Massoud Amini¹, Mohammad Bashari2, Mohamad Taghi Isaai3, Amir Hassan
Moghimi4, and Monem Ziai5
1 Department of Mathematics, Tarbiat Modares University, P.O.Box 14115-175, Tehran, Iran
^2,3,4,5 School of Management and Economics, Sharif University, Tehran, Iran

Correspondence
¹ e-mail: mamini@modares.ac.ir, Phone: +98 21 801 1001, Fax: +98 21 800 6544
² e-mail: m bashari@darmanyab.com, Phone: +98 21 8879 2695, Fax: +98 21 8879 2658
³ e-mail: isaai@sina.sharif.edu, Phone: +98 21 6602 2750, Fax: +98 21 6602 2756
⁴ e-mail: a.m@ideamedica.com, Phone: +98 21 2223 5861, Fax: +98 21 2223 5861
⁵ e-mail: monemziai@sharif.edu, Phone: +98 21 8803 9657, Fax: +98 21 8803 7383

INTRODUCTION

NHS is an abbreviation for National Health System. Its founding principle is to provide access to care to all on the basis of need (and not the ability to pay)⁶. The Iranian NHS has a long history and has made many changes all across the country, yet it has many pitfalls. Too often patients have to wait too long. There are unacceptable variations in standards across the country. What patients receive depends too much on where they live and the NHS has yet to fulfil the aspiration to provide a truly national service. Constraints on funding mean that staff often work under great pressure and lack the time and resources they need to offer the best possible service. The challenge is to use the resources available to achieve real benefits for patients and to ensure that the NHS is modernized to meet modern public expectations. The five most urgent challenges that needed to be addressed
are partnership; performance; professions and the wider NHS workforce; patient care; and prevention. A master plan which could address these issues, considering the country's vision and long term development program, is referred to as a NHS Plan. Implementing the policies set out in the Plan should calls for an inclusive approach, to ensure that the resources now available really do produce a step change in results.

One of the core concepts in NHS is Drug Distribution Plan (DDP). This includes specific protocols for need estimates, manufacturing, buying, allocation, and distribution of drugs. These protocols become more vital when we deal with subsidized drugs which are usually expensive and associated with life threatening diseases. On the other hand, it should be clear that today, any successful NHS Plan should rely on ICT technology and E-commerce tools.

The issues related to welfare reform has been discussed thoroughly in recent years. There are some concerns about ethical issues¹. The medicare payments⁴ and their effect on the poor⁸ is considered and analyzed. Some recent work discusses cash benefits and their social effect⁹. One should note that all the proposed schemes and solutions are meaningful in the light of recent advances in health care technologies⁷. Some arguments are proposed to push the solutions towards customer directed schemes¹⁰, but there are yet many political issues to be considered³.

This paper investigates the basic concepts of an E-distribution plan for subsidized drugs in Iran. In section 2, we review the present drug distribution scheme. Section 3 proposes an E-distribution protocol and section 4 outlines the required infrastructure to realize the proposed E-solution. In sections 5 and 6, we have briefly discussed phasing and feasibility of the proposed plan. The paper concludes with two brief sections devoted to evaluation and future extension of the solution.

Everyone - no matter how much they earn, who they are, how old they are, where they come from or where they live - should have the health care they need for themselves and for their families.

Pharmaceutical business for the finished product has a market size as 350,000,000USD in Iran, out of this budget, 55,000,000 USD are the products which are being imported as subsidized products.
Categorizing a product as subsidized has a quite sophisticated procedure. At present there is a comprehensive list of subsidized medications governed by Ministry of Health (MOH) and entering new items to this list is almost out of mind and is just done for very special diseases. Each year, MOH launches a program to renew the list. Currently the subsidized rate is often 5 times cheaper than the stock exchange rate, however the amount of contribution by subsidies to decrease the consumer price is being adjusted by the MOH and there is not a fixed regulation on that. Actually, the MOH tries to keep the consumer price of similar products on the list identical to prevent promoting any product by granting higher subsidies, however this adjusting could be subjective.

