President's Emergency Plan For AIDS Relief: Drug Supply Chains Are Stronger, but More Steps Are Needed to Reduce Risks
Published: 2013-04-26T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: PEPFAR, first authorized in 2003, has supported significant advances in HIV/AIDS prevention, treatment, and care in over 30 countries, including directly supporting treatment for about 5.1 million people; however, millions more people still need treatment. PEPFAR has allocated more than half of its funding to care and treatment and has spent over $1.2 billion to purchase ARV drugs. In addition to supplying ARV drugs directly in some countries, PEPFAR also helps partner countries manage their drug supply chains. GAO was asked to review PEPFARsupported ARV drug supply chains. GAO examined (1) actions PEPFAR has taken regarding ARV drug supply chains and (2) partner-country ARV drug supply chain operations. GAO reviewed PEPFAR and the U.S. Agency for International Development (USAID) guidance and supply chain studies; analyzed 16 supply chain evaluations conducted in seven countries and published in 2011 and 2012; interviewed officials from OGAC, USAID, and other agencies; and conducted fieldwork in three countries selected on the basis of program size and other factors.
section_title: What GAO Found
paragraphs: The President's Emergency Plan for AIDS Relief (PEPFAR) has worked with U.S. implementing agencies, international donors, and partner countries to increase the efficiency and reliability of antiretroviral (ARV) drug supply chains. It has done so by improving drug supply planning and procurement as well as incountry distribution of drugs. First, PEPFAR has consolidated supply chains for ARV drug procurement for more than 20 partner countries to enhance efficiency and reduce costs and has begun further consolidation with other U.S. global health programs. Second, PEPFAR has improved coordination among donors by creating an information-sharing network to help detect and resolve supply gaps and other supply chain weaknesses and by developing an emergency drug procurement mechanism. Third, PEPFAR has provided partner countries with technical assistance, such as assessment tools and training, to help them better manage drug supply planning, procurement, and distribution.
Evaluations of partner-country supply chains reflect weaknesses in inventory controls and record keeping, which may increase the risk of drug shortages, waste, and loss. The Department of State's Office of the U.S. Global AIDS Coordinator (OGAC) has issued guidance for PEPFAR emphasizing the importance of effective information management for efficient ARV drug supply chain operations. However, 11 of the 16 supply chain evaluations GAO reviewed cited weaknesses in partner countries' inventory controls; 7 of these 11 evaluations also cited weaknesses in record keeping, including incomplete or inaccurate data on the consumption of ARV drugs. These weaknesses can increase the risks of drug shortages, waste, and loss of inventory. In one country, an evaluation team identified losses valued at about $265,000. Human resource constraints contribute to these weaknesses, and PEPFAR is addressing them through technical assistance and training. However, OGAC does not require PEPFAR interagency teams in each country to develop plans to strengthen inventory controls and record keeping. Nor does OGAC require country teams to track the progress partner countries are making in measuring ARV drug consumption, waste, and loss. Thus, OGAC cannot ascertain the extent of partner-country supply chain weaknesses and take appropriate action to mitigate risks. For PEPFAR and partner countries to continue expanding treatment programs to serve up to 23 million eligible people, further improving drug supply chains is critical, particularly the efficiency of elements managed by partner countries. These improvements will become increasingly important as partner countries assume more responsibility for managing supply chains.
section_title: What GAO Recommends
paragraphs: The Secretary of State should direct OGAC to require country teams to (1) develop and implement plans to help partner countries improve inventory controls and record keeping; and (2) track the progress partner countries are making in measuring ARV drug consumption, waste, and loss. State generally agreed with the intent of both recommendations; GAO revised the second to make it broader and more feasible to implement in differing partner-country contexts.

section_title: Letter
paragraphs: Now nearing the end of its second 5-year authorization, the President’s  Emergency Plan for AIDS Relief (PEPFAR) has made significant  contributions to international treatment goals for HIV/AIDS. As of  September 2012, the Department of State’s (State) Office of the U.S.  Global AIDS Coordinator (OGAC) reported that PEPFAR’s multibillion  dollar investments in partner countries’ programs had provided treatment  for about 5.1 million people, more than half of all individuals enrolled in  treatment in low- and middle-income countries. As part of this  assistance, PEPFAR purchased over $1.2 billion in antiretroviral (ARV)  drugs during fiscal years 2005 through 2011 to treat people living with  HIV. OGAC is leading PEPFAR’s shift from an emergency program  primarily providing direct treatment to one that increasingly supports  partner countries’ capacity to manage their treatment programs. In  passing the Tom Lantos and Henry J. Hyde United States Global  Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization  Act of 2008 (2008 Leadership Act), Congress directed OGAC to continue  to expand the number of people receiving HIV care and treatment support  while also making it a major policy goal to build partner-country capacity  to deliver services and promote a transition toward greater sustainability  of country-owned HIV/AIDS programs. On the basis of recent  international guidelines, an estimated 15 million people in low- and  middle-income countries are eligible for ARV treatment. Moreover, 23  million would be eligible if programs expanded eligibility to include groups  such as all pregnant and breastfeeding women and certain high-risk  populations, consistent with recommendations in recent updates to World  Health Organization guidelines.
