Centralized Procurement of Drugs Saves Serbia 25 Million Euros

This year, the Serbian Health Insurance Fund (RFZO) will spend 114,000 Euros in 2014 on acyclovir, a drug which cures viruses. In 2013, the price tag for this exact same quantity of acyclovir was 190,000 Euros.

This 40% reduction in spending on acyclovir represents just one small portion of the 25 million Euros the Serbian health care system has saved following the introduction of a new, centralized procurement method.  

Until recently, Serbia had a system wherein each hospital, primary health center, and pharmacy all procured drugs individually – choosing suppliers and brands for products which addressed particular diseases.  Rather than competing on price, suppliers instead competed on the amount of the “rebate” they would offer to a hospital or pharmacy. These rebates were often as much as one-third of the total purchase price.

Slavica Djukic-Dejanovic, the charismatic Serbian Minister of Health, decided to change this approach after she looked at analysis performed during the preparation of the Second Serbia Health Project, financed by the World Bank.

“Two issues dominated the agenda for procuring drugs: the perception of corruption was the biggest, and there were huge arrears in payments,” says the minister. “We realized we had to come up with savings. The analysis showed we could save with a centralized procurement method, and I decided to go for it.”

It wasn’t an easy turnaround, as the Minister had to face a number of vested interests across Serbian society. Nevertheless, as a true champion, she managed to get the whole government on board for the change.

The new procurement system, which focuses on lowest price instead of rebates, is now being piloted in 2014 and will only cover about one-third of the drugs used in the Serbian health care system, starting with drugs being used in hospitals and primary health care centers.

“When the first tender went out, there were 22 bidders and 15 of them won, so no supplier has a monopoly,” says Marija Mitic, RFZO Executive Director for public procurement. “The prices achieved were, on average, 27% lower for the same drugs. We are very proud that there were no complaints from any of the bidders.” 

Momcilo Babic, the Director of RFZO, points out that this is just the beginning. Through the implementation of the new project financed by the World Bank, centralized procurement will be rolled out to all public pharmacies. Mr. Babic believes this will bring additional, substantial savings.

“The success of the first tender gives us confidence we can do more. We can save not only by rolling out centralized procurement throughout the whole system, but also by making multi-year deals with suppliers. 260 million Euros is two-thirds of RFZO’s budget for prescription drugs in pharmacies. If we saved 25 million Euros on one-third of the budget for drugs in hospitals and primary health centers, I hope we can save three times as much when we apply the centralized procurement method for purchasing drugs for pharmacies.”

Minister Djukic-Dejanovic believes reforms that bring quality, efficiency, and transparency can only improve the Serbian health care system.     

“We are satisfied. This is a good outcome for the state. The winner is the Serbian health care system. More money is left for the beneficiaries of that system,” says Slavica Djukic-Dejanovic.