We celebrate the momentous occasion of the
75th World Health Day in the shadow of the recent pandemic and a world of supply chain disruptions. In these uncertain times, to actualise this year’s theme of
“Health for All” may require another look at the oft-discussed idea of a national medical stockpile, using a new model of dynamic stockpiling.
Need for a stockpiling mechanism
The COVID-19 situation in the first two waves laid bare issues such as
inadequate production of PPE in India and the
reliance on imported Active Pharmaceutical Ingredients (APIs) and raw materials. By June 2021, in anticipation of the third wave,
Central and State governments had stockpiled critical medical items while also working with manufacturers to increase the supply of APIs and finished drugs. However, these measures were undertaken only for the short term, and there is no information about whether any of these stockpiles continue to exist for another health emergency. While home-shoring is an attractive option, it is impossible to rebase all crucial pharmaceutical production in India (ranging from APIs to medical technology to vaccines to finished drugs), requiring a national stockpile to tide over exigencies.
The COVID-19 situation in the first two waves laid bare issues such as inadequate production of PPE in India and the reliance on imported Active Pharmaceutical Ingredients (APIs) and raw materials.
A national stockpile for the long term is a crucial component of creating a more robust public health emergency response because it helps to
smoothen the early days of a pandemic/epidemic outbreak when
limited supplies are being snapped up while producers are still in the process of retooling to increase production.
Classes of stockpile holders
Broadly, four main categories of medical stockpiles exist: Manufacturer-level stockpiles, user-level stockpiles, state-level stockpiles, and national-level stockpiles.
Manufacturer-Level Stockpiles
These are not ideal because while pharmaceutical producers (including medicines, vaccines, and equipments) can be made to keep a mandated buffer of raw materials to guard against supply-chain disruption in the national interest, this would not be ideal for finished products. Doing so would lead to increased costs, thereby, harming their competitiveness and making it unsustainable over the medium to long term. Relatedly, i
n 2017, the US Strategic National Stockpile scrapped all of its vendor-managed inventory where it paid vendors to stockpile products while allowing them to sell it before expiry, due to concerns over cost-effectiveness and inability to ensure adequate preparedness and deployment.
The issue arises with the colossal regulatory burden that this would impose.
User/Hospital-Level Stockpiles
These appear to be an easy solution because the burden of stockpiling goes directly to the end-user that is likely to face shortages in an early-outbreak situation. However, the issue arises with the colossal regulatory burden that this would impose. With India having
~69,000 (estimated) public and private hospitals in 2019, ensuring that each of these hospitals maintained appropriate, serviceable/usable, and non-expired buffer stock would become a colossal task for the regulators.
There would also be increased costs borne by hospitals/labs in finding warehousing space, meeting variable storage conditions for items. While literature on this is rare, a
calculation by a 195-bed cancer hospital in Lahore, Pakistan estimated that the costs of stockpiling oxygen, PPE, medications and pathologic reagents would amount to US$ 200,000 in fixed costs and US$ 430 in monthly costs. With reports of many
private hospitals in India facing financial distress combined with the regulatory burden, mandating hospital-level stockpiles of basic, “fast-moving” equipment like N95 masks, syringes, etc. may only be possible for larger well-funded hospitals.
State-level stockpiles
As
“public health and sanitation” is on the State List of Schedule Seven of the Indian Constitution, states should ideally take the lead in setting up appropriate stockpiles. In a country as vast and climatically and economically diverse as India, having State-level stockpiles will allow meeting local public health requirements. For example, stockpiling cholera vaccines will be much more valuable in
West Bengal (a state with high cholera incidence) as opposed to
Himachal Pradesh (low cholera incidence). Indeed, according to the
National Disaster Management Plan (NDMP) 2019, states were responsible for “establishing adequate decontamination systems, critical care ICUs, and isolation wards” as well as providing “adequate PPE for all the health workers associated with responding to biological emergencies”.
Stockpiling cholera vaccines will be much more valuable in West Bengal (a state with high cholera incidence) as opposed to Himachal Pradesh (low cholera incidence).