In the House committee report on the 2008 Leadership Act, Congress  directed OGAC to work with others to develop effective, reliable public- sector drug supply chain management systems owned and operated by  partner countries and to provide ongoing technical assistance and  sustained support to ensure the functioning of such systems. In addition  to helping partner countries develop and manage their own supply chains  for ARV drugs and other health care commodities, PEPFAR supplies  ARV drugs directly in some countries through supply chains operated by  contractors. PEPFAR’s efforts to develop and augment partner countries’  supply chain systems are critical to support continued progress in the  fight against HIV/AIDS because inadequate or poorly functioning supply  chains pose risks to individual as well as to public health outcomes.  Patients on treatment receive daily doses of ARV drugs on a continuing,  lifelong basis. Skipped doses due to gaps in supply and expired or  otherwise unusable ARV drugs can lead to ineffective treatment and  increased viral resistance, necessitating newer, more expensive drugs.  Inefficient supply chains can also waste scarce public health resources.  For example, overstocking of drugs can lead to waste as drugs expire  and can no longer be used, potentially resulting in fewer patients  receiving treatment.
You asked us to review HIV/AIDS treatment programs supported through  PEPFAR. This is the last of three reports responding to your request. In  this report, we examine (1) actions PEPFAR has taken regarding ARV  drug supply chains and (2) partner-country ARV drug supply chain  operations.
To address these objectives, we reviewed reports and guidance issued  by PEPFAR and its partners, including PEPFAR country and regional  operational plans for fiscal year 2012. We analyzed nine U.S. government  global health supply chain studies and identified six key elements and  three supporting processes of effectively functioning supply chains. We  used these elements to conduct a content analysis of 16 evaluations  relevant to PEPFAR-supported supply chains. To identify these 16  evaluations, we reviewed 68 evaluations and selected the most recent,  those published in 2011 and 2012, which cover seven countries  supported by PEPFAR. We also compared the actions taken by  PEPFAR to the performance metrics and supply chain best practices  identified in U.S. Agency for International Development (USAID) reports.  We reviewed agreements between PEPFAR and partner-country  governments, including partnership framework agreements between the  United States and 22 PEPFAR partner countries or regions. In addition,  we conducted fieldwork in three PEPFAR partner countries—Kenya,  South Africa, and Uganda—in June 2012 to obtain information about the  management of partner-country supply chains and efforts taken to  improve them. The results of our fieldwork cannot be generalized to all  PEPFAR partner countries but provided insights into various aspects of  specific supply chain operations. We selected these countries based on  PEPFAR budget and spending allocations, disease burden estimates,  and PEPFAR’s role in procurement of treatment commodities and supply  chain management. We interviewed representatives of the contractor that  manages the bulk of PEPFAR’s ARV drug procurement, and PEPFAR  officials from OGAC, the Centers for Disease Control and Prevention  (CDC) of the Department of Health and Human Services (HHS), and  USAID. For additional details on our scope and methodology, see  appendix I.
We conducted this performance audit from May 2012 to April 2013 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe the  evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: OGAC sets overall PEPFAR policy and strategies and coordinates  PEPFAR programs and activities, allocating funds to PEPFAR  implementing agencies, primarily CDC and USAID. As of fiscal year  2012, these agencies executed PEPFAR program activities through  agency headquarters offices and interagency country and regional  teams in more than 30 countries and regions with PEPFAR-funded  programs. OGAC coordinates the activities of these country teams  through its approval of operational plans, which document work plans,  budgets, and the anticipated results of HIV/AIDS-related programs.  OGAC provides annual guidance on how to develop and submit  operational plans. In fiscal years 2009 through 2012, OGAC approved  country operational plan budgets totaling over $16 billion.
USAID and CDC obligate the majority of PEPFAR funds through grants,  cooperative agreements, and contracts with implementing partners, such  as U.S.-based nongovernmental organizations (NGO) and partner- country governmental organizations and NGOs. With regard to supply  chains for treatment programs, USAID and CDC typically provide  assistance in different ways. USAID purchases the majority of ARV drugs  and is the primary funder of supply chain services to partner countries  through centralized contracts with large international NGOs, for-profit  development assistance firms, and NGOs in partner countries. CDC  provides funding to purchase ARV drugs and related commodities,  including laboratory equipment and test kits, through cooperative  agreements. Both USAID and CDC provide technical assistance to  partner countries to support supply chain management.
Health care drug supply chains involve the following six key elements  (see fig. 1): product selection: selecting drugs based on national treatment  guidelines and approval;  forecasting and supply planning: estimating the quantity of drugs  needed to ensure an uninterrupted supply; procurement: contracting with suppliers to obtain drugs within  agreed-upon production and delivery time frames and costs, including  freight; warehousing: maintaining appropriate security and environmental  conditions (e.g., temperature and humidity);  inventory management: monitoring for shortages and waste due to  expired products, keeping accurate records of available and  anticipated stock, and preparing orders for distribution; and distribution: managing the flow of drugs from the point of production  to the end user for consumption (i.e., facilities where the drugs are  dispensed to patients).
All or most of these six elements involve the following three processes:  information management: generating and analyzing the data  needed to manage the supply chain from both a cost and service  standpoint (for example, gathering consumption and inventory data to  determine how much of a drug to order); human resource management: training and supervising staff  responsible for placing orders, monitoring stock, and providing drugs  to patients, and ensuring that key positions are filled; and quality assurance: ensuring that drugs are approved for use in a  partner country, meet certain standards, undergo testing, and are  monitored as they move through the supply chain.
section_title: PEPFAR Has Taken Steps to Strengthen ARV Drug Supply Chains
paragraphs: PEPFAR has taken three key steps to make ARV supply chains for  treatment programs more efficient and reliable for all PEPFAR partner  countries. First, PEPFAR and USAID have consolidated supply chains for  PEPFAR’s ARV drug procurement, enhancing efficiency and reducing  operational costs. Second, PEPFAR has improved donor coordination by  creating a network to facilitate information sharing and by developing an  emergency procurement mechanism. Third, PEPFAR has provided  partner countries with technical assistance, such as assessment tools  and training, to help strengthen their supply chains and manage them  more effectively.
