Update on work on theGlobal ACT Subsidy

Roll Back Malaria Global ACT Subsidy Task Force

Presentation to RBM Board10 May 2007

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•Institute of Medicine (IOM) Report outlines economic rationale for ACT subsidy (2004)

•RBM Finance & Resource Working Group (FRWG) takes on the task of developing the concept

•The World Bank (co-chair of FRWG), with funding from Bill & Melinda Gates Foundation, engages Dalberg to develop a detailed design

•FRWG leads a Partnership meeting on the topic in Amsterdam in January 2007

•RBM Executive Committee creates a Global ACT Subsidy Task Force to forge consensus

•Task Force Meetings + informal discussions

•Dalberg research, country visits, consultations with stakeholders

•Contributions from many institutions and individuals

Update on work to date

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Why a Global ACT Subsidy? To increase the availability of ACTs and substitute monotherapies across all sectors

CQ

SP

Mono

ACTs

Other

CQ

SP

ACTs

Private Public

406 140

Total = 546

0

20

40

60

80

100%

2006 Antimalarial Treatment volumes (M)

Note: Estimates of actual malaria treatments (vs. fever) are between 25%(BCG) and 40%(WHO). Other category includes MQ, AQ, etc.. P. Vivax treatment included (90M CQ treatments). ACT numbers updated after manuf. Interviews from 82M (WHO) to 90M public sector, and from 8M to 10M in private sector.Source: Biosynthetic Artemisinin Roll-Out Strategy, BCG/Institute for One World Health, Dalberg

-artemisinin

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But ACT prices are very high and affordable to only few in the private sector - major barrier to usage

ACT Mono-Artemisinin SP (Generic) CQ (Generic)

8.0

6.5

0.5 0.30.0

2.0

4.0

6.0

8.0

10.0

Average Prices (USD)

Range(USD) 6-10 5-8 0.4-0.7 0.2-0.4

Note: Ranges indicate variance across countries and products excluding outliers; N (observations): (ACT, 222); (AMT, 227) ; (CQ, 37) ; (SP, 118). Source: Dalberg field research (Kenya, Uganda, BF, Cameroon), Observations by World Bank and Research International (Nigeria). Smaller pricing observations were also performed in Ghana, Rwanda, Burundi, Niger and Zambia), but due to low n not included. SP and CQ data complemented with HAI and IOM observations

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OBJECTIVE: Increase overall use of ACTs

Promote the use of ACTs and drive mono-therapies and ineffective drugs from the market by:

• reducing end-user prices to an affordable level through a properly supported global subsidy of ex-manufacturer prices (CIF basis) - in line with IOM recommendation

• Introducing supporting interventions including for proper use of ACTs

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The Global ACT Subsidy will offer ACTs to first-line buyers at a similar price range as CQ and SP through

existing channels (illustrative)

Global ACT Subsidy

Medicines

Money

Information

Multiple ACT Manufacturers

Private Channel Buyers

Public Channel Buyers

NGO Channel Buyers

Retailers/Providers

(USD ~0.2-0.4 for majority of patients)

Co-payment

In-country supporting interventions

National distributors

(USD ~0.1)

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What the subsidy will not do

• Subsidize raw material suppliers• Subsidize manufacturers

• Subsidize only middle class patients• Limit competition• Discourage innovation• Undermine country ownership

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Design principlesConsensus reached in Task Force on 6 principles

1. Measurement of success2. Pricing & availability3. Management 4. Eligibility – products, supplier, buyers5. Importance of in-country supporting activities to ensure

success of subsidy6. Monitoring & evaluation

Note: These are broad guidelines for moving forward. The translation of these principles to operational considerations will be defined in the path forward

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The success of the global subsidy will be measured to the extent that it contributes to RBM Partnership’s Strategic Targets for 2015, through:

•Lowering the consumer price towards the current chloroquine and SP levels (USD 0.20 / treatment)

•Increasing access to effective treatment in all market sectors (public and private)

•Driving mono-therapies out of the market focusing in particular on the private sector

•Ensuring that the effective lifespan of ACTs is maximized through responsible introduction and use

Principle: Measurement of success

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The subsidized ACTs would be available:

•To the buyers of the private, public and NGO sectors

•At a CIF (landed) cost that makes them competitive to chloroquine and SP, i.e. less than USD ~0.10

•To malaria-endemic countries, as reasonably possible in view of global production capacity

Principle: Pricing & Availability

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The partners do not want to see another costly bureaucracy built up to manage the subsidy. The ACT subsidizing process would be managed by a small Subsidy Secretariat, hosted by an existing organization or organizations, that:

•Runs the product and supplier selection mechanisms

•Informs and registers the buyer accreditation mechanisms

•Manages the payment of the subsidy to the suppliers in line with the principles of the subsidy and in a timely fashion

Principle: Management

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Product, supplier and buyer eligibility would be guided by clear quality and price standards:

•Only ACTs recommended in WHO treatment guidelines – as well as new WHO-approved non-ACT combination classes – will be eligible

•Only fixed-dose combination products will eventually be eligible. However, for the first 2 years of the subsidy, co-blistered products will also be eligible

