Mechanisms for “Better Money”in Financing & Procurement ofReproductive Health Supplies

Update

Fall 2006 Meeting of the Reproductive Health Supplies Coalition

Reproductive Health Supplies Coalition – Vision

Vision “ensuring sustained access”

Objectives “Increase … financial resources and

their more effective use …” “Strengthen global, regional, and

country systems …”

Systems Strengthening Work Group – Objectives

Objectives

“Develop solutions to drive increased reliability, predictability, and efficiency of public financing …”

Defining the Problem

2004-05

Research on global financing and procurement (DFID, Gates)

Highlight inefficiencies

Scope for improvement in global architecture

Finding Solutions

The Hague, 2005

Technical design options to alleviate inefficiencies in financing & procurement (“better money”)

In tandem with work to develop options to mobilize “more money”

Two Options

New York, 2006

Minimum volume guarantee (MVG) Sub-optimal prices due to small,

unpredictable orders

Pledge guarantee (PG) Uncertainties in timing of funding Financing and procurement not in sync

Minimum Volume Guarantee

Aggregate demand forecasts of “preferred customers”

Provide minimum volume guarantees (advance commitment) to manufacturers

Pre-negotiated contracts Lower prices Reduce lead times

Requires reliable forecasting

Pledge Guarantee

Advance money to purchaser

More stable flows of funds

Improve prices, reduce emergency orders, enhance supply chain management

Assume risk of non-repayment

Need More Data

New York, 2006

Collect additional information on potential impacts

Impact on prices and lead timesUNFPA – manufacturers

“Downstream” country-level impactsJSI – country advisers

Overall Findings

Pricing and system inefficiencies Wide variation in procurement prices Unreliable financing and supplies =>

ripple effects

Potential to make financing more effective Political, bureaucratic, practical

challenges

Manufacturer Perspectives

Five manufacturers Condoms, IUDs, orals

Advance commitments could: Lower prices 1-10% Reduce production lead times

Prerequisites Upfront purchase order (some) Standardisation of packaging and branding (some) Accurate forecasting and planning of delivery

schedules (all)

Field Perspectives – Minimum Volume Guarantee – Impact

Lower prices for some products (70% of country advisers)

More predictable supplies and better management (56%) Reduce warehouse costs, expired

products, multiple procurements

Potential to further fragment financing/procurement (63%)

Field Perspectives – Minimum Volume Guarantee – Feasibility

Legal and regulatory barriers Amend donor, government

UNFPA as operator – varied support (50%) Bypass barriers, assume coordination Need to reinforce capacities

Field Perspectives – Pledge Guarantee – Impact

Consistent availability of funds big improvement

Forward funding

Improve long-term planning (81%) Smooth financing, more predictable

supply flows (63%) “help guarantee products arriving on

schedule”

Field Perspectives – Pledge Guarantee – Impact

Increase profile of reproductive health (78%)

“help position RH” “raise the profile of contraceptive

procurement” “create more of a sense of

responsibility and obligation”

Field Perspectives – Pledge Guarantee – Feasibility

Realities and risks

Uncertainties about donor, government funding

Accessing SWAp funds Risk of non-repayment

Recap

No clear disadvantages

Benefits case-by-case; will not solve everyone’s problems

More favorable response for pledge guarantee

Now What?

Not ready to bury the ideas

Hypothetical => Empirical

Mechanisms need to be tested, proven to work, then more broadly applied

Reality of large contracts, with upfront payment may loosen pricing further

Next Steps

Design and implement proof-of-concept

Combined minimum volume/pledge guarantee Meaningful in scale, managing risk Operationalize, apply not-so-new concepts Build on, strengthen existing architecture Focus on UNFPA procurements, expandable to

“UNFPA+”

Not endorsing McKinsey business model

Not necessarily a permanent solution

Roles of Partners

UNFPA

Existing practices and performance What capacities to reinforce What to seek in other partners

Other partners

Implications for Reproductive Health Supplies Coalition

Next steps will need:

Key individuals to champion the process

Funding for design and implementation Technical assistance The “ask” – Stakeholder buy-in (donors,

potential users) Evaluation plan Clear milestones

Questions?Comments?