Health products—including drugs, devices, diagnostics, and vector control tools—are essential for meeting the healthcare needs of any population. Right now, many low- and lower-middle-income countries (LMICs) rely on donor-managed mechanisms to procure a large share of these health commodities, often at subsidized prices or as donations—and commodity financing represents a significant proportion of external health funding in these countries. (For example, procurement and supply management of health products comprise 40 percent of Global Fund annual grant disbursements.)
But this status quo won’t stay static for long, and the global health community must prepare for sweeping changes in global health and procurement over the next 10–20 years. Here’s some of what we see happening now—and on the immediate horizon:
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LMICs are becoming wealthier. . . and graduating from aid eligibility. As countries lose access to free or subsidized health commodities, they may need to develop alternative procurement arrangements to ensure a steady and affordable supply of essential health commodities.
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LMIC spending on health—and health products—is rising. As countries increase domestic health spending, they will see opportunities to expand the range of health products (and services) offered to their populations.
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The composition of product needs and demand in LMICs is changing. As disease burdens in LMICs continue to evolve, with noncommunicable diseases accounting for an increasing share of the total burden, patients will need access to a different mix of health interventions. At the same time, wealthier and more sophisticated urban populations will demand more complex care—from cancer treatment to kidney dialysis.
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Health commodity prices paid in LMICs can be high—and highly variable. While available information is neither very recent nor complete, the literature suggests that LMICs often pay high prices for health commodities, with significant variation across countries and procurers. Looking ahead, what procurement strategies, in different contexts and for specific product classes, could help LMICs achieve more affordable prices for high-quality commodities?
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The fiscal burden of health commodity costs is increasing for LMIC governments. (See the Institute for Health Metrics and Evaluation’s projections here.) As these pressures continue, countries will need to strengthen national institutions for priority-setting and procurement to achieve greater efficiency from public spending on health.
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New technologies are coming online and competing for scarce LMIC funds. As new technologies—ranging from injectable antiretroviral therapy to personalized cancer vaccines—become available, countries will need to prioritize the use of scarce public funds to cover the most impactful and cost-effective products and interventions.
In this context, how can the global health community act now to ensure the medium- to-long-term efficiency, quality, affordability, and security of global health procurement? This question is the subject of a new CGD working group on the future of global health procurement, which aims to produce actionable recommendations for the global health community. The working group, launched in late July, brings together representatives from LMIC governments, global procurement agents, funders, and international agencies, as well as experts on issues such as industrial organization, contract theory, and auctions.
The final report, expected in late 2018, will outline the working group’s key findings and propose recommendations for near-term action. Throughout this process, CGD will engage key global health stakeholders—country representatives, procurement agents, funders, and industry partners—to learn from their experiences and to eventually translate recommendations into action. We know procurement and prices can be controversial issues, and we are committed to reflecting the range of views and to finding solutions that are feasible and help improve outcomes.
Stay tuned for more updates as we dive deeper into global health procurement—including what does and doesn’t work—with an eye toward informing future directions. In the meantime, if you have thoughts or ideas to share, please leave us a comment below.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise.
CGD is a nonpartisan, independent organization and does not take institutional positions.