subsections: section_title: PEPFAR Has Consolidated Supply Chains for ARV Drug Procurement
paragraphs: PEPFAR has consolidated supply chains for ARV drugs across partner  countries to increase the efficiency of ARV drug procurement and  shipping. In 2005, USAID contracted with the Partnership for Supply  Chain Management, a nonprofit consortium of over a dozen  organizations, to create the Supply Chain Management System (SCMS)  project, which pools procurement across more than 20 partner countries  on a voluntary basis. According to USAID, this central procurement  system provides those countries having less procurement capacity and  smaller markets with the opportunity to benefit from the lower prices and  consistent supply associated with bulk purchases. SCMS consolidated  forecasts and established long-term supplier contracts to obtain favorable  pricing and delivery conditions. SCMS has provided HIV/AIDS treatment  supply chain services for PEPFAR-supported programs, procuring and  distributing $1.43 billion in HIV/AIDS-related products, including $858  million in ARV drugs, as of March 31, 2013, according to USAID; these  products include 74 percent of the ARV drugs purchased using PEPFAR  funding in fiscal year 2012.
In addition, USAID has taken initial steps to consolidate supply chains for  PEPFAR with USAID’s other global health programs to reduce overall  management time and operational costs. These steps include reviewing  its current supply chains and developing a consolidation proposal.  Specifically, USAID announced in June 2012 a plan to offer a new,  consolidated contract that is to combine supply chains managed by  SCMS with those managed by the USAID DELIVER PROJECT  (DELIVER), which works with over 20 national and international  organizations to procure non-ARV health care commodities, such as  condoms, for PEPFAR and other USAID health programs. According to  USAID, consolidating these supply chains will help ensure an  uninterrupted supply of health commodities for PEPFAR and the other  programs, reduce costs to the U.S. government, and mitigate risk through  collaborative strategies that will include forecasting, warehousing, and  distribution.
section_title: PEPFAR Has Improved Coordination of ARV Procurement with Other Donors
paragraphs: PEPFAR has also coordinated with other donors to improve those  elements of the supply chain that operate within the control of partner  countries. In particular, it has developed an information-sharing network  and established an emergency procurement mechanism.
Information-sharing network. In June 2006, PEPFAR developed an  information-sharing network with the Global Fund to Fight AIDS,  Tuberculosis and Malaria (Global Fund) and the World Bank called  the Coordinated Procurement Planning Initiative. Since then, other  key organizations, including OGAC, USAID, the Global Fund, three  UN entities, and two NGOs, have used the network to identify and  address ARV drug supply chain weaknesses. SCMS facilitates  information sharing within the network. The network has taken a  number of steps to improve supply forecasting and procurement to  support the availability of ARV drugs and other health care  commodities needed by HIV/AIDS patients. For example, network  members have met quarterly to discuss potential gaps in delivery of  ARV drugs and solutions to these gaps, including emergency  disbursement of funds to procure drugs and avoid shortages. In  addition, the network developed tools that alert key donors to  treatment interruption crises and enable members to share best  practices regarding potential approaches to address and mitigate  these crises.
Emergency procurement mechanism. In 2010, PEPFAR established a  funding mechanism called the Emergency Commodity Fund, whose  primary aim has been supporting emergency purchases of ARV drugs  when threats arise to the continuity of patient treatment or critical  prevention programs. According to USAID, this funding mechanism  has been used to assist five countries with emergency ARV  procurement when they faced problems with Global Fund grants.  PEPFAR country operational plans for fiscal year 2012 reported that  six other countries came close to experiencing shortages of ARV  drugs and other HIV-related commodities due to Global Fund delays.  For example, the Democratic Republic of Congo’s ministry of health  requested that the U.S. government ensure a buffer stock of ARV  drugs because the Global Fund, which was the source of a majority of  the country’s commodities, had become slow in processing grants and  was experiencing difficulties forecasting drug supply and keeping ARV  drugs in stock. PEPFAR has also provided technical assistance to the  Global Fund to improve its procurement system, with the goal of  reducing the need for further emergency support from PEPFAR.  According to USAID officials, in September 2012, PEPFAR helped the  Global Fund develop a proposal for its own emergency procurement  mechanism. As of March 2013, the Global Fund had not notified  PEPFAR whether it had established this mechanism.
section_title: PEPFAR Helps Partner Countries Improve Their Supply Chains
paragraphs: As partner countries assume greater responsibility for managing supply  chains, PEPFAR is moving from a direct supply role to a more advisory  role. PEPFAR’s long-term aim is to develop effective, reliable partner- country-owned and -operated supply chain systems at the national,  regional, district, and local levels. At present, PEPFAR’s role in  supporting partner-country HIV program supply chains ranges from direct  control of major supply chains to providing training and technical  assistance. PEPFAR generally relinquishes control of the ARV drugs  once they reach a partner country’s central warehouse; from that point  on, partner countries are responsible for ensuring that the drugs reach  patients.
PEPFAR determines the level and type of supply chain assistance  primarily on the basis of each country’s treatment program and supply  chain capacity and the state of its HIV epidemic. For example, in some  countries, PEPFAR may directly procure almost all ARV drugs and  centrally control supply chains through an implementing partner such as  SCMS. In other countries, PEPFAR may provide no procurement support  for ARV drugs and only training and technical assistance for specific  elements of the partner country’s supply chains, which carry out all supply  chain functions with funding from PEPFAR, other donors, and/or the  partner-country government.
PEPFAR country teams provide technical assistance to support public  and private drug supply chains for medical supplies, including USAID- purchased commodities. This assistance includes tools to assess supply  chains and identify any weaknesses, and other types of training and  advice.
