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Global Health Supply Chains

Global Health Supply Chains. Prashant Yadav. The health production process. How international global health financing flows to low income countries (1). Drug Manufacturers. International Financing. Public Channel Buyers. Private Channel Buyers. NGO Channel Buyers. Private Sector.

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Global Health Supply Chains

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  1. Global Health Supply Chains Prashant Yadav

  2. The health production process

  3. How international global health financing flows to low income countries (1) Drug Manufacturers International Financing Public Channel Buyers Private Channel Buyers NGO Channel Buyers Private Sector Public Sector NGOs End patients

  4. How international global health financing flows to low income countries (2) Drug Manufacturers International Financing Public Channel Buyers Private Channel Buyers NGO Channel Buyers Private Sector Public Sector NGOs Slide template borrowed from Dalberg Global Development Advisors- AMFm RBM Task Force Presentation End patients

  5. Banking crisis has significant impacts on international aid Source: David Roodman

  6. Aggregate economic shocks and infant mortality Source: Baird, Friedman and Schady (2007)

  7. 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 Grant signed money disbursed PO signed With Pledge Guarantees Public tendering process Shipment and distribution process Production process Forecasts PO signed Grant signed money disbursed With Risk Sharing/volume Guarantee

  8. Options for bridging uncertainties in donor financing Examples Type of product Description Debtissuance • International Finance Facility (IFFIm used by GAVI) • Longer term debt instrument, guaranteed by donor countries Bond Commercial paper • Shorter term debt instrument, for shorter term financing needs • ?? Trade credit • Donor-asset or commitment backed commodity trade credit Pledge guarantee • RH, Net Guarantee • Loan made by exporter to importer Trade credit / commodity financing • Export credit agencies Letter of credit • Bank issued and irrevocable; used in international trade Revolving funds • Stability fund to smooth financing availability for time-sensitive health supplies • Often marries financing and procurement (pooling) • PAHO revolving fund Revolving drug fund • Commercial bank bridge loans • IBRD or IDA from WB • Grameen Growth Guarantee Working Capital loan Short term commercial lending • Working capital issued by commercial lender – “bridge” or “hard money” loan

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

  10. Inter-organizational coordination and risk sharing can shift the push-pull boundary 5 Sale or storage of unused product; potentially waste Minimum VolumeGuarantee Institution Manufacturer informs MVG of unused volume 2 6 Secondary Markets? MVG decides on volume of product and amount of risk to assume Establishes master contracts with manufacturer based on volume / risk tolerance Donors and countries estimate annual purchasing volume for specified products Manufacturer ships products directly to countries 1 Donor Country Manufacturers 4 3 Countries and/or donors each place individual orders under master contract Source: Existing McKinsey and JSI Deliver analysis; Dalberg analysis

  11. Landscape of procurement options in global health Type Description Examples Framework agreements • Master contract established • Based on aggregate forecasting and appetite for risk in level of guarantee • Clinton HIV AIDS initiative • Target specific product categories for group purchasing • Set price ceilings and agree on delivery terms based on agreed upon pooled volume Pooled procurement • Global Fund VPP Full service procurement • End to end procurement services, including freight and logistics • Agreed upon pricing at signing of agreement • PEPFAR SCMS • UNICEF

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