Essential medicine shortages, procurement process and supplier response: A normative study across Indian states

Efficient public-procurement systems are critical for ensuring Access to Medicines (ATM) and enabling universal healthcare delivery. This is especially true of India where public healthcare caters to the underprivileged population who have limited access to medicines. However, essential medicine shortage in the Indian public-healthcare system is significant and is exacerbated by inefficiencies in the procurement system. Healthcare policy makers have to constantly contend with delays and non-fulfillment of medicine orders leading to shortages. Pharmaceutical companies supplying orders argue that the current system is not business-viable or fair. To explore these issues in-depth, we distill insights from structured interviews with a Policy Maker and interactions with the pharmaceutical industry to identify supply side issues which lead to medicine shortages. We build a normative model and utilize public medicine procurement data to study how pharmaceutical supplier response and order fulfillment is impacted by orders from multiple Indian states with different procurement conditions. We then employ standard supply chain theory to propose solutions to mitigate some of these issues. We find that the current system can be significantly improved by increased capacity allocation at suppliers for state orders, staggered ordering at the state level, stricter but gradual implementation of penalties and blacklisting and sourcing from suppliers located closer to the state.