mechanisms for “better money” in financing & procurement of reproductive health supplies...
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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