Barriers and Opportunities for PPPs in African Supply Chains Jeff Barnes, MBA Abt Associates

Abt Associates | pg 2 Our Approach Private Health Sector Assessments are qualitative, multidisciplinary studies that assess the performance of the private health sector from a health systems and market dynamics perspective. Under the USAID-funded PSP-One and SHOPS projects, Abt Associates has conducted about 30 private sector assessments. We used results from Senegal, Benin, Cote d’Ivoire, Tanzania, Malawi and Ghana for this analysis.

Abt Associates | pg 3 Assessment approach –Enabling environment (Governance, Human Resources, Policy) –Health financing –Service delivery –Supply chain –Demand

Abt Associates | pg 4 Supply Chain Analysis Approach  Assess regulatory environment of the private sector supply chain;  Structure and functioning of supply chains, interaction and impact of public sector and NGO supply chain system on the private commercial sector;  Focus on access, pricing and stockouts of priority health commodities such as contraceptives, zinc/ORS, ARVs;  Assess opportunities for PPPs to strengthen system performance.

Abt Associates | pg 5 Findings from all Assessments:  Strong urban bias of retail outlets, including 2 nd tier shops  Underperforming public sector procurement and distribution parastatals  Donor focus on public sector procurement and supply chain— however investment neglects logistical capacity  Minimal integration of public and private sector supply chains.  Public sector disfunction often leads to creation of donor supported parallel supply chains managed by NGOs and FBOs.

Abt Associates | pg 6 Findings: Differences between regions Francophone Countries  Regulation by divisions within Ministries of Health– full budget support for all regulatory functions  4-6 highly capitalized, highly regulated importers/distributors able to operate at scale and serve the entire country  Price controls and low price variance at retail level  Illicit and/or substandard drugs found in traditional markets, but rarely in clinics or pharmacies. Anglophone Countries  Regulation of retail outlets is by parastatal pharmaceutical councils—regulatory functions are financed by licensing fees.  Fewer controls on competition but more fragmentation at all levels– 100 to 200 importers/distributors with few able to adequately serve the entire country;  Few price controls and greater price variance.  Illicit and substandard drug found in chemists, drug shops and distributed by registered importers.

Abt Associates | pg 7 Lower tier drug shops Francophone Countries  Existence of a “second tier” of drug shops called “Depot de pharmacie”– but not well developed and policies do not support their expansion. Fewer “depots’ than pharmacies. –In Senegal, Depot de pharmacie are owned by religious leaders as a profitable business and compete in urban markets –In Ivory Coast, depots are exclusively in rural areas and owned by pharmacists. However, not registered or promoted by the DPM

Abt Associates | pg 8 Lower tier drug shops Anglophone countries  Second tier drug shops are more formalized and very popular— often competing directly with pharmacies.  These shops show potential for being “networked” but not through a fractional franchise model: –Licensed chemical sellers in Ghana, –Duka la dawa in Tanzania  Many more shops than pharmacies e.g. In Ghana, 11,159 LCS vs. 700 licensed pharmacies.

Abt Associates | pg 9 Regulatory Issues  Francophone Countries: –Strict enforcement of one pharmacist for one pharmacy rules– limits possibilities of retail chains and for pharmacists with greater management capacity to invest and expand. –Stricter requirements of importers/distributors for all countries in West Africa Economic Union: qualifications of personnel, lot tracking, storage and transport conditions, ISO quality systems, restricting sales to registered pharmacies. High standards limit number of market entrants, ensuring that all market players have scale to serve the entire country and permit cross subsidization.

Abt Associates | pg 10 Regulatory Issues  Anglophone countries –Minimal supervision of distribution and retail outlets, leading to abuse of scope of practice of lower tier drug shops –Regulations of importers, wholesalers and distributors typically do not require lot tracking, storage, transport or restrictions on clients. Leads to fragmentation at the wholesale level, poor coverage of underserved areas, and increased risk of substandard and fake drugs leaking into formal retail network.

Abt Associates | pg 11 Public sector central stores units  Senegal: PNA supplies public and private. Gov’t mandates a minimum percentage of generic products which pharmacies procure through PNA.  Benin: Non-profit entity mandated by gov’t. Supplies to public and private and private buying cooperatives.  Malawi: Inadequacy of Central Medical stores has lead to creation of a number of donor and NGO- managed parallel distribution systems.

Abt Associates | pg 12 Opportunities for Public-Private Supply Chain Strengthening  Promote selling from public sector central purchasing units to the private sector, especially to ensure access to quality generics, (Senegal, PNA); –Increase financial viability of public sector central purchasing units, –Increase downward price pressure on prices without sacrificing quality.

Abt Associates | pg 13 Opportunities for PPPs:  Promote integration of private sector into public sector supply chains –Contracting out for private sector storage and/or delivery –Where private sector capacity is strong (esp. francophone countries), contract out for delivery from public regional stores to public sector service delivery points Reduces logistical costs to the public sector and increases flexibility to respond to needs; Allows private sector to sell excess capacity and reinvest in last mile logistical capacity

Abt Associates | pg 14 Opportunities for PPPs  Pilot new approach to drug shop networks to support advocacy for regulatory reform. –Fractional franchise approach tested in Ghana and Tanzania was not successful or too expensive—difficulties ensuring franchisee discipline. –However, there is still a need to improve efficiency and scale through a network built on private ownership. Facilitate access to capital and tax reductions for pharmacist entrepreneurs to expand a network of 2 nd tier shops beyond their pharmacies in a hub and spoke model. Pharmacist provides supply, supervision and management. Allow pharmacists to obtain volume discounts for their networks.

Abt Associates | pg 15 Opportunities for PPPs  Following documentation of pilot advocate for policy reform: –In francophone countries: Ease restrictions on pharmacists owning multiple outlets Clearer definition of drug shop scope and promotion of such outlets for last mile communities –In anglophone countries: Increase enforcement of retail outlet regulation and monitoring Restrict 2 nd tier outlets to rural and underserved areas Networks increase the ease of retail monitoring.

Abt Associates | pg 16 Thank you.