Mechanisms for “Better Money” in Financing & Procurement of Reproductive Health Supplies Update Fall 2006 Meeting of the Reproductive Health Supplies Coalition
Reproductive Health Supplies Coalition – Vision ¡ Vision l ¡ “ensuring sustained access” Objectives l l “Increase … financial resources and their more effective use …” “Strengthen global, regional, and country systems …”
Systems Strengthening Work Group – Objectives ¡ Objectives l “Develop solutions to drive increased reliability, predictability, and efficiency of public financing …”
Defining the Problem ¡ 2004 -05 l Research on global financing and procurement (DFID, Gates) ¡ ¡ Highlight inefficiencies Scope for improvement in global architecture
Finding Solutions ¡ The Hague, 2005 l Technical design options to alleviate inefficiencies in financing & procurement (“better money”) l In tandem with work to develop options to mobilize “more money”
Two Options ¡ New York, 2006 l Minimum volume guarantee (MVG) ¡ l 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 l l l ¡ Pre-negotiated contracts Lower prices Reduce lead times Requires reliable forecasting
Pledge Guarantee ¡ Advance money to purchaser l More stable flows of funds l Improve prices, reduce emergency orders, enhance supply chain management l Assume risk of non-repayment
Need More Data ¡ New York, 2006 l Collect additional information on potential impacts ¡ Impact on prices and lead times l UNFPA – manufacturers ¡ “Downstream” country-level impacts l JSI – country advisers
Overall Findings ¡ Pricing and system inefficiencies l l ¡ Wide variation in procurement prices Unreliable financing and supplies => ripple effects Potential to make financing more effective l Political, bureaucratic, practical challenges
Manufacturer Perspectives ¡ Five manufacturers l ¡ Advance commitments could: l l ¡ Condoms, IUDs, orals Lower prices 1 -10% Reduce production lead times Prerequisites l l l 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%) l Reduce warehouse costs, expired products, multiple procurements ¡ Potential to further fragment financing/procurement (63%)
Field Perspectives – Minimum Volume Guarantee – Feasibility ¡ Legal and regulatory barriers l ¡ Amend donor, government UNFPA as operator – varied support (50%) l l Bypass barriers, assume coordination Need to reinforce capacities
Field Perspectives – Pledge Guarantee – Impact ¡ ¡ Consistent availability of funds big improvement Forward funding l l l 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%) l l l “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 l l l 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 l Mechanisms need to be tested, proven to work, then more broadly applied l Reality of large contracts, with upfront payment may loosen pricing further
Next Steps ¡ Design and implement proof-of-concept l l l 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 Mc. Kinsey business model ¡ Not necessarily a permanent solution
Roles of Partners ¡ UNFPA l l l ¡ 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: l l l 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?
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