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«I instruct the Government to develop a new administrative reform to increase the effectiveness and responsibility of government bodies. Particular attention should be paid to improving management efficiency in the quasi-public sector».
K.K.Tokayev
In modern development conditions, issues of increasing efficiency for any economic entity are relevant. This aspect also seems important for the public sector of the economy, which acts as the main regulator of the entire system of the national economy and the main producer of public goods.
The development of the human resource management system of the state apparatus is one of the areas of administrative reform in Kazakhstan. The main goal is to ensure a quick and high-quality solution to the daily pressing problems of the population on the ground, as well as a high level of development of the country’s regions and economic sectors. The effectiveness of transformations in all spheres of public life directly depends on the effectiveness of the state apparatus.
Particular attention should be paid to improving management efficiency in the quasi-public sector. It is necessary to clearly delineate the functionality, tasks and criteria of the quasi-public sector, improve financial discipline, reduce the state's share in the economy, increase the efficiency of monitoring and evaluation, and strengthen corporate governance.
SK-Pharmaceuticals belongs to the quasi-public sector, being a single operator for the purchase and storage of medicines for the population within the framework of the guaranteed volume of medical care and compulsory social health insurance. Today, The Unified distributor is an organization subordinate to the Ministry of Health of the Republic of Kazakhstan with 100% state participation.
It should be noted that the single distributor system was created with the aim of providing medicines to the population, increasing the sustainability and competitiveness of the pharmaceutical industry in Kazakhstan and developing the pharmaceutical industry by consolidating public procurement in accordance with the legislation of the country.
The unified distribution system has proven its effectiveness in matters of drug supply to the population, its uninterruptedness and expediency. Every year processes are automated and new technologies are introduced.
SK-PHARMACEUTICALS EFFICIENCY PROGRAM
In pursuance of the decree of the Head of State “On measures to improve the efficiency of work to attr act investments in the country’s economy,” a working group was approved by order of the Chairman of the management Board to design and develop proposals within the framework of the SK-Pharmaceuticals Efficiency Program.
The efficiency program consists of two stages. The first is the Reboot Program, carried out in the period 2020-2023.
The SK-Pharmaceuticals reboot is a dynamic and continuous process of improvement. Creating conditions for improvement that ensured stable work on improving quality and allowed us to flexibly respond to changing market demands and be a patient-oriented company.
The main objectives of the Reboot Program are to ensure dynamic acceleration of tools for achieving the company's strategic goals and to demonstrate operational flexibility in emergency situations.
The reboot program covered the following areas:
One of the innovations is a new algorithm for the delivery of medicines, which made it possible to increase the number of scheduled flights by 1.7 times, reduce delivery times and ensure the efficient operation of the entire medicine supply chain.
The implementation of the Reboot Program ensured preparedness for a possible new wave of coronavirus infection, increased efficiency and efficiency of The Unified distributor, transparency and openness of the company's activities.
And the second stage is the Efficiency Program. At the Government meeting, the Head of State noted the end of formalism and bureaucratic red tape. “We must work without waiting for instructions from above, complaints from citizens or a worsening situation. We need to show initiative and independence” the President said.
Thus, the key goals of the Efficiency Program were to improve procurement, reduce costs, ensure maximum drug safety and prevent bureaucracy. SK-Pharmaceuticals is expanding its horizons, increasing the scope of development areas, taking into account suggestions from stakeholders, global experience and the current state of the pharmaceutical market both in the country and abroad.
The Efficiency Program has the following objectives::
Below we will dwell in more detail on each task within the framework of the Efficiency Program.
Improvement of the procurement of medicines and medical equipment
As part of The Unified distributor's Efficiency Program, proposals have been developed to improve the procurement of medicines. First of all, it is necessary to improve the quality of determining the procurement method. This requires strengthening the responsibility of the national center for the effectiveness of medicines for the quality of the information provided from the state register of medicines and an analysis of unpurchased items for previous years. As a result, this will help prevent complaints from manufacturers and distributors regarding incorrect determination of the procurement method and prevent disruption of the uninterrupted supply of medicines.