USAID and its implementing partners have developed and begun  implementing tools for identifying any needed improvements in partner  countries’ supply chains. The following are examples of two such tools:
The Supply Chain Capability Maturity Model is used to identify  performance problems by rating each element of a supply chain  against best practices. The tool also helps identify and prioritize areas  in need of strengthening and provides a method for tracking progress.  In 2012, USAID piloted the Supply Chain Capability Maturity Model in  three countries—Botswana, Paraguay, and South Africa—and used it  to assess their supply chains. In addition, USAID used the tool to  recommend targeted solutions in South Africa.
The Supply Logistics Internal Control Evaluation was developed to  assess the effectiveness of internal controls to mitigate supply chain  risk in each element of the supply chain in countries across sub- Saharan Africa. This tool generates a series of score cards  representing the estimated risk in a system and identifying strengths  and weaknesses. Beginning in 2011, this tool was piloted in several  countries, including Benin, Mozambique, and Zambia.
PEPFAR also provides other training and advice to help partner countries  strengthen their supply chains, such as audit checklists to improve supply  chain management and training in how to use them, warehousing  assistance, and stakeholder coordination to help partner countries identify  workable solutions to supply chain problems. For example, in Nigeria,  PEPFAR’s fiscal year 2012 plan includes organizing and hosting a  workshop with multiple stakeholders to assist the government in  identifying private-sector warehouse operators that could operate a new  central warehouse with the capacity to serve the country’s treatment  program.
In all three partner countries we visited, PEPFAR has taken steps through  its technical assistance to increase efficiencies by strengthening specific  steps in the supply chain process.
In South Africa, PEPFAR, through SCMS, helped the government  institute procurement reforms that enabled it to cut in half the prices it  pays for ARV drugs. Although South Africa was the largest single  market for these drugs, it had been consistently paying prices well  above the international standard.
In Uganda, USAID reports that the country team has helped the  Ugandan government and local NGOs successfully implement a  simplified distribution network by streamlining the supply chain to  create clear lines of responsibility and accountability. Previously, there  were more than four ARV drug supply chains serving three types of  facilities from three separate warehouses, and some facilities received  supplies from more than one supply chain. USAID reported that these  overlapping supply chains involved duplication of efforts and led to  confusion in ordering and reporting. In addition, PEPFAR is  supporting the national rollout of a new web-based ARV bimonthly  reporting and ordering system, whose purpose will be to enable  stakeholders to track the status of ARV supplies in all treatment sites  and provide early warning of shortages to authorities at the central  level.
In Kenya, the country team has helped the national government  establish clear and consistent distribution lines from the two central  entities that procure ARV drugs and create a system whereby stock  can be shifted at the central level to avoid supply gaps.
section_title: Information Management Weaknesses in Some Partner Countries’ ARV Drug Supply Chains Pose Risks of Shortages, Waste, and Loss
paragraphs: OGAC guidance stresses that effective information management is  essential for the efficient operation of ARV drug supply chains. However,  11 of the 16 evaluations of partner-country supply chains that we  reviewed identified weaknesses in inventory controls; 7 of these 11  evaluations also cited weaknesses in record keeping, including missing or  inaccurate drug consumption data. These weaknesses may increase  the risks of shortages, waste, and loss. Human resource constraints  contribute to these weaknesses, and PEPFAR is making efforts to  address them over the long term. OGAC operational plan guidance calls  on PEPFAR country teams to describe plans to assist their respective  partner countries in developing effective and sustainable treatment  programs. However, this guidance does not specifically require country  teams to develop plans to strengthen partner countries’ inventory controls  and record keeping that adversely affect the availability of reliable data on  drug consumption, waste, and loss. In addition, because OGAC does not  require country teams to monitor partner countries’ progress in measuring  ARV drug consumption, waste, and loss, OGAC may not be able to  reliably ascertain the extent to which supply chains in partner countries  are affected by shortages, waste, and loss and take appropriate action to  mitigate these risks.
subsections: section_title: Information Management Is Critical to Ensuring Efficient ARV Drug Supply Chains
paragraphs: PEPFAR guidance directs country teams to assess the extent to which  partner countries experience shortages of drugs and report steps the  teams take to address this problem. OGAC’s Next Generation Indicators  Reference Guide recommends that country teams track the percentage of  ARV distribution sites that report on inventory consumption, quality,  losses, and adjustments on a monthly basis. Several U.S. and partner- country officials and implementing partners we spoke with agreed that  drug consumption data, particularly at the health facility level, are  essential for ascertaining and meeting demand. Two implementing  partners involved in managing health care commodities also noted the  importance of record keeping for avoiding wasted or lost drugs.
In two of the partner countries we visited, good record keeping,  particularly the collection of reliable consumption data, led to increased  efficiency. For example, in South Africa, a USAID initiative to monitor the  consumption of ARV drugs at storage sites and health facilities reduced  shortages of ARV drugs over a 2-year period and enabled health facilities  to identify and cancel excess orders. In Kenya, a USAID official  responsible for HIV/AIDS programs reported that PEPFAR had improved  inventory management and consumption monitoring for PEPFAR- and  country-managed supply chains. According to the official, PEPFAR  coordinated information sharing at the national level and across major  facilities to identify and resolve supply chain issues, virtually eliminating  ARV drug shortages.
section_title: Inadequate Inventory Controls and Record Keeping in Some Partner- Country Supply Chains May Increase the Risks of Shortages, Waste, and Loss
paragraphs: From our review of 16 supply chain evaluations conducted in seven  PEPFAR partner countries since 2011, we identified inadequate inventory  controls for monitoring drug supply, as well as missing or inaccurate  record keeping, as key weaknesses in ARV drug supply chains controlled  by partner countries. These weaknesses can increase the risks of drug  shortages, waste, and loss.
