3.3 Commercial contract management
'Over the last year, we have saved Australian, state and territory governments $20 million for the procurement of blood and blood-related product contracts. Most importantly, these contracts ensure that Australians have access to safe and secure products.'
The National Blood Authority is responsible for negotiating and managing contracts with commercial suppliers of blood and blood-related products. These contracts relate to the supply of:
- locally produced plasma-derived products
- imported plasma-derived and recombinant blood products
- diagnostic reagents.
Plasma-derived products
Since the 1940s it has been possible to commercially extract different proteins from plasma using fractionation processes. In Australia, CSL Limited fractionates plasma collected by the Australian Red Cross Blood Service to produce products to meet the needs of the Australian health sector. As depicted in Figure 9, the amount of plasma collected by the Australian Red Cross Blood Service for fractionation has progressively increased from 172,000 kilograms in 1994–95 to 329,000 kilograms in 2006–07.
Plasma fractionation arrangements are governed by the Plasma Products Agreement between the National Blood Authority and CSL Limited and cover pricing, invoicing, supply planning and monitoring, ordering and delivery. The National Blood Authority also contracts with CSL Limited to manage a national reserve of the plasma products it produces, as well as supplying certain imported plasma-derived products. The national reserve is held at locations around Australia for contingent use.
Throughout 2006–07, the National Blood Authority worked with CSL Limited to ensure all domestic plasma-derived products were delivered when and where required. This included the negotiation of a range of improvements to ordering and distribution arrangements.
Recombinant products
Recombinant products are laboratory engineered. They are used for the treatment of bleeding disorders, mainly haemophilia.
Factor VIII
Factor VIII is required for normal clotting to occur and is deficient (or non-functional) in those with haemophilia A. Their defi ciency can be rectified by obtaining the normal factor from donated plasma or equivalent recombinant products.
Imported plasma-derived and recombinant blood products
The development of recombinant biotechnologies in the 1990s has resulted in the availability of several blood products produced by recombinant genetic engineering that would otherwise be available only as plasma-derived products. Recombinant products are mainly used for the treatment of bleeding disorders, such as the different types of haemophilia. They offer potential advantages over plasma-derived products for some patient groups. As recombinant products are not manufactured in Australia, all such products must be imported.
Some plasma products, such as Factor VIII Inhibitor Bypass Agent and Ceprotin, are imported because CSL Limited does not manufacture them in Australia. Other plasma products are imported because demand is in excess of domestic production.
New contracts for the supply of imported recombinant and some plasma-derived products came into effect on 1 July 2006. These contracts are with Baxter Healthcare Pty Ltd, Wyeth Australia Pty Ltd and Novo Nordisk Pharmaceuticals Pty Ltd. The products offer advantages over the previous contracts, including:
- a commitment by all suppliers to ensure the supply of products to Australia, as a preferred customer, in times of national or international product shortage
- an increased and consistent level of product support by suppliers
- wider delivery options, including home delivery of products to approved recipients
- significant savings in product costs over the life of the contracts compared to previous arrangements
- the availability of three recombinant Factor VIII products, including the latest generation of these products.
The demand for Factor VIII, Factor IX and recombinant Factor VIIa products in Australia has increased over the past four years. The increase in demand has occurred for a number of reasons, such as increased elective surgery, changed treatment regimes and changing demographics. These increases are illustrated in Figures 10 to 12, which depict annual demand for the respective product groups over the last four years.
The National Blood Authority worked closely with the suppliers of these products to implement the new contracts, which included the improvement of contractual, supply and logistics arrangements. The focus for the term of these contracts is to strengthen the three-way interaction between suppliers, stakeholders and the National Blood Authority to achieve best practice operation.
In November 2006, the National Blood Authority received a Prime Minister's Award for Excellence in Public Sector Management for the procurement process.
Prime Minister's Award for Excellence in Public Sector Management
The National Blood Authority was named as a joint winner of the Prime Minister's Silver Award for Excellence in Public Sector Management on 8 November 2006.
The award was a major achievement for the National Blood Authority and recognised the work it carried out in undertaking procurement of plasma-derived and recombinant blood products (referred to as 'defined blood products') for Australians who suffer from haemophilia.
'Receiving the Prime Minister's Silver Award demonstrates that, although the National Blood Authority is a new organisation, it has already proved its capacity to implement highly innovative and effective policies in a very short time. I'm very proud of my team—this is a significant achievement for the National Blood Authority,' said Dr Alison Turner, General Manager of the National Blood Authority.
In order to win the Prime Minister's Award, the National Blood Authority had to demonstrate excellence against a range of criteria including planning, implementation, monitoring and evaluation. In each of these categories, the National Blood Authority proved:
- critical commitment to and achievement of improved client satisfaction
- high standard of planning and governance arrangements
- high standard of leadership and change management arrangements
- innovative approaches to the development and delivery of products and services.
The procurement process, recognised by the award, has improved the security of future supply and resulted in better products and services for people with bleeding disorders. The dedicated and thorough intelligence gathering, and the innovative, open and detailed stakeholder consultations on needs, were significant to our success.
The National Blood Authority purchases approximately $130 million of defined blood products from domestic and international sources each year. Defined blood products are essential for the treatment of people with bleeding disorders.
It is expected that the cost saving to Australian governments achieved through this procurement for defined blood products will be $18 million over three years, from 2006 to 2009, compared to previous arrangements.
IVIg Standing Offer
The National Blood Authority has standing offer arrangements for the supply of imported IVIg. These contractual arrangements meet an ongoing shortfall in domestic production. As depicted in Figure 13, IVIg supply in 2006–07 increased by 13.7 percent when compared with the previous year.
Per capita usage of IVIg grew from 82 grams per 1,000 head of population in 2005–06 to 91 grams per 1,000 head of population in 2006–07. Similar growth is also evident internationally.
In order to ensure IVIg remains available to all Australians, the National Blood Authority negotiated a further 12-month extension to the current contract in December 2006. A procurement process for the renewal of these standing offer arrangements commenced in early 2007.
Diagnostic reagent products
Laboratories use diagnostic reagents for antenatal antibody screening and pre-transfusion testing (blood grouping, antibody screening and cross-matching) to ensure there is compatibility between donor blood and the patient requiring a blood transfusion. The Australian Red Cross Blood Service uses diagnostic reagents for donor testing and when providing blood in difficult situations—for example, when patients present with multiple antibodies.
The National Blood Authority manages a standing offer arrangement, which covers four suppliers. These suppliers are:
- Australian Laboratory Services Pty Ltd
- CSL Limited
- DiaMed Australia Pty Ltd
- Ortho-Clinical Diagnostics.
Under the current arrangements, which commenced on 1 July 2005, governments provide funds to public hospitals and laboratories to enable them to purchase a wide range of products that best suit their needs. Over 80 red cell diagnostic reagent products are available. By combining jurisdictional requirements, the National Blood Authority has achieved significant savings and a level of service that has high user acceptance and satisfaction.
In mid 2006–07, a procurement process for the supply of diagnostic reagents for up to a further four years was commenced after jurisdictions confirmed that such an arrangement was desirable and effective.