Centralised procurement as a powerful health idea

Source: This post has been created based on the article “Centralised procurement as a powerful health idea” published in The Hindu on 18^th October 2023.

UPSC Syllabus Topic: GS Paper 2 Social Justice — Issues relating to development and management of Social Sector/Services relating to Health.

News: This article discusses the advantages of centralized or pooled procurement of drugs by the central government and how it can revolutionize healthcare in India.

What are the advantages of centralized procurement?

1) Price efficiency: Corporate hospital chains, for years, have conducted direct negotiations with pharmaceutical companies, and availed significant discounts.

2) Quality concerns: In addition to cost savings, buyers can ensure better quality by having the supplies tested independently rather than having to rely on the drug regulator to ensure quality.

3) Prevent stockouts (medicines ‘out-of-stock’).

4) Cost-savings for patients: Hospitals can benefit from better bargaining power if they buy in bulk and can then pass on these cost savings to patients.

However, the central government chooses to ignore these merits of pooled procurement despite being aware of them.

Centralized procurement for beneficiaries under the CGHS (Central Government Health Scheme), ESI (Employees’ State Insurance Scheme) and PMJAY is not yet a reality.

What should the government do in this regard?

The government can follow the centralized procurement model for most of the drugs, like it follows for procuring male contraceptives.

Pharma PSUs can provide benchmark prices and also ensure that the government is not forced to buy from private manufacturers, given that there is competition from PSUs which can supply at a competitive price.

What should be the way forward?

Centralized procurement has the power and the potential to reduce costs, ensure better deployment of funds in other areas related to health care, and ensure availability of life-saving drugs in this country.

It is an idea that India should implement at scale, and as soon as possible.