pilferage, and the incentives to prevent it, to the transporter. In Zambia, privatization of the central medical stores, through an operating contract with Crown Agents, also seems to be working well (see case study D, “Last Mile Logistics for Essential Drugs: The Case of Zambia”). Contracting, however, can carry both performance and corruption risks for public authorities—as the numerous scandals around the world related to such activities suggest. In Mexico, under the national insurance reform, state governments have introduced contracting with private pharmacies to provide medicines to people enrolled in the new program (known as “Seguro Popular”). The state of Jalisco hired a single pharmacy company to provide all such medicines statewide. In 2009, however, questions were raised about the selection of that company, the transparency of financial transactions, and the huge growth in expenditures on medicines that has occurred (Incongruencias en Contratos 2009). Experience with contracting with the private sector, in many countries and in many functional areas, suggests that reformers need to consider a number of points when pursuing that approach. • Contracting works better when multiple bidders participate and those bidders do not collude to short-circuit the process. It is generally not a good idea to contract with a private sector monopolist or cartel member because those companies do not have to offer a competitive price, and they do not face the need to perform well or risk losing the contract. • Contracting works better when the required tasks are sufficiently standardized that they can be specified in detail. That also allows more objective monitoring of performance. • Agencies writing the contracts need staff members who are trained and experienced in the contracting process. Contracting requires specialized skills and a willingness to be proactive, which can be difficult for an understaffed, undertrained, and undermotivated agency. • Effective contracting requires meaningful monitoring and enforcement. Those processes work best in nations with an effective civil law system, within which contract performance can be enforced and disputes adjudicated.
Decentralization Decentralization has been a prominent organizational reform in the government activities of low- and middle-income countries in recent years. 152
Pharmaceutical Reform