Nevertheless,
as far back as 2008, a report by the National Disaster Relief Force noted that no state-level stockpiles existed for PPEs, drugs, and other key medical items. This situation continues and is unlikely to change drastically due to
poor state finances and huge debts, while political expediency means that investing these limited state funds into a longer-term stockpile is unlikely to be a priority. Moreover, political antipathy and horse trading mean that pushing through such a requirement in
all the states would be a monumental challenge. Even in an ideal situation where all states could be convinced to set up functioning stockpiles, issues with coordinating between states during a national public health emergency mean that it cannot fully replace a national-level stockpile. In fact, the
NDMP 2019, clearly states that in the “Long-Term (T3)” time frame, “
tockpiling of essential medical supplies such as vaccines and antibiotics, etc” falls under “Responsibility Centre”.
National medical stockpiles: The conundrum
National medical stockpiles have been implemented in countries such as the United States (US), the United Kingdom (UK), Canada, Australia, and Finland. Their experience throws up some pertinent problems. The biggest is that these national stockpiles are explicitly designed for the once-in-a-generation event and so the idea is to stockpile items indefinitely until such a situation arrives (or until unusability). Given this, these stockpiles by definition become a low priority for funding in normal times. To counter this, they adopt various strategies including expiry date extension (through stability and quality testing), expired stock return, and stock rotation.
However, this has been ineffective with many reviews demonstrating that such stockpiles face major issues from expired/unusable items that have not been replaced and an inability to keep up with advances in medical equipment, medications, and drugs. Moreover, excessive focus on the risk of an influenza pandemic has led to over-specific stockpiles that are not valuable for a different threat such as COVID-19.
Dynamic stockpiling: A key part of the solution
To ameliorate some of these issues, we could adopt ‘dynamic stockpiling’. In this, the government would fix a particular ‘minimum mandated requirement’ for key items e.g. X percent of annual mask consumption.
Next, it would sign regular, large deals for masks (preferably from domestic manufacturers) to be constantly delivered in tranches with total orders exceeding ‘minimum mandated requirements’ at any one time. With large order sizes, the government could negotiate relevant bulk discounts. As each tranche of masks comes in above the mandated stockpile, the oldest batch would then be sold/auctioned off, domestically or internationally, at market price or even below if feasible. These tranches can be broken up into smaller units for sale. ‘Dynamic stockpiling’ thus creates a churn with multiple benefits.
Each tranche of masks comes in above the mandated stockpile, the oldest batch would then be sold/auctioned off, domestically or internationally, at market price or even below if feasible.
First, this would ensure that the equipment does not expire (as it is constantly sold). With the government clearly indicating when it will resell the equipment, end-users will be able to integrate this with their own purchasing schedule and possibly get a better price than the market.
Second, regular renewal of deals would ensure that the stockpiled items keep up with the market standard as the government would reconsider their requirements periodically. Manufacturers too would push the government on this front to avoid keeping production lines for outdated products running.
Third, with the government receiving bulk discounts on purchases, reselling at or even below market price would allow it to recoup all of the procurement costs. Moreover, depending on the price, it would partially or totally offset storage costs. As a sweetener to bring manufacturers on board, however, a profit-sharing model may need to be worked out for the margin above cost price, which could prevent offsetting storage costs. If the government signs long-term resale agreements with large medical facilities, it would further reduce financial risks. Admittedly, there will always be risks from price volatility although this can be mitigated by appropriate hedging and the recoupment of at least partial cost on the market, even if below the purchase price.
To be clear, an interlocking set of requirements for pharmaceutical companies and medical equipment manufacturers to keep buffers of raw materials, for large hospitals to ensure buffers of items like medical oxygen and masks and for states to stockpile relevant items for their public health contexts would be very important. However, this does not detract from the need for a national medical stockpile, monitored by the central government, that can be disbursed according to the issues varying from epidemics/pandemics to supply chain disruptions. Incorporating dynamic stockpiling will allow the government to circumvent many of the issues faced by other countries and create a more operationally ready, financially sound model for a national medical stockpile.
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