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Working Group on the Future of Global Health Procurement
Many low-and lower-middle-income countries currently procure a large portion of their health commodities—drugs, devices, diagnostics, and vector control tools—through centralized, donor-managed procurement mechanisms, and often at subsidized prices or as donations. Over the next several decades, however, the landscape of global health procurement will change dramatically as countries grow richer and lose aid eligibility; disease burdens shift; and technological breakthroughs change the portfolio of commodity needs. To consider how the global health community can ensure the medium- to long-term relevance, efficiency, quality, affordability, and security of global health procurement, the Center for Global Development (CGD) launched the Working Group on the Future of Global Health Procurement in July 2017. A final report is expected in spring 2019. Throughout this process, CGD will engage key global health stakeholders—country representatives, procurement agents, funders, and industry partners—to reflect the range of views on these issues and encourage the adoption of proposed recommendations.
In recent decades, the world has made great strides toward improving global access to lifesaving health commodities, including medicines, diagnostics, medical devices, and vector control tools.* This increase in access has in large part resulted from the investments of international health partnerships such as UNICEF, UNFPA, and the Global Fund to Fight AIDS, Tuberculosis, and Malaria, and bilateral aid programs such as PEPFAR, DFID, and USAID. To deliver these lifesaving global health commodities to where they are needed most, these funders have also set up centralized procurement mechanisms to purchase drugs, diagnostics, devices, and vector control tools from manufacturers, and to subsequently make them available to countries at subsidized prices or as donations.
Over the next decade, however, most low-income countries will become middle-income countries that are ineligible for aid under current rules, spend more domestic public monies on health, and self-procure most needed health commodities. At the same time, demographic and epidemiological changes will affect the size and composition of demand for health care and related products; infectious diseases will diminish in importance while non-communicable diseases increase. Other factors—such as growing drug resistance, the pace of economic growth and its impact on public spending, the trend towards increasing decentralization of procurement and service delivery, and the continual development of new technologies in the context of rising expectations for more comprehensive health benefits—will also put new pressures on global health procurement. In this context, policymakers should be prepared to take preemptive action to ensure the medium- to long-term relevance, efficiency, quality, affordability, and security of global health procurement. This Working Group considers how global health procurement mechanisms can adapt to this changing landscape.
Working group meetings were held on July 25, 2017 in Washington, DC; February 6-7, 2018 near Geneva, Switzerland; July 19-20, 2018 in London, England; and November 29, 2018 in Washington, DC. The group benefitted from research partnerships with AfRx Consulting, the Clinton Health Access Initiative (CHAI), the Toulouse School of Economics (TSE), and the Office of Health Economics; bilateral consultations with representatives from the pharmaceutical industry; a private roundtable with private-sector procurement specialists co-hosted with the Bill & Melinda Gates Foundation; a technical workshop with leading industrial organization economists, including Nobel laureate Jean Tirole; and several CGD-led analyses. The full set of background research and analysis is available here. The final report is available here.
*Note: This working group does not consider vaccines.
Working Group Members
Michael Anderson, MedAccess
Amie Batson, formerly PATH
Sarah Garner, World Health Organization (WHO)
Christa Cepuch, Médecins Sans Frontières (MSF)
Clinton de Souza, Imperial Logistics
Todd Dickens, PATH
James Droop, UK Department for International Development
Akthem Fourati, UNICEF
Eduardo González-Pier, formerly Ministry of Health, Mexico, and Center for Global Development (CGD)
Martha Gyansa-Lutterodt, Ministry of Health, Government of Ghana
Lisa A. Hare, U.S. President’s Malaria Initiative/U.S. Agency for International Development (USAID)
Beverly Lorraine Ho, Department of Health, The Philippines
Christine Jackson, Crown Agents Ltd.