A number of proposals to improve the drug procurement system also include increasing the performance discipline of suppliers and the quality of concluding supply contracts, automation in terms of the provision by the supplier of reports on the execution of the schedule for the implementation of an investment project of a long-term agreement through the portal of a unified pharmaceutical information system or a web procurement portal and the automatic ability to maintain an electronic List of Medicines under long-term contracts with tracking capabilities.
The effects of the implementation of such proposals will be the prevention of the risk of under-delivery of goods, the risk of termination of contracts, the elimination of the human factor when forming a contract in a unified pharmaceutical information system, timely adoption of measures in the event of a violation by the supplier of the terms of a long-term contract and the consolidation of data in summary information based on the data received in semi-annual reports.
In addition, when purchasing medicines, it is proposed to automate the review of applications from potential suppliers by a commission and create an electronic store. This will reduce the time it takes for commission members to review applications and eliminate human errors and corruption factors when considering applications. As for the electronic store, this will facilitate the selection of a supplier without undergoing selection procedures and will provide the opportunity to select a drug by trade name, manufacturer, country of origin and quickly conclude an agreement.
Regarding the purchase of medical equipment, it seems appropriate to introduce service maintenance for medical equipment. In this direction, it is necessary to automate the control of service maintenance, improve the medical equipment accounting system and introduce proposals for the introduction of accreditation of service services. As a result, the operating time of the equipment will increase and, most importantly, the efficiency and quality of medical services will increase.
Improvement of logistics
Today, logistics is trying to adapt to constantly changing conditions and emerging problems that require quick response and solutions. The Efficiency Program includes proposals to improve logistics.
The first is the improvement of “Operational Activities” which requires optimization of routes, taking into account the opening of new roads in the country for transporting goods to medical organizations. This will reduce transportation costs and ensure timely shipment and movement.
An important area is the improvement of regulatory legal acts. It is proposed to create a department (working group) within the structure of the Logistics and Warehouse Infrastructure Department to develop proposals for improving legislation in the field of logistics, regarding the activities of The Unified distributor.
Among the proposals for improving logistics are the development of the material and technical base and the improvement of logistics in terms of cargo tracking. To solve problems, it is necessary to provide the Logistics and Warehouse Infrastructure Department with an interactive board for monitoring the movements of vehicles transporting goods of The Unified distributor. In addition, track the drug using the consignment note on a website integrated with cargo tracking systems.
The effects of the above will be the proper fulfillment of obligations by providers of storage and transportation services for medicines and medical products, as well as the receipt of prompt and reliable information in real time.
Attracting of domestic and foreign investments
At an extended meeting of the Government, the Head of State noted the need to significantly increase the influx of external and internal investments. Attracting investments is one of the priority areas in the activities of The Unified distributor.
The Unified distributor is systematically working to attract BigPharma companies for projects for the production of innovative drugs with further export to the countries of the EAEU and Central Asia. To date there have already been positive results in this direction. For example, concluding long-term agreements on contract manufacturing with pharmaceutical giants Pfizer and Roche.
The Efficiency Program is looking at further steps to improve the way we work with BigPharma and vendors. One of them is the localization of the production of original innovative drugs. In this case, meetings and webinars with embassies, negotiations with foreign and domestic investors, conclusion of Memorandums and long-term agreements with contract manufacturing customers are needed.
The result of this work will be the development of the clinical research market, R&D centers in local pharmaceutical clusters, technology transfer, and localization of innovative products in Kazakhstan.
Another proposal is to provide exclusive preferences for investors who have entered into an agreement on investment (AOI). As a solution, amendments and additions to the Order №110 are being considered regarding the conclusion of long-term contracts with domestic producers for a period of no more than 10 years without competitive procedures in the presence of AOI.
The main effect is the development of educational programs for medical and pharmaceutical workers in order to increase the country's human resources potential.
Support for domestic production
Supporting domestic developments and developing the domestic pharmaceutical industry is a key activity of The Unified distributor. The support measure in the pharmaceutical industry is provided in the form of concluding long-term contracts.
As part of the Efficiency Program, a proposal was made to conduct an audit and diagnostic of the current portfolio of long-term contracts. An analysis of all positions occupied under long-term contracts by the National Scientific Research Center for Healthcare is needed to determine the coverage of domestic production needs for clinical protocols. As a result, the level of localization of production in Kazakhstan will increase.
