1. Focus of DFID’s Current Research  Identify the market characteristics and determinants of reproductive health commodity supply,  Determine whether and in what way international finance and procurement systems play a role in securing commodity security, and  Through selected country case studies, explore county level architecture and systems that influence RH commodity security

2. Focus of the Country Level Studies  Understanding how continuing inefficiencies in demand estimation, financing and procurement systems at country level are contributing to the RH supply security problem  Identifying how these problems have been overcome in some circumstances, and  Knowing whether and how commodity security has been affected by the introduction of aid instruments like SWAPs or budgetary support

3. International study – emerging conclusions  For most reproductive health commodity products, supplier markets are sufficiently deep to enable supply security, without active donor intervention. In fact, the rise of generic Southern suppliers is beginning to enable major cost efficiencies – though a number of issues remain  International procurement efforts are hampered by a lack of coordination between donors and by short term funding horizons  There is evidence that international procurement efforts have been improving in efficiency and effectiveness, though evidence is patchy and there are concerns over service quality  The main issue for donors seem to be a relative lack of capability building results at country level. This issue will be pursued further during the country level study, but there is clear evidence of a lack of a coordinated, long-term strategic effort on this front  There is clearly potential for improved coordination between donors on the strategic capability building level. Real success for such an effort is likely to require: –Clear agreement between donor stakeholders on overall direction and strategy –Strong, committed leadership and dedicated, but lean, resource –An appropriate organisational form – whether as stand-alone organisation or fitting into existing organisational structures

4. World contraceptive commodity supply markets 11,000 Source: UNFPA, Global Consultants Donor-funded and operated Government- operated, may be partly donor funded Private sector/ other Total, developing country World totalDeveloped countries 15,000 4,000 300 224 ~3,500 $m, 2002 Includes: Oral contraceptives (60%+ of market) Male condoms (25% + of market) Implants/ injectibles IUDs Female condoms Emergency contraceptives Does not include sterilization products/ services

5. Rise of generic suppliers Source: Interviews For reasons of IPR or technology capabilities, only “Northern” manufacturers supply market Limited number of suppliers No/ few quality issues High prices, except where products given away at discount “Northern”* suppliers only Entry of “Southern”* suppliers [Transition phase] Maturity of “Southern” suppliers “Southern” suppliers enter market Much lower production costs enables much lower prices However, major quality and reliability issues with new entrants Use of certification and quality control procedures is key New entrants mature and resolve quality and reliability issues Donors will have a large pool of qualified producers, enabling highly competitive sourcing *”Northern” suppliers: manufacturers in developed countries. “Southern” suppliers: manufacturers in developing countries/ emerging markets, e.g. Brazil, India, China

6. Bangladesh Southern sourcing case study Source: Interviews Over the last 4 years, the Bangladeshi Government procurement function (all local staff) have managed to reduce reproductive commodity procurement cost by 1/3 (from $60 to $40m) with no loss in quality or adverse product mix This has been done purely by using best practice procurement techniques, including pushing for generic products and using a “Southern” supplier base Following some initial quality problems, “Southern” suppliers are now performing very well Anecdotally, “Southern” suppliers were able to offer oral contraceptives for 10 cents/ cycle; half the 20 cents/ cycle offered by “Northern” manufacturers Anecdotally, Wyeth upset about these low prices – “we can never match this”

7. Entry barriers becoming lower Source: Interviews; Gujarat Business Council, WHO Oral contraceptives Male condoms Injectable contraceptives Capital cost of plant Other resources required Minimum efficient scale/ turnover* $4-$6m Skilled latex/ chemical engineers Skilled labour 500,000 gross @ 144 condoms (70m) $2-$3m $3-$5m Skilled chemical engineers Skilled labour 5-10 million doses $5-$9m $2.5-$6m Skilled chemical engineers Skilled labour 15 million cycles $3-$4m

8. Need for donor intervention to build market capacity Source: Interviews Donor demand is a large fraction of total demand (or even all of it) Long ramp-up times for production; no slack in system Few suppliers (or none) Example: ACT Donor demand is a low proportion of total demand Short ramp-up times for production/ slack in systems Many suppliers Example: Most contraceptives HighLow

9. Donor procurement of contraceptive commodities Source: UNFPA $’000

10. Efficiency of donor condom procurement Source: UNFPA $/gross (144) – real 2002 prices $4.44 $2.57 UNFPA target range 2001-2002:boost in donor procurement spend

11. Average procurement prices for various donors Source: UNFPA $/gross (144) – 2002

12. Country level issues Source: Interviews Government/ Regional authorities Donors Fragmented, short term funding, focusing on commodity buying, not capability building (tactical, not strategic) Low quality supply chains, and management information systems Multiple, overlapping supply chains (agencies, governments) Low priority Governance Generally weak procurement capabilities Lack of coordination between agencies and governments Low priority Governance $$$$ Procurement Supply chain

13. Recommendations  Continue to expand the supplier base –Some work on certification and quality control measures required –Improve international procurement –Consider options to smooth fund flows and make them more predictable, to facilitate procurement –Improve donor coordination –Improve information flows (e.g. why only detailed information available on condom procurement?)  Improve donor support for country level implementation –This seems to be the biggest issue –Substantially increased strategic focus on long-term capability building required, across procurement and supply chains – increased funding clearly required, but not just a money issue –Strongly improved donor coordination  Creation of a strategic implementation vehicle –Clearly benefits from a coordinating vehicle between donors –Needs to provide strong leadership and resources on strategy and capability building issues –May also help facilitate regional procurement pooling, possibly channelling through UNFPA –Not clear whether better housed inside existing organizations or as a stand- alone entity – benefits and drawbacks to both models