Procurement for Impact (P4I) and Market Shaping Progress report 16 December 2014 IPC Meeting, World...
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Transcript of Procurement for Impact (P4I) and Market Shaping Progress report 16 December 2014 IPC Meeting, World...
Procurement for Impact (P4I) and Market Shaping Progress report
16 December 2014IPC Meeting, World Bank in Washington
Stepping back: why is the Global Fund involved in Sourcing?
2
Over the last 7 years, the Board determined that the organization should play a greater role in procurement and market shaping of health products that it finances with 3 objectives1
1. Accelerate the introduction and maturation of new, more cost-effective products;
2. Ensure recipients procure the most cost-effective, WHO-recommended health products or regimens that meet the Global Fund quality assurance policies;
3. Ensure the continued availability, affordability, and innovation of products, including those for which there are not currently sustainable market conditions. through multiple approaches
1 GF/B23
The Global Fund has stepped up its sourcing and procurement strategy through a Procurement 4 Impact (P4i) transformation
One Sourcing team dedicated to fundamentally change the way we work across the supply chain to increase access to products
Earlier involvement
and closer collaboration
with manufacturers
Improving our purchasing
capability and changing our contracting
models
Optimising the international
supply chain to reduce cost and improve quality and efficiency
Better planning and
scheduling to support
continuity of supply
Delivering more products at the right time and place to more
people
Our Methodology
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A connected process to maximise value (which is not limited to purely to cost)
UNDERSTAND DESIGN ENGAGE MANAGE
Going to the real places, meet the stakeholders and understanding the facts.
Defining a set of objectives based on findings and designing an approach to deliver them
Designing tenders to meet our objectives
Working with suppliers to drive continuous improvement
Demand and Market Analysis
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A structured, fact based diagnostic that evaluates 4 sets of criteria
The Product , Its Cost Structure and Market DynamicsIn depth analysis of API / FF; packaging and country specific requirements. Understanding of relative drivers, supply chain integrity and volatility
The Supply Base, Their Capabilities and ChallengesOn site analysis with face to face discussions Provides insight to supplier strategy, commitment and issues
The Demand Profile and Opportunities for Partner AlignmentReliable and up to date demand forecast through PPM countries;Coordination of demand across agencies; Partnering where objectives and legislative processes permit
Historical Challenges and Future DirectionLearning from the past to avoid previous mistakesUnderstanding the future development path to ensure our strategy is aligned
Demand Side Analysis
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Placing the spotlight on ourselves, our customers and partners to understand the problems from the demand perspective - our findings from ACTs.
Lack of supply chain integrity due to over commitment and under performance.
Limited transparency in co-payment allocation process
Short term planning causing instabilityIn raw material pricing
Limited capacity planning for manufacturers
Lack of leverage by separating
PPM and AMFm volumes
Complex administration processes
All these have been impacting Our Core ObjectiveAVAILABILITY OF PRODUCT
The Analysis in Practice: Delivery Performance
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Poor delivery performance means that people who need treatment are not getting it. It has been caused by a variety of factors ---------and we will do something about it
The LLIN Tender
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ResultsKey Facts
Date: Sept-Dec 2013
Value $250m per year
No of Products 50+
No of Bidders 13
Evaluation Criteria 9
Technical : Commercial Weighting
35% : 65%
Negotiation Medium Telephone
Successful Bidders 10
Additional Elements 2 year contracts with committed volumesPrice adjustment mechanism & protection
Savings of $140m (8.7%) through contract life.
Support to local manufacture
Product standardisation through active demand management
Pricing available to other parties
New levels of trust and understanding.
The ACT Tender
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ResultsKey Facts
Date: Apr-Jun 2014
Value $130m per year
No of Products 20
No of Bidders 9
Evaluation Criteria 8
Technical : Commercial Weighting
40%: 60%
Negotiation Medium Reverse Auction or Telephone
Successful Bidders 9
Additional Elements ASAQ and AL separate evaluation 2 year contractsCombined PPM, CPM and RSM volumes
• Savings of $100m (33%)
over contract life
• Stabilising Artemsinin price through longer term demand.
• Encouraging investment in new products by recognising originators
• Implementation of measures to improve delivery
• Proved supplier capability to support RSM concept
The ARV Tender
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ResultsKey Facts
Date: September-December 2014
Value $500-600m per year
No of Products 120+
No of Bidders 15
Evaluation Criteria 9
Technical : Commercial Weighting
55% : 45%
Negotiation Medium Collaborative Workshop
Successful Bidders 8
Additional Elements 2-3 year contracts- 3 companies with 3-year Supplier Partnership Contracts
• Savings of $100m (2 yr: 9%)
• Sustainable & predictable supply of the full range of the needed products
• Enabling the quicker introduction of new products recommended by WHO
• Encouraging longer shelves & country registration
The ARV tender objectives are aligned to the Board’s Market Shaping Strategy.