Eleven of the 16 supply chain evaluations we reviewed found that partner  countries had inadequate inventory controls to prevent shortages, waste,  and loss of ARV drugs. For example, an evaluation of Côte d’Ivoire’s  supply chain indicated that inadequate supervision of drug transfers  among treatment facilities and other inventory control weaknesses  resulted in significant amounts of medication that could not be accounted  for and were not available to intended beneficiaries. In another example,  an evaluation team in Zambia found a lack of adequate inventory controls  at all levels of the drug supply chain. The team was unable to rely on  documentation at the facilities and had to conduct a physical count to  determine the status of facilities’ drug inventories. The team identified  ARV drug losses totaling about $265,000, or nearly 9 percent (by value)  of the total ARV drug stock at the facilities the team visited; the loss  calculation covered a 15-month period from January 2011 to March 2012.  Lacking basic inventory control tools and procedures, these facilities ran  the risk of not knowing whether the drugs had been dispensed to patients  or distributed to other storage sites, or if they were inventory losses.
Seven of these 11 supply chain evaluations we reviewed also indicated  that some treatment facilities where drugs are dispensed had missing or  inaccurate records. As a result, these facilities had difficulty forecasting  their drug needs, ensuring that the drugs ordered would be sufficient to  meet demand, or knowing what drugs were lost to theft or inadvertent  waste. Three of these evaluations specifically mentioned a lack of  accurate consumption data. For example, an evaluation of supply chains  in Mozambique indicated that facility-level pharmacies had no monitoring  or reconciliation of ARV drugs once they left the storage shelf; thus, there  were no controls to ensure that the ARV drugs arrived at the dispensing  table or were administered to the patient. The Mozambique evaluation  team could not reconcile ARV drug consumption data with prescriptions  at facility-level pharmacies. The Mozambique evaluation also indicated  that procedures for characterizing the unit of drugs dispensed were not  always standardized across facilities: some facilities tracked ARV drugs  as pills, while others tracked them as bottles. Inconsistent units make it  more difficult to collect consumption data and may cause errors in  determining the quantity of new drugs to be ordered. An evaluation report  on Kenya’s public health supply chain indicated that more than half the  treatment sites visited by evaluators did not maintain or update stock  cards for ARV drugs. This made it difficult for the facilities to know what  new drugs to order and increased the risk of undetected loss or theft.
section_title: Human Resource Constraints Contribute to Some Partner-Country Supply Chain Weaknesses
paragraphs: Eight of the 16 country supply chain evaluations we reviewed cited  human resource constraints as contributing to weaknesses in inventory  controls and record keeping at health facilities, storage sites, or both.  For example, heavy workload, inadequate training, and insufficient  oversight may have led to poor performance by staff responsible for  inventory control and record keeping, and in at least one country, their  fear of shortages may have led to hoarding of drugs. Furthermore, poor  compensation and working conditions may have led to absenteeism,  turnover, and pilferage.
Ten of the 35 fiscal year 2012 PEPFAR country and regional operational  plans also identify human resource constraints that may contribute to  inventory control and record keeping weaknesses, including, for example,  a lack of qualified staff and difficulty retaining and motivating such staff  because of heavy workloads and low salaries. In Côte d’Ivoire, for  example, the PEPFAR country team reported that even trained  pharmacists lacked basic skills in and understanding of supply chain  management and logistics issues. As a result, they were often reluctant to  fill out all the paper-based data collection sheets, registers, and other  forms that were fundamental tools for tracking drug consumption in that  country.
Weaknesses in data systems can exacerbate human resource constraints  and contribute to unreliable information at some treatment facilities. For  example, according to a USAID official in Kenya, some rural facilities do  not have electronic data collection systems or even a stable electricity  supply and must therefore rely on paper-based systems. Such systems  can be labor intensive to maintain and prone to error. In addition, a  representative of an implementing partner in South Africa with whom we  spoke noted that there can be significant data quality issues in paper  records, particularly for facilities that are using paper records while trying  to provide treatment to large volumes of patients and as changes in  treatment guidelines expand the number of patients eligible for treatment.  In at least one instance, according to an evaluation we reviewed, a  computerized information system was not well integrated into the record- keeping process, and this resulted in errors. Addressing these errors can  add to staff workload.
PEPFAR’s ongoing training initiatives and technical assistance efforts  have begun to address some of these human resource challenges. For  example, the supply chain assessment tools are being used to help  identify and address supply chain weaknesses, including inventory control  and record-keeping weaknesses, in the countries where they are being  piloted. An SCMS official implementing the Supply Chain Capability  Maturity Model in South Africa stated that part of the process is getting  staff and managers to understand that the information generated by the  tasks they perform is important for managing their supply chain; the  official said that this is because the information feeds into or flows from  what their colleagues do, and there are consequences (e.g., shortages) if  information management tasks are not performed properly. Expanding  the application of these supply chain assessment tools to additional  countries will take several years, according to OGAC officials. The  evaluations and country operational plans we reviewed identify various  other training and recruitment efforts to address human resource  constraints in supply chain management. Several of the evaluations and  operational plans also cite efforts to make data collection and sharing  more efficient by enhancing automation or moving to Internet-based  information management systems. According to a USAID official, the  training and technical assistance under way are long-term efforts, whose  results will not begin to be apparent for at least 5 years.
section_title: OGAC Does Not Require Country Teams to Develop Plans for Mitigating Risks or to Track Partner Countries’ Progress
paragraphs: Although 11 of the 16 evaluations we reviewed highlight the risks of drug  shortages, waste, and loss due to inadequate inventory controls, OGAC  has not taken all of the steps in a risk management framework that are  important for mitigating such risks. In particular, it has not required  country teams to develop a plan for mitigating all of these risks or to track  progress in mitigating them.