In general, there is a considerable price difference between international price and consumer price. In case of subsidized medications, this difference is big enough to create a motive to drain the subsidized products. There is always a threat of leakage of the subsidies from the point of allocation to the hand of real consumer. In such a situation, no one can be sure that 100% of the allocated budget for medication subsidies will be absorbed by the real consumer and there would be a considerable profit in case of any leakage in the distribution chain of such products.

To decrease such a threat, we have to focus on the distribution channels. In this section we review the existing planning and importation procedures and distribution channels to show the pitfalls.

1 Planning
The demand and the budget to fulfil it is being allocated by the Parliament according to the total budget which has been proposed by the Government. The total allocated budget to each medicine would be based on the previous year's consumption rate and the reflected demand from the market. Actually as almost all subsidized products are being consumed and there is no exact estimation of the ratio between real consumption and the quantity which has been drained out to several outlets, this method could not be without fault. Let's say that it is just experimental and provides no way to be sure about the real demand.

Most of medicines which are receiving subsidized rates are expensive, however the price is not the only criteria for receiving the subsidy and type of the related disease is also considered. In some cases, the existing list of subsidized items lacks reasonable rational. We have some products which are being used just one time for an individual but they are subsidized, whereas there are products that are being consumed regularly and they are life saving but they are receiving no subsidy. Also allocation of subsidies to some products sounds political rather than rational. Keeping a product on the subsidized list is the best way to promote it and keep the rivals from entering the market, hence making the decision on allocation would be quite crucial.

2 Importation
There are few companies which are importing this range of products based on the announced and planned quantity by the MOH. These include private and governmental companies. The importing continues throughout the year to fulfil the announced quantity. The import companies have to give their imports to the pre-specified distribution companies. In the long run, fixing the importers and distributors could a potential source of leakage.

3 Distribution Channels
The distributor companies are delivering the products to special pharmacies, which at the moment are quite limited and are chosen by the MOH. It is very hard to imagine a leakage from the distribution companies. Pharmacies are the most vulnerable point of leakage for this kind of products. At this point, anyone with a prescription can receive the medication, and it is hard to recognize the real consumer from smugglers. This is because the pharmacies which are in charge of distribution of subsidized products are not entitled to evaluate the prescription more than regular products and one who can make the stamp and letterhead of physicians can have the medication as well!

For certain products for which the level of subsidy is very high and the consumption is regular, the patients have dossiers with the pharmacies, however as these kinds of dossiers are local and the control is not restricted, receiving these medications from other pharmacies is quite probable.

Decreasing the number of engaged pharmacies in distribution of subsidized products has had a considerable effect on the leakage decision in distribution of such products, however this has its own disadvantage of decreasing the level of ease of access for the consumer. Summing up, presently the possibility of leakage in the distribution chain is very high and there is no way to keep record of consumption, except for the above mentioned products. Our concern is to make a system for keeping track of consumption to decrease abuse, smuggling, and over-prescription of subsidized medications.

1 E-Distribution Protocol (DEDP)
The main goal of the new drug distribution system is to deliver the right medication to the right patient, at the right time, through the right channel with the right price.

There are four groups of people who are suffering from an old, inadequate, traditional distribution system.

a. Patients who are directly impacted from different aspects. They have no access to the right information at the right time, and they are vulnerable to misuse or over treatment. This can be intensified due to lack of technical information among physicians and health care staff. Traditional distribution systems may cause severe drug shortages which is dangerous indeed for patients who receive these medications.

b. Physicians and health-care professionals who need to access to the most recent scientific information about new treatment methods, new medicines and also need to know which of these medicines are better available for their patients in their living area. They also require having enough information about their patients, their disease and their medical background. Sometimes they also ought to see patients' medical documents, diagrams, and test results to make a perfect decision.

c. Supporting staff like importers, distributors, and pharmacies who should organize their businesses to strike the right balance between good service and optimal profit. Importers need right quantitative
forecasts of distributor requests in advance to decide about quantity and time of importing and to make stock level decisions. Distributor companies must distribute needed medications all over the country but avoid overstocking and/or shortages in different areas. Doing this successfully requires access to a perfect updated database providing consumer and supply information. The most demanding problem of pharmacies is to recognize the right patients from abusers/ smugglers. This is really difficult to perform unless an electronic system is used for patient identification.

d. Health care managers and government officers who are responsible for subsidizing real patients,
preventing leakage of subsidies in distribution channels and predicting drug shortages and providing
equal chances for all patients to receive their needed medications.

