Rhsc meeting ny april 27 28 2006
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RH Commodity Supplies Financing Study Workstream A: « Mobilizing Additional Dollars «  Workstream B: Financing Mechanism Analysis: «  Better Money « . RHSC Meeting NY, April 27-28, 2006. Estimated Costs and Donor Support for Contraceptives and Condoms for STI/HIV Prevention.

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RHSC Meeting NY, April 27-28, 2006

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Rhsc meeting ny april 27 28 2006

RH Commodity Supplies Financing StudyWorkstream A:« Mobilizing Additional Dollars « Workstream B:Financing Mechanism Analysis: «  Better Money « 

RHSC Meeting

NY, April 27-28, 2006


Estimated costs and donor support for contraceptives and condoms for sti hiv prevention

Estimated Costs and Donor Support for Contraceptives and Condoms for STI/HIV Prevention

Developed by DSW based on data from: Ross, John, John Stover and Demi Adelaja, Profiles for Family Planning and Reproductive Health Programmes 116 Countries (2005); UNFPA Achieving the ICPD Goals: Reproductive Health Commodity Requirements 2000-2015 (2006); and UNFPA, Global Estimates of Contraceptive Commodities and Condoms for STI/HIV Prevention 2000-2015 (2000).


Criteria for additional approach

CRITERIA for « Additional $ » Approach

  • Produce more $ volumes + More stable and predictable $

  • Additional vis-à-vis ODA & existing mechanisms / If possible build upon existing schemes

  • Feasibility / Launch speed

  • Visibility and attractiveness / Compelling brief needed

  • Foster local ownership and country responsibility / Reward performance

  • Efficiency

  • Sustainability


Possible sources of additional

Possible Sources of « Additional $ »

Each with Specific Requirements & +/-

  • Donors & related Organisations

  • Private sector

  • Philanthropy

  • IFIs

  • Public, as solidarity contributor

    To be Mobilised Whenever Possible

  • Local Governments

  • End-users


Range of approaches investigated

Range of Approaches investigated


Possible routes three examples 1 revolving fund

Possible Routes: Three Examples1. Revolving Fund

  • Fund is created with initial endowment (Donors and/or others)

  • Fund procures and pre-finances RH commodities on optimal terms & conditions

  • Participating countries commit to reimburse Fund for supplies + pay fee (PAHO model)

  • Participating countries who cannot pay for supplies delivered can, under certain conditions, have access to ancillary “bridging fund” (or to direct ODA support)

    +Sustainability / Visibility / Countries made responsible and made to contribute $

    - Country appetite for joining?

    ►Link with Workstream B solutions ?


Possible routes three examples 2 use microfinance to expand social marketing

Possible Routes: Three Examples2. Use Microfinance to expand Social Marketing

  • Provide dedicated loans through MFIs in order to strengthen local RH sales network, including social marketers

    + Generates more $ from end-users who can afford to pay for RH supplies

    + Strengthens awareness, advocacy and use of RH

    -The “small end” of the $ generation scale

    ► Approach which could be combined with larger-scale $ generation effort


Possible routes three examples 3 international air ticket tax

Possible Routes: Three Examples3. International Air Ticket Tax

  • Tax on air tickets (Can be tailored)

  • France committed to start July 1

  • Other countries considering to join

  • If enough join and agree on application of funding, potential for sizable and predictable $

  • International Working Group working on

    • i) Implementation details

    • ii) Use of funding (Including idea of an International Drug Purchase Facility / Not exclusive)

      ► Why not a RH Commodity Compartment ?


Moving forward suggestions

MOVING FORWARDSuggestions

  • Preliminary report end of May

  • Workstream B Advisory Group to start providing advice, feedback under Workstream A

  • Aim: To single-out and further develop up to 3 options

  • Final report by end of July


Financing mechanism analysis better money

Financing Mechanism Analysis: “Better Money”

  • Improving efficiencies in the reproductive health commodity financing/procurement system

  • Focus areas:

    • Low/middle income recipient countries

    • Global level donor lens (bilateral & multilateral)

  • Objectives:

    • Smooth external funding volatility (enable long-term planning, minimize chaos in supply chain management system)

    • Reduce system cost (via price negotiations, advance notice, reduced costly emergency shipments)


Research process

Research Process

  • Literature review

  • Advisory Group

    • Georgia Taylor (Dfid)

    • Jagdish Upadhyay (UNFPA)

    • Jacqui Darroch (Gates Foundation)

    • Kees Kostermans (World Bank)

    • Wolfgang Bichmann (KfW)

  • Interviews/consultations (13 country representatives, 6 manufacturers, private NGOs, procurement agencies, bilats, & multilats)

  • Reviewed and narrowed financing mechanism options

  • Analyses: impact, costs, feasibility assessment/system alignment, implementation pathway


Pledge mechanism 1 of 2

Pledge Mechanism (1 of 2)

  • Problem: Donor funding volatility/ delays

    • Appraisal process delays

    • Budget cycles

  • Solution: Financing mechanism confirms donor pledge, negotiates MOU with donor, and releases funding for recipient country use. Donor funding replenishes financing mechanism.

  • Rationale:

    • Financing mechanism assumes risk – no debt on books

    • Donors typically follow-through with RH commodities even if not timely

    • RH commodities relatively small price tag

    • Phase out once donors provide long-term commitments


Pledge mechanism 2 of 2

Pledge Mechanism (2 of 2)

  • Addressable: $35m (max: $69)

  • Direct Impact: ~$5m

  • Indirect Impact:

    • Smooth funding & secure product availability

  • Costs:

    • Capital costs ~ market size

    • Default costs ~ risk appetite

    • Administrative costs ~ structure


Minimum volume guarantee 1 of 3

Minimum Volume Guarantee (1 of 3)

Illustrative

Subscale: 6-11% savings potential if aggregated

3.1

20.0

16.8

Pills

4.3

2.8

14.1

11.3

4.5

Suboptimal: 5% savings potential with long-term/volume commitment

Condoms

Vendors not providing per- order volume based discounts

Vendors per order volume based discounts

Orders already at maximum discount volume level

Subscale volume orders

Total order amount

100 %

~ 40 %

~60%

~40%

~20%

Percent of total

Maximum potential impact from minimum volume guarantee

Target vendors for min volume guarantee


Minimum volume guarantee 2 of 3

Minimum Volume Guarantee (2 of 3)

  • Solution: Financing mechanism aggregates demand forecasts and establishes preferred price with suppliers using minimum offtake. Users can enjoy preferred price based upon performance (demand ~ offtake). Financing mechanism procures “unused” products.

  • Rationale:

    • Financing mechanism shares risk of demand forecasts, while providing incentive to improve demand forecasting data

    • “Unused” product not necessarily lost if shifted


Minimum volume guarantee 3 of 3

Minimum Volume Guarantee (3 of 3)

  • Addressable: $62 m ($83 max)

  • Direct Impact:

    • Cost savings: $2.6-8.2m

  • Indirect Impact:

    • Reduce supply lead time

    • Guaranteed volume may attract new suppliers and reduce price

    • Incentive for suppliers to submit products for prequalification  increase product quality

  • Costs:

    • Administrative costs ~ structure

    • Unused product procurement ~ risk appetite


Next steps

Next Steps

  • Review findings in Systems Strengthening Working Group

  • Assess value in testing assumptions

  • Explore pilot option


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