OGAC country operational plan guidance calls on PEPFAR country  teams to describe plans to assist their respective countries in developing  effective and sustainable treatment programs. OGAC has generally  instructed teams to promote the development of national HIV supply  plans and strengthen partner countries’ ability to forecast, procure,  manage, and distribute HIV-related commodities. However, OGAC does  not specifically require country teams that support partner-country supply  chains to develop and implement plans to strengthen partner countries’  inventory controls and record keeping to reduce the risks of shortages,  waste, and loss in ARV drug supply chains. We reviewed country  operational plans for the seven countries covered by the evaluations we  analyzed and found that most of these documents discussed plans for  improving inventory controls and record keeping to help countries reduce  the risk of shortages. However, only two mentioned the risks of waste or  loss in their discussions of these plans. Without plans that address all of  the elements of risk to supply chains, OGAC cannot ensure that country  teams are appropriately targeting assistance to avoid shortages, waste,  and loss in partner-country supply chains.
OGAC’s Next Generation Indicators Reference Guide requires country  teams to collect information on progress partner countries are making in  developing reliable supply chains. Specifically, the country teams are  required to collect information on access to high-quality, low-cost  medications generally, and more specifically on the percentage of  treatment facilities that experienced ARV drug shortages in the previous  12 months. This guide also recommends that country teams track the  percentage of ARV drug distribution sites that report on drug consumption  and losses, but this is not a required indicator. According to OGAC,  monitoring this information is important but not indispensable to basic  program tracking. Six of the seven country operational plans we reviewed  provided information on assessing or attempting to address shortages,  and five of the seven discussed using ARV consumption data to do so.  However, only two discussed using consumption data to help reduce the  risk of waste or loss, and none provided information on the percentage of  distribution sites that report on drug consumption and losses. Monitoring  partner countries’ progress in measuring consumption, waste, and loss is  vital to basic program tracking, because without data on progress in  reducing waste and loss, OGAC cannot fully assess whether partner  countries can operate supply chains independently and efficiently. This is  increasingly important as partner countries are expected to assume  greater responsibility for managing their supply chains.
section_title: Conclusions
paragraphs: PEPFAR is at a critical juncture as it transitions from directly managing  supply chains to primarily providing guidance and advice. PEPFAR has  taken steps toward greater integration with partner-country health  systems, overall health system strengthening, and greater partner-country  responsibility for addressing HIV/AIDS. If PEPFAR can increase  efficiency by reducing shortages, waste, and loss, it would be better able  to expand treatment to more of the 23 million people in low- and middle- income countries living with HIV/AIDS and in need of treatment or who  are in at-risk groups eligible for treatment. Because PEPFAR generally  relinquishes control of the supply chain once the drugs reach a country’s  central warehouse, it is essential that partner-country governments  develop the capacity to manage their drug supply chains without  excessive risks of shortages, waste, or loss of inventory.
PEPFAR has strengthened supply chains in a number of ways and is  continuing to take steps to make them more reliable and efficient. In  addition, it is important that PEPFAR’s efforts to address partner  countries’ human resource constraints are sustained over the long term to  show results. However, at some distribution and treatment sites,  weaknesses in inventory controls and record keeping limit the ability of  some partner-country health systems to track consumption, putting them  at risk for shortages, waste, and loss. OGAC does not require PEPFAR  country teams to develop plans to address these weaknesses or to  monitor progress in reducing these risks. Without such plans or  monitoring, OGAC cannot fully assess partner-country progress toward  the goal of self-sufficient supply chain management.
section_title: Recommendations for Executive Action
paragraphs: To help ensure that drug supply chains in PEPFAR partner countries  function efficiently and mitigate the risks of shortages and wasted and lost  drugs, we recommend that the Secretary of State direct the U.S. Global  AIDS Coordinator to take the following two actions:  require that country teams develop and implement plans for assisting  countries to address inadequate inventory controls and record  keeping; and  require that country teams track the progress partner countries are  making in measuring ARV drug consumption, waste, and loss.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to State, USAID, and CDC. Responding  jointly with USAID and CDC, State provided written comments (see app.  II for a copy of these comments). State and USAID also provided  technical comments, which we incorporated, as appropriate.
State agreed with the intent of our first recommendation to improve  partner countries’ inventory controls and record keeping for drug supply  chain management. State agreed that inventory controls are not  optimized in all PEPFAR countries and indicated that it will further assess  these controls and focus technical assistance on improving them where  they are found lacking. State also noted that PEPFAR has engaged with  partner countries in supply chain capacity development through careful  assessment of each country’s supply chain context and the degree to  which PEPFAR is positioned in the country to support a long-term  technical assistance effort. Noting that PEPFAR operates in many  different environments and supports a range of HIV/AIDS activities with  diverse sets of stakeholders, State commented that PEPFAR country  teams should continue to place supply chain improvement as a high  program priority in countries where PEPFAR has a large financial  investment in supporting HIV treatment; in countries where PEPFAR’s  investment is more limited, State commented that country teams should  work with other donors and the partner government to ensure that any  supply chain weaknesses or risks, including those related to inventory  and record keeping, are addressed. State also commented that there are  other, often greater supply chain weaknesses that result in an inadequate  supply of ARV drugs, such as delayed Global Fund disbursements or  poor procurement planning by partner-country governments. We found  that these delays and planning issues are significant challenges and note  that PEPFAR is already taking steps to address them through, for  example, developing an information-sharing network with other donors to  identify and address potential gaps in supply and establishing an  emergency procurement mechanism to fill these gaps. However,  PEPFAR guidance does not explicitly address the need for plans to  improve inventory controls and record keeping to mitigate the risks of  waste and loss as ARV drugs move through the supply chain in partner  countries to the patients who need them. We believe that such plans are  necessary to ensure that efforts to mitigate these risks are systematically  implemented and progress in mitigating them is documented.