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These objectives will result in a new form of supplier
engagement
• Reduced lead times• Improved Delivery
Performance• Mitigate force majeure
Meeting programme needs Continued reliable supply De-risking API supply Improved processes To be customer of choice
Leveraged volumes Improved planning and
longer term contracts Use supplier expertise Collaboration to protect
reasonable margins
Sustainable supply
Competitive pricing and affordability
On-Time Delivery
Quality and Regulatory
Longer shelf life Broader country
registrations Supporting new product
introduction
The Global Fund’s Position in Global ARV Spend
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other national, bilateral &
multilateral funds, $350
Government of South Africa, $250
PEPFAR, $400
Global Fund, $500
Funding sources for ARVs in low and middle income countries, USD millions (2012)
PPM 50-55%
Non PPM PRs45-50%
33%
27%
17%
23%
In 2012 PPM Spend accounted for +/- 20% of the global institutional spend. Estimates suggest this may have risen by 2014 to a maximum of 22%
2012
While this gives the leverage that can be deployed it gives the Global Fund greater flexibility in
supplier selection without de-stabilising the market.
This tender 17-18%
15-17%
A Re-Cap on the Key Elements
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Scope 75 ARV medicines Spend of $350m in 2014 forecast to rise to $600m by 2016
Timeline Tender Issued 25th July2 Rounds of Q+AResponses Received 12th September15 Suppliers RespondedEvaluated workshops: 13- 17 October
Key Elements
Addresses the Board’s strategy on market shaping through sustainability as well as affordabilityBidders offered two types of contractCollaborative workshops formed part of the evaluation process for selected bidders.
Key Elements of the Approach 1: Continuous Supply
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Challenge to Address: Ensuring delivery across all 75 products where some, although vital in treatment, have very intermittent demand.
Solution: Segmentation of products across a standard lifecycle model withweighted scoring. Evaluation of Supplier API Sourcing Strategy to determine risk.
Key Elements of the Approach 2: Market Sustainability
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Challenge to Address: Ensuring ongoing and new supplier participation in amarket associated with low returns.
Solution: Offer to develop long term supplier partnerships with selected suppliersbased on collaborative projects and committed product volumes over 3-5 years. Mechanism developed to support new entrants and new products from existingplayers.
A two track approach to supplier engagement
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Two forms of framework agreement were defined
Approach Profile Engagement Model
Longer Term
Shorter Term
Type 1(Supplier Partnerships)
Type 2Supply Contracts
The type and duration of contracts awarded will be determined as part of the tender process
Allocated and Committed VolumesAnnual joiint business plansA range of products (high volume)
Allocated and Committted VolumesSingle products (lower volume)
Weighting Criteria
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To achieve a complex range of objectives a number of criteria were evaluated with the overall weighting shown below.
The overall weighting comprised • 45.5% price criteria • 54.5% other technical & value
elements
Evaluation Methodology
A structured methodology was followed through out the process which required a significant level of data load. All data and calculations have been independently verified and a full audit trail maintained.
The Collaborative Workshops
The workshops were based on projects initiated by the Global Fund and by bidders. For the bidders projects submitted varied in ambition and detail covering topics including African investment, API security and new product and formulation development.
The Global Fund initiated 4 projects:
Project one: Target pricing• Tenofovir based regimens/APIs: TLE, TEE, TL, TE, E and • 2nd line protease inhibitors: Lopinavir-ritonavir and atazanavir-ritonavir
Project two: Target Pricing• Zidovudine based regimens/APIs specifically: LZN, LZ, N.
Project three: Improving paediatric supply and formulations
Project four: Vendor Managed Inventory to support the Rapid Supply Mechanism
Benefits Analysis: 1
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1. Improvements to supply chain integrity by de-risking the supply of active pharmaceutical ingredients (API)
Number of products which have previously proved difficult to source reduced
Evidence of API diversification across the supply base to improve API security.
Proposals received for improvements to the supply of paediatric products.
Objectives
Results
Benefits Analysis 2:
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4. Ensuring continuous, reliable supply.
Results
The long term collaborative agreements will support continuous supply through improved lead times and better delivery performance
The new approach will drive further improvements through the deployment of objectivised annual business plans.
RSM responses received indicate the viability of a VMI solution to support the proposed profile.