Along with this, a forecast for the development of the pharmaceutical market is provided. This requires the development of a strategy for the development of the pharmaceutical market in Kazakhstan based on 5-year forecasts for the consumption of medicines and medical products. This will enable the creation of a value chain in the pharmaceutical industry.
Another proposal was to change approaches to the formation of a range of medications. A tool in achieving this goal will be the development and approval of a range of medicines for concluding long-term contracts with domestic manufacturers at the level of the National Scientific Research Center for Healthcare, taking into account the medium-term forecast of morbidity in the Republic of Kazakhstan and the consumption of medicines. Or, by analogy with the Kazakhstan National Drug Formulary, approve a Unified List of Strategically Important Medical Products with detailed technical characteristics to further confirm the feasibility of having a position in the draft nomenclature. The result is an improvement in the quality of domestic products and an expansion of their range.
Ensurement of financial sustainability
Financial stability can be considered one of the most important indicators of the stability of an organization. For The Unified distributor, financial sustainability is the ability of an organization to maintain smooth operations.
To ensure the absence of a cash gap, financial stability, increase the range and the possibility of creating your own infrastructure for the storage and transportation of medicines, a number of proposals are provided within the framework of the Efficiency Program.
This is ensuring solvency, timely payment of the social health insurance fund, generalization of control and analytical information for making management decisions and reducing unproductive costs.
Particular attention should be paid to the control of accounts receivable, which is an important financial component of The Unified distributor. All this together affects the timely purchase and supply of medicines throughout the country. Since The Unified distributor makes purchases in advance, that is, drugs for the next year are purchased in the current year. Today, the receivables of medical organizations amount to 12.5 billion tenge.
To accomplish the above tasks, it is necessary to apply such tools as returning the function of the social health insurance fund in terms of monitoring the actual expenses of medical organizations, obtaining benefits for exemption in the payment of dividends for 2023, the requirement to provide the social health insurance fund with an opinion on monitoring the quality and volume of medical services, monthly analysis of receivables, introduction of a register of “problem debtors” and control over this category.
Improvement of legal regulations
Today, issues of changing the regulatory framework to support the development of the pharmaceutical industry are a priority. The Unified distributor has carried out work to introduce changes and additions to regulations in the field of medicines circulation.
As part of the Efficiency Program, The Unified distributor proposes to develop a number of proposals in various directions. First of all, we will talk about an investment agreement, namely the introduction into the Procurement Rules of a mechanism for concluding investment agreements for the localization of the production of medical equipment on the territory of Kazakhstan. This will lead to an increase in the number of investment agreements concluded.
The next question is long-term contracts. It is worth considering the possibility of introducing a differentiated method for determining the cost of purchasing medical equipment depending on the volume of purchases for the year, which will ultimately increase the level of provision of medical services.
Long-term contracts with domestic producers will not be left without attention. The introduction of a lower threshold for the cost of medical equipment (20 million tenge) for concluding long-term contracts is being considered. The final effect will be an increase in the share and models of domestically produced medical equipment.
In addition, it is proposed to create an advisory body for the consideration of proposals for regulatory legal acts as an advisory body with approval of the Regulations and the procedure for consideration, monthly analysis of regulatory legal acts and employee training. Along with this, there are proposals to make changes and additions to the regulations governing the activities of SK-Pharmaceuticals (Order of the Ministry of Health of the Republic of Kazakhstan No. 110):
1) review the mechanism for purchasing medicines and medical devices;
2) include representatives of the Ministry of Health of the Republic of Kazakhstan in the competitive procurement commission;
3) transfer the supply mechanism within the framework of outpatient drug provision to the hospital principle;
4) the right of SK-Pharmaceuticals to independently reduce the annual needs of medical organizations, in case of procurement during the financial year.
Improvement of pricing for medicines
As part of the Efficiency Program, it is necessary to develop changes to regulatory legal acts on the issue of pricing for generic drugs and biosimilars. This will lead to an effective reduction in the cost of purchasing medicines and medical products, as well as budget savings.
To increase the efficiency of the auction, it is proposed to declare the tender invalid if there are no steps to reduce the price from the allocated amount. And to ensure transparency, it is advisable to increase the minimum possible step in the auction from 0.5% to 1%.
To achieve maximum cost savings, it is necessary to fully automate the procurement procedures for medical equipment on the web portal: tender, conclusion of contracts, warranty coverage, acceptance certificate for the transfer of medical equipment.
