries in three important ways, namely by:

• Focusing technical support to countries in procurement planning, distribution, and product forecasting.
• Ensuring the supply of quality product through the application of quality assurance norms in pharmaceutical procurement and quality control
• Facilitating communication and coordination between suppliers and participating countries to improve product availability and affordability
• Participation in the Strategic Fund facilitates the delivery of technical cooperation through PAHO and collaborating partners to National Authorities and/or Global Fund Principal Recipients, in order to strengthen national capacity in procurement and supply management, as well as in the application of norms in procurement quality assurance (Box 2).

In addition, the Fund is used by countries as a reference for product pricing. It facilitates the acquisition of stocks in cases of emergency, and improves coordination between PAHO Member States and global procurement initiatives such as the Global Drug Facility, The Green Light Committee, The Aids Medicines and Diagnostics Services (AMDS), and The Malaria Medicines Service (MMS). By using the Strategic Fund participating Member States are expected to achieve cost savings, and benefit from available Fund capital to purchase product in advance of payment. The Strategic Fund will strengthen administrative and managerial capacity of program managers in pharmaceutical supply management. It stimulates the acquisition of essential public health supplies at the national level as it heightens awareness in important areas of commodity planning and management.

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Essential Medicines - Pan American Network for the Drug Regulatory Harmonization (PANDRH) - Pharmaceutical Education - Pharmaceutical Forum of the Americas (FFA) - Access to Medicines - Laboratories