Background: In India, access to medicine in the public sector is significantly affected by the efficiency of the drug procurement system and allied processes and policies. This study was conducted in two socioeconomically different states: Bihar and Tamil Nadu. Both have a pooled procurement system for drugs but follow different models. In Bihar, the volumes of medicines required are pooled at the state level and rate contracted (an open tender process invites bidders to quote for the lowest rate for the list of medicines), while actual invoicing and payment are done at district level. In Tamil Nadu, medicine quantities are also pooled at state level but payments are also processed at state level upon receipt of laboratory quality-assurance reports on the medicines.
Methods: In this cross-sectional survey, a range of financial and non-financial data related to procurement and distribution of medicine, such as budget documents, annual reports, tender documents, details of orders issued, passbook details and policy and guidelines for procurement were analysed. In addition, a so-called ABC analysis of the procurement data was done to to identify high-value medicines.
Results: It was observed that Tamil Nadu had suppliers for 100% of the drugs on their procurement list at the end of the procurement processes in 2006, 2007 and 2008, whereas Bihar's procurement agency was only able to get suppliers for 56%, 59% and 38% of drugs during the same period. Further, it was observed that Bihar's system was fuelling irrational procurement; for example, fluconazole (antifungal) alone was consuming 23.4% of the state's drug budget and was being procured by around 34% of the districts during 2008-2009. Also, the ratios of procurement prices for Bihar compared with Tamil Nadu were in the range of 1.01 to 22.50. For 50% of the analysed drugs, the price ratio was more than 2, that is, Bihar's procurement system was procuring the same medicines at more than twice the prices paid by Tamil Nadu.
Conclusion: Centralized, automated pooled procurement models like that of Tamil Nadu are key to achieving the best procurement prices and highest possible access to medicines.