Supply Chain Frontiers Issue #29. Read all articles in this issue
More than $10 billion in donor-financed health commodities is expected to flow into low- and middle-income countries (LMICs) annually by 2011, and much work is going on to improve the efficiency of the supply chains that deliver these products. But the innovations that are helping LMICs to overcome chronic healthcare problems tend to be program-based: a major challenge is how to leverage best practices across programs. The Zaragoza Logistics Center (ZLC) organized the Global Health Supply Chain Summit (November 6-7, 2008) in Zaragoza, Spain, to address this challenge.
Health care supply chain performance is much poorer in LMICs than in OECD nations, and varies substantially among countries, regions, programs, delivery channels, and sub-populations. Performance also may vary considerably over time. For example, it is estimated that the average availability of treatments at LMIC public health facilities is less than 25%, and at private outlets, where products are often unaffordable to most of the population, availability is under 65% (source: HAI surveys in five LMIC countries).
In general, health commodities are manufactured internationally, procured and delivered to the country, and distributed or dispersed through one of four channels -public, private, faith-based and employer-provided - before being used by the patients. At times, all the players in the global health community drive, reinforce, and support the complexity of this structure.
In LMICs the health system is organized into vertical program-based supply chains, with a fairly distinct supply chain for each of the major programs: Family Planning, Essential Medicines, Malaria, Tuberculosis (TB), HIV/AIDS and Vaccination. While some in-country physical distribution activities have been integrated across programs in a number of countries, activities such as program planning, needs quantification, coordination of product flow, data collection and financing are most often segregated by program.
The program-based structure does offer clear advantages, particularly in terms of organizing and overseeing resources in difficult environments to deliver measurable positive health outcomes. Some programs have also made significant gains in improving supply chain performance.
However, supply chain complexity resulting from the program-based structure continues to be a burden for health care systems. For example, an analysis of the supply system for medicines in Zambia in 2007 showed that 12 main product categories were served by donations from 19 different sources of funding and 17 procurement organizations: an organizational maze that sits on top of a highly fragmented warehousing system.
The supply chain challenges, successes, and innovations can be considered in three dimensions:
1. Demand and market dynamics
The health commodity supply chain for a particular program aims to meet demand in the channels through which products are dispensed or sold, subject to the funding stream from international donors and government finances. Thus, the needs, constraints, challenges, and opportunities that are presented to the supply chain from the “demand side” vary by program. For example, for TB, malaria, family planning, and essential medicines programs, the supply chain replenishes its stock of medicines through a tiered warehousing structure to dispensing points. For programs such as HIV/AIDS, which use a patient roster and vaccination campaigns to administer pre-determined treatment quantities, the supply chain needs to provide the specified quantity to the right locations according to a schedule.
2. Global manufacturing and supply
For most health products, international supply - the upstream portion of the supply chain - includes manufacturing, international procurement, shipment, importation, and delivery to the first in-country warehouse. The international supply process varies quite a bit across programs. For instance, some drugs have long manufacturing lead times due to low supply of natural raw materials, limited capacity for specialized technology in some process steps, and production delays in conjunction with high product variety. Procurement challenges include gaps or delays in donor funding releases, variation in prices paid across countries, redundant procurement activities across countries, and the manufacturer’s risk of increasing capacity in the absence of financial guarantees.
3. In-country distribution
The downstream part of the chain, which distributes and sells products within countries, varies across programs in the types of channels involved (public, private, faith-based), and in the number and location of dispensing points. Programs are experimenting with a number of ideas to improve access to health care, including social marketing to stimulate demand, price subsidies for expensive drugs such as new anti-malaria medicines, and defining new roles for the private sector to extend the reach of public and faith-based channels.
To the extent that LMIC health initiatives are addressing the same underlying supply chain challenges and opportunities, it seems reasonable that these initiatives can learn from and leverage one another to build economies of scale in the solutions being implemented, and to reduce supply chain complexity. It is understandable that individual programs do not want to put their performance levels in jeopardy by joining a shared supply chain. Furthermore, creating common supply chains can be tricky, as product characteristics and market dynamics create unique supply chain needs for particular products and programs. Still, the global health community must think carefully about innovation, assessing what is truly needed, what is unnecessarily constraining, and what is genuinely possible in LMICs.
The Global Health Supply Chain Summit took a step along that path. Professor Prashant Yadav observed that, “While the next steps continue to be identified, many participants felt that the conference itself was a big step forward, since it created a unique venue to discuss supply chains and establish relationships with their counterparts across a variety of health programs.”
This article was based largely on the conference pre-read document written by Prof. Laura Rock Kopczak and Prof. Prashant Yadav. For more information on the Global Health Supply Chain Summit and on related research underway at ZLC, please contact Dr. Jarrod Goentzel, Executive Director, MIT Zaragoza International Logistics Program