3.4 Commercial contract management
The NBA is responsible for negotiating and managing contracts and standing offers with commercial suppliers of blood and blood-related products. These contracts relate to the supply of:
- locally produced plasma-derived1 products
- imported plasma-derived and recombinant blood products2
- diagnostic reagents.
Locally produced plasma-derived products — CSL Ltd Plasma Products Agreement
Since the 1940s, it has been possible to extract different proteins from plasma on a large scale using fractionation processes. In Australia, CSL Ltd fractionates plasma collected by the ARCBS to produce products to meet the needs of the Australian health sector. Plasma fractionation arrangements are governed by the Plasma Products Agreement (PPA) between the NBA and CSL Ltd which covers pricing, invoicing, supply planning and monitoring, ordering and delivery.
Funding to CSL Ltd
Funding to CSL Ltd for the PPA increased from $141.3 million in 2006–07 to $155.9 million in 2007–08. Growth in funding reflects the demand for plasma products.
The NBA and CSL Ltd maintained a highly effective contract throughout 2007–08 that ensured the optimum supply of Australian manufactured blood products. The NBA worked with CSL Ltd to ensure all domestic plasma-derived products were delivered when and where required. Performance against the KPIs for the contract is shown in Table 3.6.
Table 3.6 Key performance indicators for the CSL Ltd Plasma Products Agreement
Key performance indicator | Achievement |
Yield of Group 1 products | 5.3 g IVIg per kg starting plasma |
Loss of Group 2 plasma or Group 2 finished products | 1.98% |
Fulfilment of orders | 99% |
In order to finalise a new agreement with CSL Ltd by 31 December 2009, a stakeholder consultation process started that included meetings with senior health department officials.
A key tool to gather feedback on the contract and its products was the release of a discussion paper on the current arrangements. The discussion paper was posted on our website and also circulated on 19 May 2008 to 108 stakeholders including CSL Ltd; ARCBS; funding jurisdictions; other blood product commercial suppliers; and national, state and territory organisations representing clinicians, nurses, hospitals, pathology labs and patient groups. The paper sought opinions on product selection, product delivery, improvement in support and product demand. Feedback from this and further bilateral discussions will inform the development of the next contract with CSL Ltd.
Figure 3.7 Issues for IVIg products
Figure 3.8 Issues of IVIg per 1000 head of population
In May 2008, members of the JBC agreed to a new set of negotiation policy parameters that will guide the nature and scope of negotiations. The parameters address issues such as the nature of pricing, the potential for changed product management and distribution arrangements and term.
Imported plasma-derived and recombinant blood products
The NBA has established and operates a range of contracts with overseas suppliers for the importation of selected plasma-derived and recombinant blood products to augment domestic supply and source products which cannot be manufactured in Australia, either because of an unavailability of technical capacity or uneconomic viability. The most significant of these are the contracts for imported IVIg and recombinant blood products.
Imported intravenous immunoglobulin standing offer
Intravenous immunoglobulin (IVIg) is a product derived from donor plasma and is used to treat a variety of acute and chronic haematological, neurological and immunological conditions (ie multiple myeloma and acquired immunodeficiency syndromes). It is also used extensively to treat autoimmune disorders and an increasing number of autoimmune-based neurological conditions.
Although IVIg is manufactured in Australia, limitations on the amount of plasma collected mean that local supply is unable to meet demand and some product must be imported (see Figure 3.7). Australia’s demand for IVIg continues to increase in line with global trends and now exceeds 100 grams per 1000 head of population as seen in Figure 3.8.
The NBA has standing offer contracts for the supply of imported IVIg. With the ending of contracts in late 2007, the NBA commenced a procurement process for new contracts in mid-2007. The procurement process built on extensive consultation with all relevant stakeholders, which included stakeholder representation on the request for tender evaluation committee.
The outcome of the procurement was the finalisation of a new fixed price contract with Octapharma Australia Pty Ltd for the supply of Octagam for three years under the National Blood Supply arrangement. Octagam and a CSL Ltd imported product, Sandoglobulin Liquid, are also supplied under Jurisdictional Direct Order (JDO) arrangements negotiated by the NBA on behalf of state and territory health providers.
