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RHSC Meeting NY, April 27-28, 2006

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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  1. RH Commodity Supplies Financing StudyWorkstream A:« Mobilizing Additional Dollars « Workstream B:Financing Mechanism Analysis: «  Better Money «  RHSC Meeting NY, April 27-28, 2006

  2. 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).

  3. 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

  4. 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

  5. Range of Approaches investigated

  6. 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 ?

  7. 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

  8. 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 ?

  9. 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

  10. 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)

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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

  17. Next Steps • Review findings in Systems Strengthening Working Group • Assess value in testing assumptions • Explore pilot option

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