•Products meeting internationally recognized product quality standards

•The price setting mechanism of the CIF price will be as open and competitive as possible in each submarket and in a way that encourages price reduction, pre-qualification and innovation efforts

•Buyer eligibility will be guided by transparent country-led accreditation mechanisms

•Order eligibility will be defined by a clear set of rules established in collaboration with the countries

Principle: Eligibility – products, suppliers, buyers

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Principle: Importance of in-country activities to ensure success of subsidy

Core in-country activities linked to subsidy

• Regulatory preparedness (drug status, retailer status)

• Alignment of national malaria programs

• Public-focused media campaigns to promote ACTs

• Mechanism to control markups in local supply chain

• Subsidy-specific M&E (incl price) and pharmaco-vigilance

• Provider training re prescribing and dispensing ACTs

Additional activities linked to subsidy

• Promotion of supply chain discipline e.g. : Sell-through systems; Incentive schemes for wholesalers; Social marketing programs; Community-based programs

• Promotion of more appropriate use of ACTs; e.g. proved diagnostic tools

External to ACT subsidy • Malaria interventions distinct from subsidy scope• General malaria programme M&E

The roles and responsibilities of endemic country governments, supported by partners, in the subsidy process and use of subsidized ACTs are significant and include:

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For a responsible introduction the subsidy roll-out will be informed and monitored by concomitant subsidy-specific and subsidy co-paid operational research and M&E of:

•Retailer prices

•Access

•Drug quality

•Drug resistance

•Market dynamics

In at least 6 sentinel countries in Africa (4), Asia (1) and Latin America (1)

Principle: Monitoring & Evaluation

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•Hosting arrangements – the need to find a suitable organization(s) willing to host the subsidy and able to deliver on the management performance measures to be agreed as part of the detailed proposal

•Governance arrangements – the form and structure of the subsidy oversight arrangements and to whom the subsidy is ultimately responsible

•Funding – the size of the funds necessary for the subsidy and establishing a sustainable and reliable long-term source of these funds, as well as definition of an exit strategy

•Supporting activities – define linkage and costing of activities supporting the subsidy

Outstanding design components

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Additional research prior to launch

Questions requiring further analysis:• Will the subsidy be passed on to the patient at the point of sale?• What will the uptake be if prices drop? What is the elasticity of demand?• To what extent will the ACT subsidy contribute to the diminishing use of mono-

therapies?

Types of operational research prior to launch: • Analyze case studies demonstrating uptake of other medicines• Assess experience of existing subsidy-type antimalarial programmes:

– Public sector sales of low-cost ACTs to private sector with stringent controls of mark-ups, e.g., Global Fund grantees in Cameroon, Senegal, Benin

– Social marketing programmes, e.g., PSI programmes in Cambodia, Rwanda• Studies linked to additional demonstration projects, e.g., Tanzania• Baseline surveys

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•June: submission of draft detailed technical proposal to the RBM Executive Committee

•July - October: finalize arrangements for governance, hosting, funding and supporting activities

•July – October: further research to support introduction of subsidy

•November: submit final detailed technical proposal to the RBM Board

•November: announce the subsidy

Next steps

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Requested Board action

Endorse the subsidy objectives and design principles

Express continued support for the introduction of a global subsidy for ACTs according to those principles and objectives

Approve the continuation of the RBM Global ACT Subsidy Taskforce:– As the only RBM mechanism to forge consensus on;– To guide the finalization of a detailed technical proposal including

governance and hosting arrangements, funding requirements, formal linkage with and costing of supporting activities, and any other outstanding operational issues;

– To submit for approval a detailed technical plan for the launch of the subsidy to the November 2007 RBM Board.

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BACK-UP

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Risks identified

• Failure to sustain competition & price reductions• Failure to maintain innovation• Insufficient scale-up of manufacturer capacity• Subsidy not passed on to patient• Slow consumer uptake• Fraud or over-ordering• Failure to implement supporting interventions• Insufficient funding• Scope creep

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Without a Global ACT Subsidy, the price of ACTs will not fall low enough to be affordable

0.0

2.0

4.0

6.0

8.0

$10.0

Costs and Prices (USD)

ACT price (current)

MSP

International Distribution

Local Distribution

~8

ACT-price (2013, no subsidy)

~ 2- 4

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With a Global ACT Subsidy, ACTs would cost between 20 and 70 cents in the private sector

0

2

4

6

8

10

Costs and Prices ($)

ACT price(current)

Local Distribution

International Distribution

MSP

~8

ACT price (2013,

no subsidy)

~2 - 4

ACT price(post-subsidy,competitive)

~0.2 - 0.4

ACT price(post-subsidy,

non-competitive)

~0.4 - 0.7

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More affordable prices would triple the uptake of ACTs

Other

CQ

SP

ACTs

Other

CQ

SP

Mono

ACTs

CQ

SP

ACTs

Treatmentdoses (2004)

Treatmentdoses (current)

Treatment doses(post-subsidy)

546 546 546

0

20

40

60

80

100%

Treatment coverage (doses)

• Available willingness-to-pay, demand curve and affordability studies have been used for penetration estimates

• Overall, a penetration of ~55% in the private sector and ~90% in the public sector is estimated