Improving Health in the World and Saving Lives with More Effective Supply Chains

Improving Health in the World and Saving Lives with More Effective Supply Chains

Sustainability GalaNetherlands, June 2, 2010

Prashant Yadav

Yadav . Global Health Supply Chains

2

Clinton Foundation HIV/AIDS Initiative

AcknowledgementsBill and Melinda Gates Foundation

Center for Global Development

UK Department for International Dev.

MIT and MIT-Zaragoza Logistics Program

World Health Organization

Healthcare Redesign Group

Medicines for Malaria Venture

Resources for the Future

Dalberg Global Development Advisors

INSEAD

US Agency for International Development

Government of Zambia

Government of Uganda

Government of Ghana

Government of Kyrgyzstan

Government of South Africa

Government of Tanzania

World Bank

Government of Nigeria

UN Global Fund to fight HIV/AIDS, TB and Malaria

Harvard Medical SchoolZaragoza Logistics Center

UNFPA

John Snow Inc.

http://web.mit.edu/zlc/index.html�


3

The supply chain for health and happiness

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 to 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

Key focus of supply chain innovation



4

Health: The World is Not Flat



5

Does increased wealth result in better health?



6

Unprecedented increases in financing for global health

0

5000

10000

15000

20000

25000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Year

Mill

ion

$

Australia Austria Belgium

Canada Denmark Finland

France Germany Greece

Ireland Italy Japan

Luxembourg Netherlands New Zealand

Norway Portugal Spain

Sweden Switzerland United Kingdom

United States Bill & Melinda Gates Foundation Corporate Donations

Debt Repayments (IBRD) Other



7

End patients

Drug Manufacturers

PrivateChannel Buyers

PublicChannel Buyers

NGOChannel Buyers

NGOs

International Financing

Public Sector

Private Sector

International financing flows for health products (1)

Slide template borrowed from Dalberg Global Development Advisors- AMFm RBM Task Force Presentation



8

End patients

Drug Manufacturers

PrivateChannel Buyers

PublicChannel Buyers

NGOChannel Buyers

NGOs

International Financing

Public Sector

Private Sector

Slide template borrowed from Dalberg Global Development Advisors- AMFm RBM Task Force Presentation

International financing flows for health products (2)



9

Most diseases are treatable with existing medicines



10

Many of these medicines are however not available

Average availability was only 34.9% in the public sector and 63.2% in the private sectorSource: WHO, Health Action International, United Nations MDG8 Report



Why do people seek treatment in the private sector?Travel distances are large to reach public facilities



Waiting lines are long at public facilities



Drug availability is low at public facilities



14

Private sector supply chains for medicines



15

Points of access for medicines in the private sector



16




17




18

18


Non fixed structure retail store

Fixed structure retail storeDrug storeLicensed pharmacy

Drug hawker

Source: MMV

Structurally different supply chains serve each of these end retail points



19

Source: Joint study with CHAI and UNZA in Zambia



20




21




22

-

2,000

4,000

6,000

8,000

10,000

12,000

- 1 2 3 4 5 6

Pric

e ch

arge

d fo

r a fu

ll co

urse

of a

ntim

alar

ial i

n

Zam

bian

Kw

acha

Competition Index= # of sources for anti-malarials in 1 km radius

How retail competition impacts price

P value = 0.0854

Study of over 100 outlets in 4 districts in Zambia



23

CR-n ratios and Herfindahl index for wholesalers in Uganda

Ratio

CR-1 27.7%

CR-2 43.3%

CR-3 55.8%

CR-4 63.8%

CR-5 71.8%

CR-6 77.6%

CR-7 83.3%

CR-8 87.2%

CR-9 90.5%

CR-10 92.3%

Under-5 Adult Total

HHI 4398 1323 1398

Usually a market with HHI less than 1,000 is considered to be a competitive marketplace

1,000-1,800 to be a moderately concentrated marketplace

1,800 or greater to be a highly concentrated marketplace



24

Piggy-backing on other supply chains



25

Public sector supply chains for medicines



26

Public health clinics remain stocked out



27

Rudimentary order and stock management



28

Drivers of poor availability at health facility level

Suppliers Ministry of Health Distribution

Financiers

Clinics

Uncertainties in timing of grant disbursement

Long lead times (up to 36 weeks)

Delays in procurement due to archaic procurement processes and poor quantification and planning

Weak distribution infrastructure and

skeletal MIS

No capacity to manage inventory or consumption tracking

Typical structure. May not hold for all countries and programs

Poor bargaining power and price

transparency



29

Supply Chain Redesign Options



30

Creative Bridge Financing Solutions

Pledge Guarantee (PG) mechanism

Donor CountryManufacturers1

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

6Manufacturer 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

Source: Work with Dalberg Global Development Advisor for RHSC



Forecast Driven

Drug Substance Manufacturing

Current Push-Pull Boundary in Global Health Supply Chains

Co-formulating and Packaging

Pre-delivery Inspection

Shipping and Transport

Drug SubstanceInventory

Final ProductInventory

Order Driven

Inventory /Order Interface

Source : Yadav, Sekhri and Curtis (2006)



32

Risk Sharing shifts 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 contractswith 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

Joint work with Dalberg Global Development Advisors



Forecast Driven

Drug Substance Manufacturing

Shifted Push-Pull Boundary in Global Health Supply Chains

Co-formulating and Packaging

Pre-delivery Inspection

Shipping and Transport

Drug SubstanceInventory

Final ProductInventory

Order Driven

Inventory /Order Interface




34

Regional Health Commodity Supply Hubs


Reduced lead-timeReduced stock-outsReduced logistics cost



35

Regional Health Commodity Supply Hubs

Source: Partnership for Supply Chain Management



36

NationalDistribution Center

(1)

DistrictStores

72

Health Centers~1450

Source: Tom Brown, MSL, Zambia)

Current distribution structure in Zambia



37

Distribution Redesign : Cross-docking




38

Distribution Redesign : Regional distribution centers

HC HC HC HC HC HC HC HC HC HC HC HC

RDC - Lusaka RDC – TBC RDC - TBC RDC - TBC

Key: Information / Order Flow

Dispatches

HQ MSLLusaka

Option 2a – Regional Distribution Centres




39

A quasi randomized experiment to determine optimal supply chain structure for the public sector clinics

National Distribution Center

District Stores72

Health Clinics~1500

Option BOption A

• 24 districts selected• Three subsets based on similarity, propensity matching• Option A, B or control randomly assigned to each district• Service Level and Inventory of 25 tracer drugs monitored at each clinic for 12 months

Control group



40

The CSCMP Global Health

Distribution System Challenge

Courtesy: Blair Sachs Hanewall, Bill and Melinda Gates Foundation



41

The Federated States of Micronesia



42

Immunization program staff at work



43

Immunization out-reach trip

Low population density on each island

Cost per drop is very high

No storage capacity on islands requiring more frequent deliveries



44

Summary


Improving Health in the World and Saving Lives with More Effective Supply Chains

Business

Transcript of Improving Health in the World and Saving Lives with More Effective Supply Chains