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Yadav . Global Health Supply Chains
22
The health production process
Health care workers
Drug Supplies
Equipment (Lab+Other)
Facility Infrastructure
Health care production
process
Patient
Health care
Clinical outcome
Health production process
Environment, Sanitation, Nutrition
Patient’s ability or willingness to manage their health
Income and Wealth
Quality of Life production
process
Goods and services
Health
Quality of Life
Material Inputs
Goods and services
production process
Patient’s ability and willingness to seek health care
and pay for it
Yadav . Global Health Supply Chains
33
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
44
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
55
Banking crisis has significant impacts on international aid
Source: David Roodman
Yadav . Global Health Supply Chains
66
Aggregate economic shocks and infant mortality
Source: Baird, Friedman and Schady (2007)
Yadav . Global Health Supply Chains
77
Financial flows
PO signed
Public tendering process Production process Shipment and distribution process
Grant signedmoney disbursed
Forecasts
Current
PO signed
Public tendering process Production process Shipment and distribution process
Grant signedmoney disbursed
Forecasts
With Pledge Guarantees
PO signed
Public tendering process Production process Shipment and distribution process
Grant signedmoney disbursed
Forecasts
With Risk Sharing/volume Guarantee
Grant pledge
Yadav . Global Health Supply Chains
88
Debtissuance
Trade credit
Revolvingfunds
WorkingCapitalloan
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
99
A donor coordinated pledge guarantee (PG) mechanism can provide bridge financing and decrease procurement delays (and hence stockouts)
Pledge Guarantee (PG) mechanism
DonorCountry
Manufacturers1
Donor makes pledge
2Country request
mechanism to cover product cost
3
PG verifies pledge with donor and establishes
MOU
4 Country procures through existing process
5Mechanism pays manufacturer or
procurement agent
6 Manufacturer ships product to country
7
Donor pays the mechanism
(1) Could also be accessed by NGO or UNFPASource: Existing McKinsey and JSI Deliver analysis; Dalberg analysis
Yadav . Global Health Supply Chains
1010
Inter-organizational coordination and risk sharing can shift the push-pull boundary
Source: Existing McKinsey and JSI Deliver analysis; Dalberg analysis
Minimum VolumeGuarantee Institution
Country ManufacturersDonor
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
3Countries 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
1111
Framework agreements
Pooled procurement
Full serviceprocurement
Type DescriptionExamples
• 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