Global Health Supply Chains Prashant Yadav

Yadav. Global Health Supply Chains 2 The health production process

Yadav. Global Health Supply Chains 3 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)

Yadav. Global Health Supply Chains 4 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

Yadav. Global Health Supply Chains 5 Banking crisis has significant impacts on international aid Source: David Roodman

Yadav. Global Health Supply Chains 6 Aggregate economic shocks and infant mortality Source: Baird, Friedman and Schady (2007)

Yadav. Global Health Supply Chains 7 Financial flows PO signed Public tendering processProduction processShipment and distribution process Grant signed money disbursed Forecasts Current PO signed Public tendering processProduction processShipment and distribution process Grant signed money disbursed Forecasts With Pledge Guarantees PO signed Public tendering process Production process Shipment and distribution process Grant signed money disbursed Forecasts With Risk Sharing/volume Guarantee Grant pledge

Yadav. Global Health Supply Chains 8 Debt issuance Trade credit Revolving funds Working Capital loan 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

Yadav. Global Health Supply Chains 9 A donor coordinated pledge guarantee (PG) mechanism can provide bridge financing and decrease procurement delays (and hence stockouts) Pledge Guarantee (PG) mechanism Donor Country Manufacturers 1 Donor makes pledge 2 Country request mechanism to cover product cost 3 PG verifies pledge with donor and establishes MOU 4 Country procures through existing process 5 Mechanism pays manufacturer or procurement agent 6 Manufacturer ships product to country 7 Donor pays the mechanism (1) Could also be accessed by NGO or UNFPA Source: Existing McKinsey and JSI Deliver analysis; Dalberg analysis

Yadav. Global Health Supply Chains 10 Inter-organizational coordination and risk sharing can shift the push-pull boundary Source: Existing McKinsey and JSI Deliver analysis; Dalberg analysis Minimum Volume Guarantee Institution Country Manufacturers Donor 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 3 Countries 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

Yadav. Global Health Supply Chains 11 Framework agreements Pooled procurement Full service procurement Type Description Examples 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