The NBA has expended approximately $34.3 million against this new standing offer in 2007–08, an increase of $13.6 million over 2006-07 expenditure. The new standing offer contracts satisfy all JBC-mandated parameters and offer governments’ exceptional value-for-money and a range of significant improvements, including:
- a highly competitive price compared to current and forecast global prices
- a choice of two imported products for JDO
- the transfer of the overhead and risk for inventory management from the NBA to the supplier
- the maintenance of a three month NBS in-country reserve at the supplier’s cost
- strong delivery requirements throughout Australia.
Figure 3.9 Market share of recombinant factor VIII issues
Figure 3.10 Issues of factor VIII products
Figure 3.11 Issues of factor IX products
Figure 3.12 Issues of recombinant factor VIIa products
Figure 3.13 Issues of total factor VIII per 1000 head of population
Figure 3.14 Issues of total factor IX per 1000 head of population
Imported defined 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 are imported.
The NBA manages contracts for the supply of imported recombinant and some plasma-derived products with Baxter Healthcare Pty Ltd, Wyeth Australia Pty Ltd and Novo Nordisk Pharmaceuticals Pty Ltd. New contracts for the supply of these products commenced in July 2006 and include:
- a commitment by all suppliers to ensure the supply of products to Australia, in times of national or international product shortage, as a preferred customer
- 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. Figure 3.9 depicts market share for these three products in 2006–07 and 2007–08.
The NBA expended approximately $139.9 million under these contracts in 2007–08 for the supply of imported blood products. The issues of the specific products are illustrated in Figures 3.10, 3.11 and 3.12. Figures 3.13 and 3.14 show growth in issues per 1000 head of population.
Following the establishment of new contractual supply and logistic arrangements in 2006–07, the focus in 2007–08 was to strengthen the three-way interaction between suppliers, stakeholders and the NBA to achieve best practice operation. A summary of the performance of suppliers against contractual KPI’s in 2007–08 is shown in Table 3.7.
Table 3.7 Imported recombinant blood product contract key performance indicators
Key performance indicators | Baxter | Wyeth | Novo Nordisk |
Delivery performance | Achieved 10 out of 12 months | Achieved | Achieved |
In-country reserve | Achieved | Achieved | Achieved |
Ordering | Achieved | Achieved | Achieved |
Record keeping | Achieved | Achieved | Achieved |
Reporting | Achieved | Achieved | Achieved |
Shelf-life of products to Approved Recipients | Achieved | Achieved | Achieved |
Figure 3.15 Market share for diagnostic reagent supply
Diagnostic reagent products
Laboratories use diagnostic reagents for antenatal antibody screening and pretransfusion testing (blood grouping, antibody screening and cross-matching) to ensure there is compatibility between donor blood and the patient requiring a blood transfusion. The ARCBS uses diagnostic reagents for donor testing and when providing blood in difficult situations — for example, when patients present with multiple antibodies.
The NBA manages standing offer contracts for the supply of diagnostic reagents to public hospitals and laboratories to enable them to purchase a wide range of products that best suit their needs. By combining jurisdictional requirements, the NBA has achieved significant savings and a level of service that has high user acceptance and satisfaction. The NBA conducted an extensive procurement process for new contracts that concluded in the second half of 2007. The procurement process identified areas for improvement over the contracts that existed at the time, further improving the service provided. The new contracts commenced on 1 November 2007 with four suppliers:
- Australian Laboratory Services Pty Ltd
- CSL Ltd
- DiaMed Australia Pty Ltd
- Ortho-Clinical Diagnostics.
Around 110 red cell diagnostic reagent products are available under the new contracts.
In 2003–04 and 2004–05 diagnostic reagents were supplied by CSL Ltd to the private and public pathology laboratories. This was funded by all Australian governments. In 2005–06 all governments amended the policy to only fund public hospitals and pathology laboratories and agreed to providing market competition. New agreements were entered into with four suppliers and the market share for each of these suppliers since 2005–06 is depicted in Figure 3.15.
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