Barriers and Opportunities for PPPs in African Supply Chains - PowerPoint Presentation

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Barriers and Opportunities for PPPs in African Supply Chains Jeff Barnes, MBAAbt Associates

Our ApproachPrivate Health Sector Assessments are qualitative, multidisciplinary studies that assess the performance of the private health sector from a health systems and market dynamics perspective.

Under the USAID-funded PSP-One and SHOPS projects, Abt Associates has conducted about 30 private sector assessments.

We used results from Senegal, Benin, Cote d’Ivoire, Tanzania, Malawi and Ghana for this analysis.

Assessment approach

Enabling

environment (Governance, Human Resources, Policy)Health financing

Service deliverySupply chainDemand

Supply Chain Analysis Approach Assess regulatory environment of the private sector supply chain;Structure and functioning of supply chains, interaction and impact of public sector and NGO supply chain system on the private commercial sector;

Focus on access, pricing and stockouts of priority health commodities such as contraceptives, zinc/ORS, ARVs;Assess opportunities for PPPs to strengthen system performance.

Findings from all Assessments: Strong urban bias of retail outlets, including 2nd tier shopsUnderperforming public sector procurement and distribution

parastatalsDonor focus on public sector procurement and supply chain—however investment neglects logistical capacityMinimal integration of public and private sector supply chains.Public sector disfunction often leads to creation of donor supported parallel supply chains managed by NGOs and FBOs.

Findings: Differences between regionsFrancophone Countries Regulation by divisions within Ministries of Health– full budget support for all regulatory functions

4-6 highly capitalized, highly regulated importers/distributors able to operate at scale and serve the entire countryPrice controls and low price variance at retail levelIllicit and/or substandard drugs found in traditional markets, but rarely in clinics or pharmacies.

Anglophone CountriesRegulation of retail outlets is by parastatal pharmaceutical councils—regulatory functions are financed by licensing fees.

Fewer controls on competition but more fragmentation at all levels– 100 to 200 importers/distributors with few able to adequately serve the entire country;Few price controls and greater price variance.Illicit and substandard drug found in chemists, drug shops and distributed by registered importers.

Lower tier drug shopsFrancophone Countries Existence of a “second tier” of drug shops called “Depot de

pharmacie”– but not well developed and policies do not support their expansion. Fewer “depots’ than pharmacies.In Senegal, Depot de pharmacie are owned by religious leaders as a profitable business and compete in urban marketsIn Ivory Coast, depots are exclusively in rural areas and owned by pharmacists. However, not registered or promoted by the DPM

Lower tier drug shopsAnglophone countriesSecond tier drug shops are more formalized and very popular—often competing directly with pharmacies.

These shops show potential for being “networked” but not through a fractional franchise model:Licensed chemical sellers in Ghana, Duka la dawa in Tanzania

Many more shops than pharmacies e.g. In Ghana, 11,159 LCS vs. 700 licensed pharmacies.

Regulatory IssuesFrancophone Countries:Strict enforcement of one pharmacist for one pharmacy rules– limits possibilities of retail chains and for pharmacists with greater management capacity to invest and expand.Stricter requirements of importers/distributors for all countries in West Africa Economic Union: qualifications of personnel, lot tracking, storage and transport conditions, ISO quality systems, restricting sales to registered pharmacies. High standards limit number of market entrants, ensuring that all market players have scale to serve the entire country and permit cross subsidization.

Regulatory IssuesAnglophone countriesMinimal supervision of distribution and retail outlets, leading to abuse of scope of practice of lower tier drug shopsRegulations of importers, wholesalers and distributors typically do not require lot tracking, storage, transport or restrictions on clients. Leads to fragmentation at the wholesale level, poor coverage of underserved areas, and increased risk of substandard and fake drugs leaking into formal retail network.

Public sector central stores unitsSenegal: PNA supplies public and private. Gov’t mandates a minimum percentage of generic products which pharmacies procure through PNA. Benin: Non-profit entity mandated by gov’t. Supplies to public and private and private buying cooperatives.Malawi: Inadequacy of Central Medical stores has lead to creation of a number of donor and NGO- managed parallel distribution systems.

Opportunities for Public-Private Supply Chain StrengtheningPromote selling from public sector central purchasing units to the private sector, especially to ensure access to quality generics, (Senegal, PNA);Increase financial viability of public sector central purchasing units,Increase downward price pressure on prices without sacrificing quality.

Opportunities for PPPs:Promote integration of private sector into public sector supply chainsContracting out for private sector storage and/or deliveryWhere private sector capacity is strong (esp. francophone countries), contract out for delivery from public regional stores to public sector service delivery pointsReduces logistical costs to the public sector and increases flexibility to respond to needs;

Allows private sector to sell excess capacity and reinvest in last mile logistical capacity

Opportunities for PPPsPilot new approach to drug shop networks to support advocacy for regulatory reform.Fractional franchise approach tested in Ghana and Tanzania was not successful or too expensive—difficulties ensuring franchisee discipline.However, there is still a need to improve efficiency and scale through a network built on private ownership.

Facilitate access to capital and tax reductions for pharmacist entrepreneurs to expand a network of 2nd tier shops beyond their pharmacies in a hub and spoke model. Pharmacist provides supply, supervision and management. Allow pharmacists to obtain volume discounts for their networks.

Opportunities for PPPsFollowing documentation of pilot advocate for policy reform:In francophone countries:Ease restrictions on pharmacists owning multiple outletsClearer definition of drug shop scope and promotion of such outlets for last mile communities

In anglophone countries:Increase enforcement of retail outlet regulation and monitoringRestrict 2nd tier outlets to rural and underserved areasNetworks increase the ease of retail monitoring.

Thank you.

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