Access to safe, effective, and affordable essential medicines is an integral global health goal, and all the more important during a public health emergency like COVID-19. Supply chain inefficiencies, procurement capacity constraints, and financial difficulties impede access to affordable, quality medicines; crises exacerbate these issues.
Pooled procurement offers potential solutions for both routine purchasing and emergency response efforts by aggregating demand, improving buyers’ negotiating power, integrating quality assurance, and strengthening supply management—although pooling alone is not a magic bullet. The Pan-American Health Organization (PAHO) Strategic Fund—one example of a pooled purchasing mechanism—facilitates access to health products in the Americas, including those critical to the COVID-19 response.
In July, CGD co-hosted an online event with PAHO to discuss the advantages and challenges of pooled procurement for essential medicines and supplies during the pandemic and beyond, bringing together policy researchers, Ministry of Health officials, and PAHO country representatives and unit chiefs from across the Latin American region. This blog covers five main takeaways from the discussion.
1. Political solidarity is a prerequisite for successful pooled procurement
One of the main lessons learned from the PAHO Strategic Fund that could be applied to other pooled procurement initiatives around the world is the need to secure political commitment among participating buyers. Prashant Yadav (Senior Fellow, CGD) emphasized that pooled procurement is not only a technical matter; past evidence shows that the technical benefits of pooled procurement are typically not enough to compel countries to work together, agree on priorities, and collaborate on joint purchasing.
2. Pooled procurement reaps benefits beyond economies of scale and lower prices
Several speakers highlighted key advantages of pooled procurement, including lower prices, quality controls, shortened delivery lead times, and streamlined processes. Speakers also touched on less commonly discussed advantages—such as access to alternative financing, technical cooperation to strengthen supply chain capacities, demand predictability, and increased transparency and information sharing.
Yadav emphasized that these upsides extend to suppliers, who benefit from reduced transaction costs and the adjacent activities that accompany pooled purchasing (e.g., upfront financing for working capital and demand forecasting), while Analía Porrás (Unit Chief of Medicines and Health Technologies, PAHO/WHO) credited pooling with creating stable demand for medicines for neglected diseases, such as Chagas disease and Leishmaniasis. Socorro Gross-Galiano (PAHO Country Representative, Brazil) went even further in describing market shaping benefits and flagged that pooled procurement can help incentivize the development and production of products particularly needed in the region.
3. Pooled procurement increased supply chain resilience and protected essential services during COVID-19
Jarbas Barbosa (Assistant Director, PAHO/WHO), Alejandra Hidalgo (Vice Minister of Insurance and Management of Unified Health System, Ministry of Health, Bolivia), and Gross-Galiano reflected on the role of the Strategic Fund during COVID-19 in both protecting the supply of essential products for priority programs such as HIV/AIDS, tuberculosis, and malaria as well as supporting countries to procure COVID-19 health supplies like testing kits, PPE, and intensive care medicines. Barbosa shared that the Fund increased purchases three-fold in 2020 compared to the previous year and entered new product areas (e.g., PPE), while Porrás and Gross-Galiano highlighted the role of the Fund in reducing the risks of substandard products and governance challenges associated with emergency purchasing.
Building on some of these comments, Yadav explained that pooled procurement mechanisms allow countries to benefit from supplier diversity, which helps mitigate the effects of pandemic-induced manufacturing and transportation disruptions. In that vein, Christopher Lim (Unit Chief, PAHO Strategic Fund) underscored the need to promote both efficiency and resiliency in health product markets.
4. The decision on which products should be subject to pooled procurement is up for discussion
Panelists presented different perspectives on how to determine which products should be included in pooled procurement initiatives. Porrás spoke of the need to “choose our battles” and recognize that not all health products are equally suited to pooled procurement due to a range of economic (and at times political) barriers. She also pointed to the Fund’s success in breaking monopolistic prices of Hepatitis C medication and new antiretrovirals as examples of products for which the Fund was able to level the playing field. Claudia Vaca (Associate Professor, National University of Colombia) proposed four priority categories to include in pooled procurement: (1) medicine types that have recently been added to the WHO Essential Medicines List (e.g., monoclonal antibodies); (2) new innovations for chronic diseases (e.g., insulin analogues for the treatment of diabetes); (3) essential medicines that are in short supply or are at risk of short supply; and (4) medicines with a concentrated supplier base to increase market competition (e.g., biosimilars).
However, Yadav cautioned against segmenting purchasing between pooled and independent arrangements given how complicated and time intensive it can be to assess the relevant considerations (e.g., supplier concentration, potential cost savings, etc.) for each product. Given that pooled procurement for a wide range of supplies can produce net gains—even if some of the products may be theoretically better suited to decentralized approaches—the benefits of collective negotiating power for a basket of purchases tend to balance out the downsides.
5. Now is the time to leverage untapped opportunities to strengthen pooled procurement mechanisms
Speakers discussed several areas where pooled procurement mechanisms like the PAHO Strategic Fund could either improve or further explore. Gross-Galiano highlighted the need to increase the Fund's capitalization, pointing out that while the Strategic Fund expanded to place purchase orders amounting to over US$235 million in 2020, it has not grown as much as the PAHO Vaccine Revolving Fund. Yadav also called for context-specific approaches to deciding which procurement functions should be carried out at the regional, national, or local levels—a discussion that has been more prevalent outside the Latin America region. Yadav proposed arrangements in which centralized purchasers conduct price negotiation and contract management to realize cost savings, while national or subnational decision-makers handle purchasing orders to improve medicine availability.
Yadav also recommended that the future of pooled procurement better address and make visible what happens after products leave production facilities; the role of the pooling mechanism need not end with the initial handover of the product. Relatedly, Julio Garay (Chief of National Tuberculosis Program, Ministry of Health, El Salvador) stressed that technical assistance to country governments is an important part of the Strategic Fund’s value-add. Better information sharing on what happens beyond factory gates will allow purchasers and suppliers to improve their planning and forecasting and shine a light on process-related challenges that require technical support.
Pooled procurement mechanisms like the Strategic Fund are vital to increasing access to quality assured, affordable medicines amid complex challenges such as COVID-19. Going forward, further research and analysis is needed to deepen the evidence and improve the application of cooperative purchasing at the global and regional levels. Such efforts would serve to optimize the role of pooling in the broader agenda for sustainable and efficient procurement and supply chains for essential health products.
You can watch a full recap of the event here.
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.