PRESS RELEASE issued on 22 November 2004
The NAO Report - Performance Audit – Inventory Strategy and Distribution of Pharmaceutical Products – Health Division – was laid on the Table of the House of Representatives by the Honourable Speaker in Terms of the Auditor General and the National Audit Office Act.
The report, which was developed by the Value for Money Section, concentrates on two issues which affect the purchase and distribution of medicines in the public health services, namely:
§ The adequacy and cost of the inventory strategy applied by the Government Pharmaceutical Services (GPS).
§ The robustness and reliability of stock management systems at government pharmacies, managed by the Institutional Health Department, the Primary Health Care Department and the Ministry for Gozo.
GPS, as the department responsible for procurement of pharmaceuticals in the Health Division, owns an inventory model to ensure stock replenishment and NAO carried out an exercise on a frequently-transacted item to assess this model in terms of stockouts and holding costs. The assessment indicates that, at some stage, GPS abandoned its model and adopted a strategy of responding to problems only after these arise. GPS is not satisfied with the overall results as the strategy proved to be erratic and is trying to develop a more economic inventory model.
NAO’s report recommends appropriate guidelines for the adoption of a more economic inventory strategy. NAO’s advice to study stock behaviour in detail, enabling the identification of an optimal inventory strategy, has already been taken up by GPS. This exercise will be lengthy in nature and requires the early implementation of outstanding strategic decisions effecting GPS operations.
The second issue of the report addresses the effectiveness of stock management systems at government pharmacies. During fieldwork in 2003 in government pharmacies, NAO identified weaknesses and operational risks concerning stock management and distribution of pharmaceuticals. These included an organisational structure which is weak on accountability, responsibility and reporting relationships, the prevalence of inadequate stock control and an unsatisfactory audit trail of documents. Critical risks arising out of these weaknesses include unacceptable levels of obsolescence and pilferage. These risks could not be assessed due to lack of stock movement information.
Over the past year, some of the pharmacies, have introduced limited changes with the aim of enhancing stock control and advancing good pharmacy practice. However, there are a number of areas where more needs to be done to ensure that the pharmacies have adequate control and reliable stock management systems.
The report identifies the following measures which, if applied, could contribute to increased economy, efficiency and effectiveness at government pharmacies:
1. The enforcement of policies, procedures and controls in all pharmacies,
2. The strengthening of management structures and the determination of clear lines of accountability and responsibility,
3. The provision of necessary resources to government pharmacies to ensure effective stock management,
4. The development of an internal function to monitor and audit pharmacy activities.