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With shifting disease burdens, growing populations, and rising expectations comes a greater focus on value for money. International health funders and agencies want to know how to make the most of money spent by focusing on the highest impact interventions among the most affected populations. Whether through better procurement systems for health commodities, results-based financing, or more detailed assessments of the effective ness of health technology, CGD’s work aims to make health funding go further to save, prolong and improve more lives.
Looming budget cuts for FY2012 and recent reports about the decline in AIDS funding from the USG in FY2010 relative to FY2009 have triggered the classic Washington, D.C. tug-of-war; global health and development advocates are pushing to maintain funding levels, if not to increase them, and the U.S. Congress is looking for ways to increase oversight and management of taxpayer dollars. Advocates are rightly pointing out what would happen if we don’t have the money and Congress is rightly signaling that the party is over. What’s new? Nothing.
The latest effort to address aid coordination problems and health system issues – the Health System Funding Platform (the Platform) – is evolving slowly and beginning to recreate the same traps it was supposed to solve. In a paper released this month, Bill Savedoff and I show how the natural tendency for aid agencies to fall back on measuring and paying for inputs is likely to undermine the Platform’s goals. Linking funding to results is the most promising way for the donors to achieve the aims they initially set for the initiative.
Current shortcomings in the system of demand forecasting for essential drugs, vaccines and diagnostics are constraining access to these products in developing countries, resulting in poor health and unnecessary deaths from disease like AIDS, TB and malaria. Ruth Levine, Director of Programs and Senior Fellow at CGD and the chair of a new Global Health Forecasting Working Group, explains how the global community can work together to solve this urgent challenge.
To learn more, read and comment on the Working Group’s consultation report (pdf, 1MB).
Q: What is demand forecasting and why is it so important now?
A: Demand forecasting is a bread-and-butter part of virtually every business that supplies goods. It's the ongoing process of projecting which products will be purchased where, when, and in what quantities. To forecast demand, you combine information about need – like incidence and prevalence of disease – with information about funding, health care coverage, losses in the supply chain, consumption patterns and other factors that affect demand. Getting good forecasts certainly is not a new challenge in the pharmaceutical supply chain in developing countries, but has become much more urgent recently. There is more money for global health products, many of them are quite costly to produce, and they need to be supplied steadily. Without the ability to forecast effective demand with a reasonable degree of certainty, increased funding for drugs will not improve health or get to the people who need it. Without good demand forecasts, manufacturers cannot increase production capacity, make commitments to suppliers of raw materials, or see a business case for investment in costly clinical trials and other activities to develop future products. National governments and international funders also need good demand forecasts for budgeting purposes, while health programs and implementing agencies depend on forecasts to plan their supply chain logistics.
Q: If everyone would benefit from better forecasts, why hasn't the situation already been fixed? What is the underlying problem?
A: I think it's a combination of factors. Clearly, it's partly because forecasting in global health hasn’t quite caught up with what's happening in the market. There has been a relatively recent surge in the amount of health funding and products available for the developing world and a rapid increase in the number of donors, suppliers, buyers and intermediaries. But there has not yet been a corresponding improvement in forecasting methods or institutional roles.
There's really no question that the underlying problem is about risk: within the current market, risks are unequally distributed across key actors whose decisions affect supply of and demand for these products. Those who suffer the direct financial and health consequences of the risks – primarily manufactures and patients - are not in a position to reduce them; conversely, the funders and intermediaries who could take specific action to address the underlying budgetary, policy-related and logistics risks only feel the consequences indirectly.
As a result of this, there are systematic problems. Not all stakeholders have incentives to develop better forecasts and greater access to critical medical technologies. And because of the limited market potential in developing countries, the private sector invests relatively little in market research and other sources of information that are common in developed markets. As we see it, the core challenge is to understand and take steps to correct the misaligned incentives by reducing and sharing risk.
Q: Are there any feasible, near-term solutions?
A: There are definitely things that can be done and would make a big difference. First, I think there should be a very clear recognition by a variety of stakeholders in global health that forecasting deserves attention and that it’s a function that needs to be clearly separated from advocacy and other activities. Second, there’s an opportunity to establish an information intermediary (or "infomediary") that would mobilize and share information and baseline forecasts in a coordinated way. This is a function that is quite common in other types of supply chains. Third, funders need to accept more of the risk; they can use creative contracting mechanisms to share risk more efficiently. These constitute a coherent package; we think that implementing these recommendations would enhance the relationship among funders, suppliers, intermediaries and users of health products, and go a significant distance toward aligning incentives towards increased access to quality health technologies. These are the recommendations that we’re hoping to get feedback on during the consultation process we’re undertaking right now. I am really looking forward to hearing views about these ideas.
Q: Where will this get us, and what's left?
A: Taken together, I think the Working Group’s recommendations have the potential to dramatically improve demand forecasting at the global level, and that would contribute to improved access to health products. At the same time, better forecasting can only get us so far when there are so many sources of underlying uncertainty. Dealing with those problems requires a broader and longer-term agenda that many people are working on, in one way or another -- strengthening health systems and building supply chain capacity in-country; increasing the market-orientation of product development activities; enhancing the regulatory regimes and enforcement; and improving the predictability of donor funding. Those are extremely important to work on, while we also do what we can today to make a real difference.