2 Information System
It is obvious that the prerequisite of all of the above mentioned activities is managing information. In our plan, this is done through an information system consisting of five integrated subsystems.

a. Care Recording System (CRS): Delivers an individual electronic record for each patient. Recording
information starts when the patient goes to the hospital or is visited by a physician for the first time and continues during his/her life.

b. Electronic Prescription System (EPS): Enables the transferral of electronic prescriptions from the physicians directly to the pharmacy. Using this system, pharmacies will ensure that the patient is a real consumer.

c. Drug Availability Monitoring System (DAMS): Strikes the balance between real consumer's need and availability of products in the supply chain. It collects information from patient's consuming behaviour in a historical basis as well as their current needs and consequently checks possible drug availability for future requests. It helps all the chain members to control time and volume of their purchasing, and the MOH to make the right decision about managing its restricted resources.

d. Digital Picture Archiving System (DPAS): Empowers CRS by adding the pictures, scans, X-rays and MRIs electronically to the patients' folder.

e. Customized Education and Information System (CEIS): provides customized and personalized information and education for patients as well as physicians and other health staff. It could be more helpful for the second group because they are more probable users of network applications. Patients as end customers are located in the heart of the system. They must be traced continuously and the system should be shaped based on their requirements. Identifying and tracing patients which is the core concept of the E-distribution protocol is done by the system.

3 E-card
The concept is to make an Electronic id-card for the consumers of subsidized medications to track their medical history. In our plan, we have considered a card which has a micro-chip containing all personal data of the patient including:

a. Name
b. Age
c. Gender
d. Place of living
e. Disease
f. Related grading (this is very crucial for dose adjustment and level of consumption)
g. In charge physician

Having an E-card, when a patient goes to a medical centre or a physician's office they can retrieve their personal information from the network. Each E-card has a microchip which makes the stations located in different centers able to provide service without need to have online internet connection in case that the service in not operating. Using online connections, they have access to complete information from the Care Recording System (CRS) and could obtain extra data from Digital Picture Archiving System (DPAS).

Physicians and other health staff use Customized Education and Information System (CEIS) to offer updated clinical services to patients and prescribe subsidized medications electronically by Electronic Prescribing System (EPS). Pharmacies and other related centres identify the patient and using EPS ensure that the identified patient is allowed to receive subsidized medications. Prescribed drugs are inputs for Drug Availability Monitoring System (DAMS). Based on DAMS, the supply chain organizes its activities and MOH makes nationwide decisions. To make the plan more efficient, we have divided the subsidized range products into four major categories:

a. Products which are consumed by a certain group of patients on a regular basis, like Tularemia, Hemophilia and Dialysis patients. At the moment, these diseases are recognized as special diseases and have special coverage.

b. Products which have certain regular consumers but have not been recognized as medications of special disease, like Anti Cancer products.

c. Products which have no regular consumption, but are very expensive and used just for acute conditions, like IVIG.

d. Products which are consumed by a fraction of the population, vulnerable to certain urgent conditions, like pregnant women vulnerable to deliver babies with problems such as RDS which needs to be treated by Surfactant.

As the target group of products of type 2 and 3 are potentially the whole population, we eventually have to make a nationwide coverage. Obviously this should take place gradually and based on priority. One possible schedule for this coverage extension is as follows:

i. Making the dossier for all current consumers of subsidized products, like Oncologic medications and issuing an E-card for the groups 1 and 2: the data for this kind of patient could be available easier and the variety of products is more restricted. The fourth group could receive their E-card at the time of breakthrough events, like the time of marriage, where the vaccination for dT and Rubella is a must. We may gradually make E-cards mandatory for young females at the time of marriage as well.

ii. Making the dossier for the acute disease patients who come for the first time to get their prescription.

iii. Making the E-Card for the general population, starting with newborns.