In the draft we sent for comment, we recommended that country teams  track the percentage of ARV distribution sites reporting on inventory  consumption, waste, and loss. State agreed with the intent of this  recommendation, but noted some constraints that would make it difficult  to implement: in countries where PEPFAR works with a large number of  treatment sites, it would be costly to collect data from all of them; and in  countries where PEPFAR provides limited support, requiring site-level  data collection could be perceived as overly onerous by partner-country  governments and at odds with PEPFAR’s efforts to promote country  ownership of supply chain management. Nevertheless, tracking the  percentage of ARV drug distribution sites reporting on inventory  consumption, waste, and loss is an indicator that PEPFAR currently  recommends that country teams implement, although it does not require  them to do so. State proposed ways to deal with the constraints it  identified, such as sampling site data and working with partner countries  like South Africa to provide targeted technical assistance where needed.  Specifically, State noted that PEPFAR has begun a more systematic  investment in health supply chain metrics to identify risks and  weaknesses in partner-country supply chains and assess progress in  reducing risks and enhancing performance. State further noted that, as  PEPFAR reviews and updates its guidance, it will incorporate measures  to evaluate the capability of partner-country supply chains to identify risks  and assess progress, and that new indicators will include inventory  management. In response to State’s comments, we revised our  recommendation to reflect that another, more flexible indicator besides  the one OGAC had already developed may also be appropriate. We  believe that requiring country teams to track the progress partner  countries are making in measuring ARV drug consumption, waste, and  loss in whatever way is most appropriate in those countries would be  beneficial in two ways: (1) it would provide a measure of accountability for  partner countries as they transition to assuming greater responsibility for  managing their supply chains, and (2) it would provide OGAC with  flexibility in the differing contexts of PEPFAR involvement in each country.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of State and  the U.S. Global AIDS Coordinator and interested congressional  committees. The report also will be available at no charge on the GAO  website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-3149 or gootnickd@gao.gov, or contact Marcia Crosse at  (202) 512-7114 or crossem@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This is one of three reports responding to a congressional request to  review HIV/AIDS treatment programs supported through the President’s  Emergency Program for AIDS Relief (PEPFAR). This report examines (1)  actions PEPFAR has taken regarding antiretroviral (ARV) drug supply  chains and (2) partner-country ARV drug supply chain operations.
To obtain background information and establish a framework for  understanding drug supply chains serving PEPFAR, we identified key  participants in PEPFAR supply chain management programs by  reviewing laws and regulations relating to these programs. We also  identified six supply chain elements and three processes common to  effective drug supply chains by analyzing guidance documents on supply  chain performance assessment processes, tools, and metrics, and an  expert review focused on supply chain best practices. Specifically, we  analyzed seven guidance documents obtained from PEPFAR  implementing partners that procure drugs and one produced by the World  Health Organization in conjunction with the U.S. government and other  multilateral organizations. The expert review we also analyzed was a  best-practices supply chain study for the U.S. Agency for International  Development (USAID). We determined that a supply chain element or  process was key if the same, or similar, element or process appeared in  at least four of the nine sources we reviewed.
To examine actions PEPFAR has taken regarding ARV drug supply  chains, as well as to describe partner-country ARV drug supply chain  operations, we reviewed reports and guidance issued by PEPFAR and its  implementing partners, including all 35 PEPFAR country and regional  operational plans and all 22 PEPFAR country partnership frameworks for  fiscal year 2012. We also reviewed studies, reports, and assessment  tools on the drug supply chains used by PEPFAR-supported treatment  programs that were prepared by USAID; the Centers for Disease Control  and Prevention (CDC); key implementing partners such as the Supply  Chain Management System (SCMS); multilateral agencies such as the  Global Fund to Fight AIDS, Tuberculosis, and Malaria and the World  Health Organization; and PEPFAR partner countries.
Furthermore, to examine partner-country supply chain operations, we  analyzed selected evaluations relevant to PEPFAR-supported supply  chains and synthesized their findings, conclusions, and  recommendations. To select these evaluations, we reviewed documents  obtained through site visits, USAID Office of the Inspector General audits,  and a database of evaluations compiled for a related GAO engagement.  We identified 68 evaluations published from 2008 through 2012  containing some assessment of drug supply chain systems or a selection  of components in those systems in countries supported by PEPFAR. We  then eliminated all evaluations published before 2011, yielding 16  evaluations. Our final set of 16 evaluations included findings,  recommendations, and/or actions taken related to supply chains in these  seven countries: China, Côte D’Ivoire, Kenya, Mozambique, South Africa,  Uganda, and Zambia.
We analyzed each of the 16 evaluations to identify any findings,  recommendations, or actions taken related to the six supply chain  elements and three processes we had previously identified. We used this  analysis to identify any weaknesses within each supply chain function and  related actions taken to address them. We also reviewed fiscal year 2012  PEPFAR country operational plans for all 32 countries and three regions  that prepared these plans in that year.