Objective
Benefits Analysis 3:
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5. Underwriting affordability by ensuring competitive pricing
Results
Cost reductions for optimal 1st & 2nd line regimens for adults & children: immediate and further reductions over time
Cost avoidance through mitigation of proposed price increases for zidovudine-based regimens
Significant shifts in the price dynamics of alternate WHO recommended 1st & 2nd line regimens and for better formulations for children leading to further potential for cost reductions
Budgetary potential through budgetary capping
Objective
Benefits Analysis 4.
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7. Enabling the quicker introduction of new products
8. Encouraging the development of products with longer shelf life and widespread country registration to reduce supply chain risks
9. Working with originator and generic manufacturers to facilitate the development and scale-up of new optimal products as recommended by WHO
Results
Many suppliers have launched projects and/or announced plans for new product introductions: improved formulations and next generation regimens for adults and children
Many suppliers have launched projects and/or announced plans for improved shelf life extensions
Engagement with originator manufacturers on planned for Q1 2015
Objective
Conclusion
Adopting the new approach based on long term, strategic relationships has, from the evidence of the tender, proved successful.
Through the tender the Secretariat has supported the Board’s strategy on market shaping through underpinning long term sustainability both at a product and market level.
Direct savings of $96m for PPM grants have been achieved with a future price roadmap that will increase affordability equating to at least 400,000 people on treatment for 2 years
Further budgetary headroom of up to $125m for non PPM grants has been identified which equates to up to at least 500,000 people on treatment for 2 year
Supplier relationships have now moved to a state where future value can be created for mutual benefit.
The team acknowledges further work is required to turn aspiration into reality and that maximising the achievable value on an ongoing basis will require close collaboration across the Secretariat to ensure clear and timely visibility and management of demand.
Operationalising the relationships starts in January 2015
Global Fund on HIV and health products for HIV• 2014-2016 allocations: HIV = USD 7.8 billion for 105 countries
• Based on historical evidence this will translate into a spend of at least USD 3.4 billion on medicines and health products
Historically: • 80% on ARVs• 20% diagnostics, drugs of opportunistic infections; condoms etc.
Recent (Global Fund) Technical Review Panel (TRP) observations
• “Grant applicants have struggled to present a clear and prioritized concept note that explicitly explains strategic choices made in the allocation of limited resources to high-impact, cost-effective activities”
• “The TRP fully recognizes the important contribution that treatment can make to reducing both mortality and new infections. However, these gains can only be fully realized in an environment of ready and equitable access to HIV testing and treatment, strong linkages between diagnostic and ART services, quality medical care and support, appropriate regimens, high retention and good adherence”
Feedback from recipient countries and grant management teams
• Confusion on the interpretation of the WHO recommendations about CD4 and viral load
• Challenges to develop a prioritized rational and afforded plan for implementing the WHO recommendations
• Uncertainty of how DBS and “POC” will evolve and what is the right mix; should they wait?
• Need for a guidance on the process for a transparent selection and procurement of the optimal most cost-effective platforms
• National laboratory teams need empowering to be able to argue their case in funding prioritization decisions
Feedback from manufacturers
• Gaps around DBS and sample transport normative guidance• Need for & realistic country based forecasts with funding behind
them: separation of need from demand • International expectations don’t often meet country reality• Infrastructure and skills gaps need redressing• Greater focus on service levels in selection and procurement• Longer term vision in procurement and contracting • Service contracts need to be funded and purchased
HIV Diagnostics: Our approach will be broad based and designed to address a range of objectives - including
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These objectives will result in a new form of supplier engagement
• Reduced lead times• Improved Delivery
Performance• Simplify supply logistic
chains & distribution models
• Mitigate force majeure
Continued supply of products
Meeting the needs of country programmes
• Leveraged volumes• Improved planning and
longer term contracts• Use supplier expertise• Product Standardisation
Sustainable Supply
Competitive Pricing and Affordability
On-Time Delivery
Quality and Regulatory
• Support up-take of new technologies improving programme performance
• Procurement of Quality Assured products
We are working with the companies to develop a range of contracting models for high-cost analysers
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Framework Agreement Pricingschedule
Purchase agreement
Performance schedule
Quality schedule
Reagent rental
agreement
Turnkey agreement
Governanceschedule
Country OrdersCountry
OrdersCountry Orders
Country OrdersCountry
OrdersCountry Orders
Country OrdersCountry
OrdersCountry Orders
Initial cost outlay
High Low Medium
Level of complexity
Low Medium High
Maturity of environment
High Medium Medium/Low
Risk to user High High Low
Indicative Timeline.
Activity Timeline
HIV Diagnostics Manufacturers Engagement
18 September 2014
HIV Diagnostics Partners Engagement 2 October 2014
Market Assessment & Strategy Definition Q4-2014/ Q1-2015
Viral Load RFP Launch: Q4 2014
RDT and CD4 RFP Q1/Q2 2015