4 Supply Chain
The second question is how the government injects the subsidy inside the population to avoid any leakage through the supply chain and ensures that the right people are receiving the subsidy. Let's have a look to the supply chain: Importer? Distributer? Pharmacy? Patient

Imagine that the landed cost of an item for importer is 500 EURO and it receives 430 EURO as subsidy from the government, and it will sell the product at 70 EURO to the distributor. The distributor receives its markup and sells it at 77 EURO to the pharmacy and the pharmacy obtaining its markup sells it at 89 EURO to the final consumer which is the patient.

The obvious difference between real price of these medications out of borders and after subsidising prices along the chain is attractive enough to urge people to smuggle. The subsidy may also be paid to distributors and pharmacies but the problem remains unsolved because price difference still exists. Basically patients are the less probable population for smuggling because they are real users of drugs. Moreover, subsidized drugs are used for diseases which are generally a big threat if they are not well treated. Thus the best way is paying subsidy directly to patients. Our proposed E-solution provides a way to identify real patients. It also helps government in managing financial transactions. All of the annual subsidy should be placed in a bank account and as soon as a patient receives his/her medication from the pharmacy, the corresponding portion of the allocated subsidy transfers to the pharmacies' account.

In this section we briefly review the required infrastructure for the proposed E-solution for subsidized drug distribution. This infrastructure constitutes

1. Network: The network should cover the whole supply chain presented in section 3.2. In rural areas, pharmacies could be replaced by health centers.

2. System and subsystems: The main information system and its subsystems are explained in section 3.2. The E-Distribution protocol presented in section 3.1 (and its proposed extension in section 8) also relies on the following systems:
Patient System
Physician System
Pharmacy (or Health Center) System
Government Office System
Insurance System

3. Hardware: The hardware includes:
E-card reader and writer
Network hardware
Personal computers

4. Software: The software includes:
Information systems and Decision Support Systems
Transaction systems
Databases

The phasing should be planned properly to meet the concern regarding the subsidized medication E-distribution and to minimize the deviation from the main objectives and mission. The phasing will be in 3 steps as follows:

a. Planning: In the planning phase the following issues should be covered:
Required IT infrastructure
The system's owner authorities and responsibilities
Stakeholder system requirements
Development

b. Design: The design phase includes:
Database design
System architecture
User interface

c. Implementation: The implementation phase shall be planned in 4 steps:
Pilot and applying the required improvement based on the feedbacks
Development in the centres of provinces
Development in cities of over 200,000 population
Development all over the country

The main point is the right selection of pilot which should have the feasibility of infrastructure and readiness of the stakeholder.

1 Pilot
Tehran with a population over 7 million has 12 pharmacies giving subsidized drug services. All of these pharmacies, as well as physicians' offices and a good percentage of patients have access to internet. To pilot our E-solution in Tehran, we could first restrict ourselves to products of type 1 and 2 (in section 3.3) and subsystems 1, 2, and 3 (in section 3.2). The security issues of running the system on internet could be checked and possible leakages and pitfalls could be extracted.

Most of the value associated with this system comes from the information it contains. This becomes more crucial if we note that it provides this information in a timely, integrated, concise, and relevant form. The development of this system also forces the relevant organizations to examine their executive information collection and delivery processes. This helps to uncover problems such as poorly defined information requirements, inadequate computing infrastructures, and data management shortcomings. The proposed E-solution facilitates collection and delivery of information by integrating inquiring, collecting, processing, and presenting the transactional data.

The potential benefits from this system fall in four major categories:
a. Better support for accomplishing MOH objectives,
b. Enhancing the effectiveness of senior management team,
c. Focusing management attention on key areas,
d. Upgrading the inquiry, collection, integration, access, and presentation of information.

The value of it depends on the payoff from quicker and better informed decisions. On a national scale, this payoff will be considerable both financially and socially. Some benefits of the new system are:
a. Creating a database for stakeholders,
b. Supervision of subsidized medications prescription and distribution,
c. Supervision of insurance services
d. Spending subsidy for real consumers
e. Managing the subsidy budget.

1 Transactions Margins
In our proposal, we give the subsidy to the customer. When a subsidized medication is prescribed, the physician writes the quantity of prescribed medications on the patient's E-card. By keeping track of actual usage of subsidized medications, the price structure for these medications could be kept the same as regular medications. The transaction margins of subsidized medications which used to be high (see section 3.4) now could be easily adjusted according to the MOH drug policy.