We compared the actions PEPFAR took to strengthen supply chains with  performance metrics and supply chain best practices identified in USAID  reports. Specifically, we identified performance metrics, best practices,  lessons learned, and supply chain models in relevant guidance,  evaluations, and assessment tools. Furthermore, we compared the  actions to five basic guiding principles of risk management: (1)  management and personnel identify risks; (2) they analyze risks; (3) after  analyzing the risks, they create a plan that identifies different possible  courses of action to mitigate the identified risk; (4) when a plan for risk  mitigation is approved, management and personnel implement the risk  mitigation action plan; and (5) they track risks and mitigation action plan  implementation to determine if the plan was successful in mitigating the  risk. We also compared the actions with Standards for Internal Control in  the Federal Government, which identify risk management as critical to the  ability of managers to run organizations and achieve their objectives. We  searched the country operational plans for the seven countries covered  by the evaluations we reviewed as well as PEPFAR guidance for  developing operational plans to determine whether these documents  included plans to mitigate the risks identified by our analysis of the  evaluations.
In addition, we conducted fieldwork in three PEPFAR partner-countries— Kenya, South Africa, and Uganda—in June 2012 to obtain information on  drug supply chain operations. We selected these countries based on their  relatively large PEPFAR budget and spending allocations, relatively high  disease burden estimates, variation in PEPFAR’s role in supply chain  management, and other factors, including feasibility of travel. We selected  these countries from a list of countries with the largest PEPFAR budgets,  including those with greater than $100 million in their annual budgets and  greater than $25 million spent on ARV drug procurement between fiscal  years 2009 and 2010. We further narrowed our sample by limiting the  selection to countries with the highest HIV prevalence rate using April  2012 estimates from the Joint United Nations Programme on HIV/AIDS.  By applying these criteria, we obtained a list of four countries. We then  selected South Africa and Kenya because they had SCMS regional  distribution centers, and we selected Uganda because it was the only  remaining country that could provide examples of non-SCMS  procurement models. We interviewed representatives of SCMS, the  contractor that manages the bulk of PEPFAR’s ARV drug procurement;  representatives of PEPFAR implementing agencies, including officials  from OGAC, USAID, and CDC in the countries we visited and in  Washington, D.C. We also interviewed partner-country government  officials in each of the three countries. The results of our fieldwork cannot  be generalized to all PEPFAR partner countries but provided insights into  various aspects of specific supply chain operations.
We conducted this performance audit from May 2012 to April 2013 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
section_title: Appendix II: Comments from the Department of State
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Jim Michels, Assistant Director;  Kay Halpern; Katherine Forsyth; Erika Navarro; Chad Davenport; David  Dayton; and Steven Putansu made key contributions to this report. In  addition, Todd M. Anderson, Brian Hackney, Etana Finkler, Grace Lui,  and Jane Whipple provided technical assistance and other support.
section_title: Related GAO Products
paragraphs: President’s Emergency Plan for AIDS Relief: Shift Toward Partner- Country Treatment Programs Will Require Better Information on Results.  GAO-13-460. Washington, D.C.: April 12, 2013.
President’s Emergency Plan for AIDS Relief: Per-Patient Costs Have  Declined Substantially, but Better Cost Data Would Help Efforts to  Expand Treatment. GAO-13-345. Washington, D.C.: March 15, 2013.
Ensuring Drug Quality in Global Health Programs. GAO-12-897R.  Washington, D.C.: August 1, 2012.
Defense Infrastructure: The Navy’s Use of Risk Management at Naval  Stations Mayport and Norfolk. GAO-12-710R. Washington, D.C.: July 13,  2012.
President’s Emergency Plan for AIDS Relief: Agencies Can Enhance  Evaluation Quality, Planning, and Dissemination. GAO-12-673.  Washington, D.C.: May 31, 2012.
President’s Emergency Plan for AIDS Relief: Program Planning and  Reporting. GAO-11-785. Washington, D.C.: July 29, 2011.
Global Health: Trends in U.S. Spending for Global HIV/AIDS and Other  Health Assistance in Fiscal Years 2001-2008. GAO-11-64. Washington,  D.C.: October 8, 2010.
President’s Emergency Plan for AIDS Relief: Efforts to Align Programs  with Partner Countries’ HIV/AIDS Strategies and Promote Partner  Country Ownership. GAO-10-836. Washington, D.C.: September 20,  2010.
President’s Emergency Plan for AIDS Relief: Partner Selection and  Oversight Follow Accepted Practices but Would Benefit from Enhanced  Planning and Accountability. GAO-09-666. Washington, D.C.: July 15,  2009.
Global HIV/AIDS: A More Country-Based Approach Could Improve  Allocation of PEPFAR Funding. GAO-08-480. Washington, D.C.: April 2,  2008.
Global Health: Global Fund to Fight AIDS, TB and Malaria Has Improved  Its Documentation of Funding Decisions but Needs Standardized  Oversight Expectations and Assessments. GAO-07-627. Washington,  D.C.: May 7, 2007.
Global Health: Spending Requirement Presents Challenges for Allocating  Prevention Funding under the President’s Emergency Plan for AIDS  Relief. GAO-06-395. Washington, D.C.: April 4, 2006.
Global Health: The Global Fund to Fight AIDS, TB and Malaria Is  Responding to Challenges but Needs Better Information and  Documentation for Performance-Based Funding. GAO-05-639.  Washington, D.C.: June 10, 2005.
Global HIV/AIDS Epidemic: Selection of Antiretroviral Medications  Provided under U.S. Emergency Plan Is Limited. GAO-05-133.  Washington, D.C.: January 11, 2005.
Global Health: U.S. AIDS Coordinator Addressing Some Key Challenges  to Expanding Treatment, but Others Remain. GAO-04-784. Washington,  D.C.: June 12, 2004.
Global Health: Global Fund to Fight AIDS, TB and Malaria Has Advanced  in Key Areas, but Difficult Challenges Remain. GAO-03-601. Washington,  D.C.: May 7, 2003.