Sizing Up Health Commodity Markets in Low- and Middle-Income Countries: Take One

What can we say about the relative size and composition of health commodity markets across different countries? While it is possible to answer this question for high-income countries, and especially OECD markets, data to analyze such trends across low- and middle-income countries are harder to come by. We took a stab at piecing together publicly available data sources to find an initial answer as part of the background work to inform the CGD Working Group on the Future of Global Health Procurement. The working group aims to develop actionable policy recommendations on how smarter, more efficient procurement practices over the next 10-20 years can ensure high-quality health commodities are available at affordable prices to those who need them the most. And a better understanding of the size and composition of health commodity markets in low- and middle-income countries is essential to that effort.  

You can find a full description of our methods, data sources, preliminary findings, caveats, and plans for next steps in our new CGD note. Here is a quick preview of our early findings and initial analyses. If you have questions, feedback, or ideas for us, please reach out in the comments section below.

As a starting point, we aggregated multiple publicly available sources of data on the value of multiple health commodities (pharmaceuticals, hospital consumables, diagnostic devices, bed nets, vaccines) for 2015 across 50 low- and middle-income countries (we included countries with GNI per capita < $7000; China is not included). Our analysis also differentiates expenditures between the public (i.e., governments, social health insurance funds, as well as grants and loans from donors and NGOs) and the private (i.e., out-of-pocket spending, private insurance, as well as private not-for-profit, charitable, and faith-based organizations) sectors. By doing so, we aim to estimate the split between government, donor/NGO, and private procurement. And we are also interested in understanding how these different sectors carry out procurement functions. For example, is procurement consolidated or fragmented?

The WHO World Medicines Situation 2011 report, which estimated total pharmaceutical expenditure for 161 countries using data for 2006, is to our knowledge the most recent estimate predating our work. Our initial findings (depicted in figure 1), though not directly comparable, provide more recent estimates and also differentiate donor/NGO funding—a component the WHO report did not capture. The WHO analysis estimated that 77 percent of health commodities in the low-income countries (LICs) they studied were financed by the private sector. Our methodology suggests a much lower proportion of 36 percent in LICs, but a comparable level of private finance in lower-middle-income countries (LMICs) and upper-middle-income countries (UMICs). It is worth noting that India—where the health commodity market is mostly privately financed—moved from LIC to LMIC status in 2008, which would significantly shift estimates for the two groupings. In addition, the levels of donor assistance for HIV nearly doubled between 2006 and 2015, which we believe has significantly increased the relative share of the health commodity market from donor financing, especially in LICs.

While these are still very early results—and there are certainly caveats underlying these findings—we observe what looks like a commodities transition from a predominantly public consolidated and donor-funded procurement landscape in LICs to one that is predominantly privately financed in MICs. In some ways this points to the priorities ditch hypothesis—a concept our colleagues Amanda Glassman and Charles Kenny explain here—applied to health commodities.

There is certainly ample room for improvement, and over the coming months we are looking to expand and improve our analyses. We hope to draw on additional sources of data including IMS Health data and Indian export data to gather new evidence to inform the working group’s recommendations. For example, we are looking to understand how procurement prices vary both between and across countries, and how the composition of what countries buy (commodities for non-communicable versus communicable diseases, for example) changes over time as they become richer.

Stay tuned for additional analyses as we move forward in this process. In the meantime, if you have ideas about data sources we could use, or ways to improve our analyses, do leave us a comment.