Management of the National Medical Stockpile

26 Jun 2014

This audit assessed the effectiveness of the Department of Health’s management of the National Medical Stockpile.

Audit objective, criteria and scope

The audit objective was to assess the effectiveness of the Department of Health’s management of the National Medical Stockpile.

To assist in evaluating the department’s performance in terms of the audit objective, the ANAO developed the following high level criteria:

  • the Department of Health has sound governance arrangements in place for the management of the Stockpile, including an integrated and systematic approach to risk management and performance reporting;
  • the Department of Health’s procurement and contract management arrangements for the Stockpile demonstrate a focus on getting the right outcomes and achieving value for money;
  • the Stockpile’s inventory management system reflects value for money—it provides an assurance that the right items in the correct amount are being purchased, and stored appropriately, until they are either deployed, or they are disposed of on expiry; and
  • the deployment plans and processes provide a high level of assurance that the Stockpile can be reliably deployed within agreed timeframes to agreed locations.

The ANAO did not assess processes for the disposal or destruction of expired stock. While the audit examined aspects of the deployment strategy for the Stockpile, it did not seek to assess Australia’s general preparedness to respond to a national health emergency. Nor did the audit assess the clinical efficacy of stockpiled items.

An ANAO performance audit in 2007–08 on Australia’s pandemic preparedness concluded that the Stockpile was established without high level planning, assessment of risks and an appropriate management framework. The ANAO recommended a shift from a short term ‘supply and store’ strategy for the Stockpile to a longer term management strategy. The current audit was not intended to assess implementation of all the earlier audit recommendations. However, in the course of the audit the ANAO considered the extent to which the Department of Health has implemented recommendations relating to the Stockpile.

Overall conclusion

The maintenance of the National Medical Stockpile (the Stockpile) since 2002 represents a significant government investment in the nation’s preparedness for public health emergencies resulting from terrorist activities or natural causes such as pandemics; with over $750 million allocated for the Stockpile in the past decade. In 2012–13 the Stockpile comprised 42 products and over 110 million items, with a reported value of almost $196 million. The effective management of this large strategic reserve, comprising pharmaceuticals and personal protective equipment with a limited shelf life, relies on planning and administrative arrangements geared to: select and procure appropriate items; warehouse and control the stock; and deal with expiring items. Effective deployment arrangements are also required to augment state and territory reserves of items from the Stockpile in a timely manner.

Overall, the Department of Health’s management of the National Medical Stockpile has been generally effective in recent years, benefiting from improvements introduced since 2010. There remains scope, however, for improving the department’s strategic framework, operational management and deployment arrangements for the Stockpile.

Since 2007, when the ANAO concluded that the department had not developed an appropriate framework for managing the Stockpile, the Department of Health has implemented a more structured management approach, including: the development of strategic and operational risk management plans in 2010; the rationalisation of previously fragmented storage contracts in 2010; the application of an evidence‑based approach for the selection of appropriate stockpile items; and the maintenance of formal deployment arrangements with states and territories. Strategies have also been adopted or examined for the cost‑effective replenishment and disposal of expired stockpile items. However, there remains scope for improving key elements of the department’s management arrangements, including: updating the strategic and operational risk management plans; clarifying aspects of the storage contracts to strengthen reporting and performance monitoring; improving the integrity of data used to manage the stockpile; and planning to test Stockpile deployment arrangements. Key issues relating to the Stockpile’s strategic framework, operational management and deployment are discussed in the following paragraphs.

The department adopted a more strategic approach to the Stockpile’s management with the introduction of a strategic plan in 2010, albeit some eight years after the Stockpile was established. While the plan broadly describes the governance, funding and administrative arrangements for the Stockpile, it should be updated to identify objectives, priorities and strategies for the Stockpile’s management—key elements of a strategic plan. High level outcomes for the Stockpile agreed to in 2011 by the then Government should also be reflected in an updated plan.

Operational management of the Stockpile benefited from the introduction of an operational risk management plan in 2010, which should be updated to reflect risks identified in the Department of Finance’s 2011 Strategic Review of the Stockpile. Operational management was further improved with the consolidation of warehousing arrangements into two longer‑term contracts with logistics firms, relating to pharmaceutical items and personal protective equipment. However, management reports have not been regularly provided, as required under the contracts, and the department should clarify reporting obligations. Further, there is scope to address weaknesses in some system controls and shortcomings in manual processing, which have contributed to the emergence of data integrity issues such as discrepancies between information held in the Stockpile database and warehouse system records.

The department has developed a deployment framework with states and territories, although these arrangements have not been recently tested. To provide assurance that deployment arrangements will be effective in a national health emergency, the department should undertake planning to test deployment arrangements, in consultation with other jurisdictions.

While there remains scope for further improvement as indicated above, the department’s work in recent years demonstrates a more active approach to management of the Stockpile, as does the recent focus on the findings of the 2011 Strategic Review. The ANAO has made four recommendations aimed at improving the effectiveness of the department’s management of the Stockpile, by: improving strategic planning and risk management; enhancing performance reporting by contractors; reviewing information management arrangements; and planning to test deployment arrangements.

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