global health supply chains

Global Health Supply Chains

Prashant Yadav

http://web.mit.edu/zlc/index.html

Yadav . Global Health Supply Chains

22

The health production process

Health care workers

Drug Supplies

Equipment (Lab+Other)

Facility Infrastructure

Health care production

process

Patient

Health care

Clinical outcome

Health production process

Environment, Sanitation, Nutrition

Patient’s ability or willingness to manage their health

Income and Wealth

Quality of Life production

process

Goods and services

Health

Quality of Life

Material Inputs

Goods and services

production process

Patient’s ability and willingness to seek health care

and pay for it


33

End patients

Drug Manufacturers

Private Channel Buyers

Public Channel Buyers

NGO Channel Buyers

NGOs

International Financing

Public Sector

Private Sector

How international global health financing flows to low income countries (1)


44

End patients

Drug Manufacturers

Private Channel Buyers

Public Channel Buyers

NGO Channel Buyers

NGOs

International Financing

Public Sector

Private Sector

How international global health financing flows to low income countries (2)

Slide template borrowed from Dalberg

Global Development Advisors- AMFm

RBM Task Force Presentation


55

Banking crisis has significant impacts on international aid

Source: David Roodman


66

Aggregate economic shocks and infant mortality

Source: Baird, Friedman and Schady (2007)


77

Financial flows

PO signed

Public tendering process Production process Shipment and distribution process

Grant signedmoney disbursed

Forecasts

Current

PO signed



Forecasts

With Pledge Guarantees

PO signed



Forecasts

With Risk Sharing/volume Guarantee

Grant pledge


88

Debtissuance

Trade credit

Revolvingfunds

WorkingCapitalloan

Short term commercial

lending

Revolving drug fund

Trade credit / commodity financing

Letter of credit

Pledge guarantee

Bond

Commercial paper

Type of product Description Examples

• Longer term debt instrument, guaranteed by donor countries

• Bank issued and irrevocable; used in international trade

• Loan made by exporter to importer

• Donor-asset or commitment backed commodity trade credit

• Stability fund to smooth financing availability for time-sensitive health supplies

• Often marries financing and procurement (pooling)

• Shorter term debt instrument, for shorter term financing needs

• Commercial bank bridge loans• IBRD or IDA from WB• Grameen Growth Guarantee

• Working capital issued by commercial lender – “bridge” or “hard money” loan

• International Finance Facility (IFFIm used by GAVI)

• Export credit agencies

• PAHO revolving fund

• ??

• RH, Net Guarantee

Options for bridging uncertainties in donor financing


99

A donor coordinated pledge guarantee (PG) mechanism can provide bridge financing and decrease procurement delays (and hence stockouts)

Pledge Guarantee (PG) mechanism

DonorCountry

Manufacturers1

Donor makes pledge

2Country request

mechanism to cover product cost

3

PG verifies pledge with donor and establishes

MOU

4 Country procures through existing process

5Mechanism pays manufacturer or

procurement agent

6 Manufacturer ships product to country

7

Donor pays the mechanism

(1) Could also be accessed by NGO or UNFPASource: Existing McKinsey and JSI Deliver analysis; Dalberg analysis


1010

Inter-organizational coordination and risk sharing can shift the push-pull boundary

Source: Existing McKinsey and JSI Deliver analysis; Dalberg analysis

Minimum VolumeGuarantee Institution

Country ManufacturersDonor

1

Donors and countries estimate annual purchasing volume for

specified products

2

MVG decides on volume of product and amount of

risk to assume

Establishes master contracts with manufacturer based on

volume / risk tolerance

3Countries and/or donors each place individual orders under

master contract

4

Manufacturer ships products directly to

countries

5

Manufacturer informs MVG of unused volume

Secondary Markets?

6

Sale or storage of unused product; potentially waste


1111

Framework agreements

Pooled procurement

Full serviceprocurement

Type DescriptionExamples

• Master contract established • Based on aggregate forecasting and appetite for risk

in level of guarantee

• PEPFAR SCMS• UNICEF

• End to end procurement services, including freight and logistics

• Agreed upon pricing at signing of agreement

• Target specific product categories for group purchasing

• Set price ceilings and agree on delivery terms based on agreed upon pooled volume

• Clinton HIV AIDS initiative

• Global Fund VPP

Landscape of procurement options in global health

global health supply chains

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