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Global Health Supply Chains
Prashant Yadav
The health production process
Patient’s ability or willingness
to manage their health
Health care workers
Drug Supplies
Health care
production
process
Health
care
Clinical
outcome
Health production
process
Health
Equipment (Lab+Other)
Facility Infrastructure
Quality of
Life
Patient’s ability
and willingness to
seek health care
and pay for it
Environment, Sanitation,
Nutrition
Patient
Income and Wealth
Quality of Life
production
process
Goods and services
Goods and
services
production
process
Material Inputs
Yadav . Global Health Supply Chains
2
How international global health financing flows to low income countries (1)
Drug
Manufacturers
Private
Channel
Buyers
Private
Sector
International
Financing
Public
Channel
Buyers
Public
Sector
NGO
Channel
Buyers
NGOs
End patients
Yadav . Global Health Supply Chains
3
How international global health financing flows to low income countries (2)
Drug
Manufacturers
Private
Channel
Buyers
Private
Sector
International
Financing
Public
Channel
Buyers
Public
Sector
NGO
Channel
Buyers
NGOs
Slide template borrowed from Dalberg
Global Development Advisors- AMFm RBM
Task Force Presentation
End patients
Yadav . Global Health Supply Chains
4
Banking crisis has significant impacts on international aid
Source: David Roodman
Yadav . Global Health Supply Chains
5
Aggregate economic shocks and infant mortality
Source: Baird, Friedman and Schady (2007)
Yadav . Global Health Supply Chains
6
Financial flows
Public tendering process
Production process
Shipment and distribution process
Forecasts
Grant signed
money disbursed
PO signed
Current
Public tendering process
Production process
Shipment and distribution process
Forecasts
Grant pledge
PO signed
Grant signed
money disbursed
With Pledge Guarantees
Public tendering process
Forecasts
Grant signed
money disbursed
Production process
Shipment and distribution process
PO signed
With Risk Sharing/volume Guarantee
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Options for bridging uncertainties in donor financing
Type of product
Bond
Debt
issuance
Trade
credit
Examples
Description
• Longer term debt instrument, guaranteed by donor
countries
Commercial
paper
• Shorter term debt instrument, for shorter term
financing needs
Pledge
guarantee
• Donor-asset or commitment backed commodity
trade credit
Trade credit /
commodity
financing
Letter of
credit
• Loan made by exporter to importer
• International Finance Facility
(IFFIm used by GAVI)
• ??
• RH, Net Guarantee
• Export credit agencies
• Bank issued and irrevocable; used in international trade
Revolving
funds
Revolving
drug fund
• Stability fund to smooth financing availability for timesensitive health supplies
• Often marries financing and procurement (pooling)
Working
Capital
loan
Short term
commercial
lending
• Working capital issued by commercial lender –
“bridge” or “hard money” loan
• PAHO revolving fund
• Commercial bank bridge loans
• IBRD or IDA from WB
• Grameen Growth Guarantee
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8
A donor coordinated pledge guarantee (PG) mechanism can provide bridge
financing and decrease procurement delays (and hence stockouts)
Donor pays the
mechanism
Pledge Guarantee (PG)
mechanism
7
PG verifies pledge with
donor and establishes
MOU
Mechanism pays
5 manufacturer or
procurement agent
3
Donor
2
1
Country request
mechanism to cover
product cost
Country
Donor makes pledge
Manufacturers
4 Country procures through
existing process
6
Manufacturer ships product
to country
Yadav . Global Health Supply Chains
(1) Could also be accessed by NGO or UNFPA
Source: Existing McKinsey and JSI Deliver analysis; Dalberg analysis
9
Inter-organizational coordination and risk sharing can shift the
push-pull boundary
5
Sale or storage of
unused product;
potentially waste
Secondary
Markets?
Minimum Volume
Guarantee Institution
Manufacturer
informs MVG of
unused volume
2
6
MVG decides on volume of
product and amount of
risk to assume
Donors and countries estimate
annual purchasing volume for
specified products
Donor
Establishes master contracts
with manufacturer based on
volume / risk tolerance
Manufacturer ships
products directly to
countries
1
Country
4
Manufacturers
3
Countries and/or donors each
place individual orders under
master contract
Yadav . Global Health Supply Chains
Source: Existing McKinsey and JSI Deliver analysis; Dalberg analysis
10
Landscape of procurement options in global health
Type
Framework
agreements
Pooled
procurement
Full service
procurement
Description
• Master contract established
• Based on aggregate forecasting and appetite for risk
in level of guarantee
• Target specific product categories for group
purchasing
• Set price ceilings and agree on delivery terms
based on agreed upon pooled volume
• End to end procurement services, including freight
and logistics
• Agreed upon pricing at signing of agreement
Examples
• Clinton HIV AIDS initiative
• Global Fund VPP
• PEPFAR SCMS
• UNICEF
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