In the example of section 3.4, if the transaction margins are unchanged, an item with landed cost of 500 EURO for the importer is sold 550 EURO to the distributer. The distributer receives its markup and sells it at 605 EURO to the pharmacy and the pharmacy obtaining its markup puts a price of 695 EURO of which around 100 EURO is paid by the patient. In this case, the subsidy is paid to the final customer, and the price could be adjusted by controlling the transaction margins.

2 Allocation of Money in Bank
There is an important financial issue here. Both before and after implementation of the proposed E-solution, the subsidy is allocated in the government account. However, in the E-distribution protocol, the spending of money is based on the end customer request for medication, whereas in the past it was based on the importer application and had to be paid in large amounts. If one considers that the total amount is substantial, this phase difference could be of financial significance.

3 Possible Leakages and Abuse
At the moment, the subsidized drug distribution system is very similar to non subsidized products. The delivery takes place after importation to the warehouse of the distributor company which potentially can provide nationwide coverage for any pharmaceutical. The distributor is delivering subsidized products to special pharmacies, which are entitled to distribute the subsidized items.

The planning for such a distribution is quite hectic and empirical. Each entitled pharmacy is supposed to have a very limited stock of the subsidized products, therefore just by considering the level of sales (regardless of the patient who has received the medicines) the MOH sends daily or weekly plans to distributors to advise them about the quantities that they can deliver to the pre-specified pharmacies. Obviously in case of any malpractice in terms of prescription (like identifying a faked rescription) there is no control by MOH.

Possible leakages in the E-distribution system are as follows:
1. Issuing level: Anybody who can receive a fake card is a potential source of leakage. To prevent this, integration of national data like national card and police records is required. On the other hand, controlling should not be so sophisticated that it causes any difficulties for the patient receiving their medications.

2. Diagnosis and prescription level: In the E-distribution protocol certain doctors or clinics are entitled to prescribe subsidized medications, These are subject to periodic audit and a random based percentage of the visited patient can be re-evaluated by a committee who can assure the accurate diagnosis and prescribing for each patient.

3. Delivery level: At this level, the product is being delivered by pharmacy to the patient. As each patient is receiving the product by prescription, there would be a limited possibility of leakage here.

4. Usage level: Most of the subsidized products are injectable products which should be administrated by a nurse or a doctor and it is basically possible to control the appropriate usage of the medication.

The evaluation of the E-distribution protocol could be done using suitable KPI's which are associated to the corresponding CSF's. The Critical Success Factors of the proposed E-solution, based on the Balanced Scorecard framework, falls into four major categories:

1. Financial Factors: The most important KPI in this category is the total amount of government drug subsidy. This indicator is affected considerably by recovering leakages due to smuggling subsidized medications and giving the subsidy to the real customer.

2. Customer Satisfaction: Customer satisfaction could be measured using indicators such as frequency of availability check. The E-plan can increase customer satisfaction by providing easier access to subsidized medications and needed information, as well as better availability.

3. Internal Processes: Throughout the supply chain, the internal processes could be improved and facilitated using E-solution tools and systems.

4. Learning and Growth Factors: The whole National Health System could benefit from successful
implementation of an E-solution in drug distribution. The growth issue becomes more crucial when it is noted that the plan is proposed in a developing country.

The E-distribution system provides a useful network and electronic infrastructure for health organizations and patients. It also provides practical knowledge about e-systems and perfect experience of observing advantages of electronic services in medical applications. This infrastructure and knowledge are critical for implementing a nationwide E-health system. Expansion of the E-distribution system could be done gradually:

1. Covering all drugs instead of subsidized drugs,
2. Covering all patients,
3. Covering the entire supply chain, including all manufacturers, importers, distributors, and pharmacies.

After these expansions, all of the population could potentially be users of this electronic service. It facilitates moving to an electronic National Health System (NHS) in which lifetime health plans, Hospital Information Systems (HIS), choosing medical services and booking, tele-consultation and finally Medical Decision Support Systems (MDSS) are considered. The E-card users are in contact with insurance companies, banks and other related organizations. Furthermore at the final stage, where all people are users of medical E-cards, it could be transformed into a multi-purpose card.

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