Transcript Diapositiva 1

Strategies to Raise the state
Buying Power
Research Department
Regulatory framework
Demand
aggregation
through framework
agreements
Framework
agreements
Decentralized
tenders
One or more
agencies
Centrally
tendered with
decentralized use
Using FA V/S individual purchases
Demand Aggregation:
Health care sector singularity
For drugs and medical devices there is one single
buying agency (CENABAST) which aggregates demand
and tender for the whole system. Afterwards,
distribution is carried out to each Hospital.
How different are drugs prices when procured through
this centralized agency or when using framework
agreements?
Demand Aggregation: CENABAST
• Generic Drugs: Twice a year CENABAST aggregates
Hospital´s demand and call for proposals through
www.mercadopublico.cl e-marketplace. Awarded products will
have a 6 month fixed price.
• Ministerial Programs: Non generic drugs and vaccines are
purchased by Ministerial command through CENABAST.
Quantities and delivery structure is defined by the Ministry.
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
Demand Aggregation: FA
Business Model: Recently deployed FA (April 2011).
• Scope: Generic drugs
• Call for proposals: Done by ChileCompra through
www.mercadopublico.cl
• Agreement duration: 3 years
• Prices: After the first year, prices may be updated depending on
market conditions.
• Delivery mechanism: From vendors to purchasing units along the
country.
• Payment system: decentralized
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
Market structure
CENABAST has a 36,6% market share (data in log scale):
However, nowadays framework agreements are
irrelevant in terms of market share
CENABAST and FA: comparative performance
The following table shows a comparison between the two
purchasing mechanisms (CENABAST and FA), showing that under
current conditions, they are complementary
Concept
Total Compared
# Items
Average
Purchase per
Drug $MM
242
Actual Cost
$MM
Valor CMM
Value Direct
$MM
Purchase $MM
Value 100%
(Savings) CMM
CENABAST
vs Actual $MM
$MM
36.321
38.736
45.956
N/A
6,6%
Share of CENABAST
50%-100%
114
164
18.735
23.028
27.621
16.504
22,9%
10%-49%
18
475
8.555
7.924
9.250
5.930
-7,4%
1%-9%
110
82
9.031
7.784
9.035
N/A
-13,8%
Total
242
150
36.321
38.736
45.906
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
Aggregating demand with framework
agreements: 21% additional
Going beyond drugs: The case
of computers: Savings 24,5%
Could framework agreements deliver
additional savings?
Study of FA Mechanism
Some variables that affect prices in framework agreements:
•
Agreements duration.
•
Vendors pricing strategies.
•
Estimated demand.
•
Idiosyncratic industry features.
•
Others factors
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
UNCERTAINTY
Modeling FA as Options a la Black-Scholes
Grounded evidence on the necessity of FA theory
While standard auctions are considered an efficient mechanism in many cases, in the presence of
uncertainty about future demand, future spot prices, or the desired properties of the procured
product, they become less successful in allocating goods to the most efficient suppliers.
The figures bellow, emphasize auction inefficiency in the presence of demand uncertainty, in which
even a simple randomizing mechanism (e.g., a coin flipping) may perform better in terms of
efficiency than a standard auction. This suggests that procurement mechanisms that operate under
this type of uncertainty such as FAs require a special treatment that goes beyond standard
auctions.
Left: The portion of Bad assigments (i.e., expost inefficiency) as a function of alpha.
Right: The fraction of time the big supplier is preferred out of the inefficient assignments as a function of alpha.
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
Dealing with uncertainty: Systematic market risk
Assessing a call premium research project
• The seller is obligated to sell the
commodity if the buyer use the
option.
0
Premium
Profit
• The buyer of the call option has
the right, but not the obligation to
buy an agreed quantity of a
particular commodity from the
seller of the option at a certain
time for a certain price..
Share Price at
Maturity
Strike
Price
Long Call
• The buyer pays a fee (called a
premium) for this right.
Frameworks agreements may include a premium for allowing the
buyer handle the underlying commodity uncertainty.
Dealing with uncertainty: Auction theory
approach to asses demand uncertainty impact
Dealing with uncertainty: Product
Uncertainty and Horizontal Differentiation
Gobierno de Chile | Ministerio de Hacienda | Dirección ChileCompra
Strategies to Raise the state
Buying Power
Research Department