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Analysis of the upstream supply chain for Artemisinin Combination Therapy (ACT) treatments for malaria Student: Song Lijie Advisor: Prashant Yadav Santiago Kraiselburd Malaria & ACT Malaria Transmitted disease- by mosquito bite Symptom: Mild flu to death in a few hours 1B cases every year, 1.2 million deaths Hardest hit region: sub-Sahara, 80% of the world deaths Preventable and curable- ACT Malaria & ACT (con´t) ACT Artemisinin-based Combination Therapy Artemisinin derivative (eg. artesunate) + partner drug (eg. lumefantrine) The only effective antimalarial drug $1.00 at public sector Background Global Subsidy Subsidize the price of ACT at global level in public as well as private sectors Lower the ACT price paid by first-line buyers such as private national wholesalers or ministries of health AMFm-Affordable Medicines Facility for Malaria Source: RBM Task Force/Dalberg Background Upstream Supply China of ACT Planting, harvesting and drying of A. annua Seeding in December to January, harvesting in August Extraction and purification of artemisinin Done by extractors located close to growing area Production of artemisinin derivatives Disconnected from the previous phase Production of ACT Prequalified ACT manufacturers Total lead time = 18 months Research Question What will be the impact of subsidy on te upstream supply chain of ACT? What subsidy structure will lead to optimal outcomes in the upstream supply chain? Modeling Approach SP 1 Y1 =P1-SP1 ACT1 (P1) Manufacturer Upstream Supply Chain Before Subsidy ACT2 (P2) Manufacturer Global Subsidy (AMFm) SP 2 1. SP1= k * P1; SP2 = k * P2 2. SP1=SP2 3. Y1=Y2 After Subsidy Y 2=P2-SP2 Modeling Approach Intermediate supplier 1 Manufacturer A Component A1 Intermediate 1 Drug A (AM+LF) Intermediate supplier 2 Component 2 Intrermediate 2 Modeling Approach 1 player in one market (Monopoly) 2 players in one market (Cournot Equilibrium) 2 players in 2 markets Multiple players in multiple markets -------------------------------------------- Equilibrium prices and supply quantities for different ACTs and intermediates in the above scenarios under different subsidy structures