Improvement of the quality and safety of medicines
Drugs that have passed state registration are subject to purchase through The Unified distributor. The country has a whole system of regulatory mechanisms in place to ensure that Kazakhstanis do not encounter low-quality or counterfeit drugs.
Issues of the quality of medicines circulating on the market of Kazakhstan fall within the competence of the Committee for Medical and Pharmaceutical Control of the Ministry of Health of the Republic of Kazakhstan, which carries out the registration procedure for all medicines and medical products produced in the country, as well as those imported into its territory. The registration procedure is preceded by a thorough examination, which consists of several stages. The National Center for Expertise of Medicines and Medical Devices carries out the examination and issuance of a conclusion.
To improve the quality and safety of medicines, it is proposed to carry out reliability checks of counterparties, which requires the development of internal regulatory documents. This will ensure the organization’s safety from additional financial expenses and losses.
As part of the Efficiency Program, there is a proposal to introduce a “One-time import” instrument. To achieve the goal, it is necessary to improve the regulatory legal acts on the responsibility of manufacturers for the quality of the drug when obtaining permission for a “one-time import” and to conduct an examination of samples by the National Center for the Examination of Medicines, Medical Devices and Medical Equipment.
Along with this, the development of a tool for collecting claims from medical organizations on the portal of a unified pharmaceutical information system and a revision of the approaches to issuing ST-KZ certificates are being considered. The key effect will be to improve the quality of products and expand their range, including domestic ones.
EFFECTS
«The effectiveness of the management system will be measured by the end result, not by the progress of the work. Effective decisions will be made in the interests of the country and the quality of services provided to the population will improve».
K.K.Tokayev
The President noted that the effectiveness of the management system should be measured by the end result. To date, The Unified distributor has achieved important and significant results in the field of drug supply and the pharmaceutical industry as a whole. First of all, success lies behind an integrated and detailed approach to work by company employees, who have their own responsible and important task. It is this well-established chain of interaction among employees that allows us to reach new heights.
Speaking about the latest key results, it is worth noting that in 2023, the historic signing of long-term contracts with global players BigPharma - Roche and Pfizer for the contract production of original innovative drugs took place. Thus, an agreement was reached on the production of the 20-valent Pfizer pneumococcal vaccine and Roche biotechnological drugs for the treatment of cancer. Cooperation with pharmaceutical giants will bring to Kazakhstan not only new technologies, but also a whole philosophy of health.
Another innovation of the year was the initiative to conduct group procurement, which was consolidated in the form of a Memorandum of Cooperation and Understanding between The Unified distributor and the Kyrgyzpharmacy State Enterprise under the Ministry of Health of the Kyrgyz Republic. It is planned to carry out the first pilot purchases for the two countries this year.
Along with this, Kazakhstan entered into agreements with Johnson & Johnson LLC, AstraZeneca, Bayer KAZ LLP for the development of contract manufacturing of medicines and technology transfer in the field of clinical trials. Also, an agreement was reached with the BIOCAD company, which is interested in investing in new pharmaceutical production in Kazakhstan, and the domestic enterprise Santo on developing the potential of the cluster and the research sector.
To further develop contract manufacturing and attract investments from global players in Kazakhstan, from the beginning of 2024, The Unified distributor entered into a Memorandum with the Astana International Financial Center (AIFC).
Cooperation with the AIFC opens up new opportunities for development, providing foreign investors with a reliable legal framework, an independent judicial system, developed financial infrastructure, innovation and expertise.
The implementation of the Efficiency Program will have a positive impact on the country’s pharmaceutical industry and will allow us to conquer even more peaks in the country’s drug supply. By attracting global players and external investments to the local market, Kazakhstan will soon become an important player in the global pharmaceutical industry.
Using all available resources, it is possible to significantly accelerate the development of the clinical research market, R&D centers in local pharmaceutical clusters, technology transfer and localization of innovative products in Kazakhstan.
All areas of improvement within the SK-Pharmaceuticals Performance Program play a significant role in achieving big wins. SK-Pharmaceuticals aims to continue to work comprehensively and systematically, adhering to a patient-centric approach. The end result is the development of the healthcare system and improving the quality of life of patients.
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