Mariatou Tala Jallow, Global Fund to Fight AIDS, Tuberculosis and Malaria
Biljana Kozlovic, Ministry of Health, Serbia
Wesley Kreft, i+ solutions
Melissa Malhame, Independent Advisor and formerly Gavi, the Vaccine Alliance
Susan Nazzaro, Bill & Melinda Gates Foundation
Aurélia Nguyen, Gavi, the Vaccine Alliance
Ed Rose, formerly NHS England
Rajeev Sadanandan, Government of Kerala, India
Eugene Schneller, W. P. Carey School of Business, Arizona State University
Andreas Seiter, World Bank
Paul Stannard, Population Services International
Netnapis Suchonwanich, Health Intervention and Technology Assessment Program, Thailand
Gregory Vistnes, William Davidson Institute, University of Michigan
Brenda Waning, Global Drug Facility
Tommy Wilkinson, University of Cape Town, South Africa
Janeen Madan Keller
From the article, which cites CGD's procurement work:
"Across low- and middle-income countries, the prices of essential medicines, such as cancer treatments, HIV antiretrovirals, and antibiotics, display substantial variations, with the locally observed prices sometimes being many times higher than the lowest international reference level for generic equivalents. Chalkidou et al. (2020) show that some purchasers in low- and middle-income countries pay up to 30 times the minimum international reference price for basic generic medicines, such as paracetamol, insulin, and omeprazole. High prices, in turn, deplete already-limited public health budgets and generate shortfalls in access, especially for the poorest and neediest members of society."
"Existing economic research has addressed the issue of affordable access to drugs in developing countries mostly from a patent protection angle. Several authors have analysed the trade-off between the potential costs of restrictive patent policies (due to the higher prices resulting from monopolistic pricing policies) and the potential benefits related to the faster diffusion of new drugs to markets enjoying stronger patent protection (Chaudhuri et al. 2006, Kyle and Qian 2014, Cockburn et al. 2016)."
From the article:
"Health-focused startups have been low-profile players in Nigeria’s burgeoning tech ecosystem over the past decade—but that’s starting to change.
Startups identifying gaps in the healthcare delivery value chain across Africa’s most populous country are increasingly winning investor attention and dollars. The sector reached a milestone this month as 54gene, a genomics company focused on African DNA, raised $4.5 million in a seed round—the largest by a Nigerian health tech startup. Investor participants in 54gene’s seed round included Y Combinator, Fifty Years, Better Ventures, KdT Ventures, Hack VC and Techammer.
While the investment size pales in comparison to other sectors such as fintech which is characterized by bigger-ticket funding rounds, it reflects the nascent nature of the health-tech startup space, not just in Nigeria but across the continent.
In the long-term however, health tech startups are likely to experience a growth path mirroring fintech startups given their crucial similarities in solving fundamental problems. Like fintech startups, health tech startups are often building technical infrastructure from scratch and innovating solutions in a sector that has been slow to evolve over the years.
Given the several low-hanging opportunities—ranging from drug distribution and insurance to medical records and data—to resolve inefficiencies across the sector, health tech startups are likely to command larger investment amounts as they prove product market fit and become embedded in the value chain.
Six months after its founding, 54gene’s record seed round will be deployed to fund its ambitious plan to bridge the lag in African genomic data and research by creating the world’s largest and first African biobank. It’s a lofty target given the continent has contributed only 2% to global genomics data. “We haven’t been invited to the table where decisions as regards our healthcare have been made,” says Abasi Ene-Obong, founder of 54gene.
The net effect of is that drugs development is hardly based on African DNA while drugs also typically reach African markets many years after being launched and often at high prices. Last month, a report by the Center for Global Development found users in low and middle-income countries pay up to 20 times the “minimum international reference price” of basic medicines. To bridge the gap, Ene-Obong says 54gene will ensure that developed drugs based on its genome samples are trialed and used in Africa first as it focuses on studying diverse African DNA samples to find “naturally occurring mutations” which can be modeled as drugs to treat both Africans and non-Africans..."
From the article:
"A new report, published by the Center for Global Development in June, finds that as countries move up the ladder of economic development, it becomes harder for government agencies, hospitals and health care companies to buy drugs at reasonable prices.
The report compares the range of prices that seven low- and middle-income countries pay for 25 medicines, including acetaminophen for pain relief, bisoprolol to treat high blood pressure, insulin to treat diabetes and omeprazole to treat heartburn. And when the prices were compared, there was a huge discrepancy. Some countries pay 20 to 30 times as much as other countries for the same drugs.
So even though a country may be progressing up the economic ladder, the researchers say, there may not be affordable medicine for everyone.
The researchers studied the Philippines, Senegal, Serbia, South Africa, Tunisia and Zambia as well as the Indian state of Kerala. They selected these countries to see how drug pricing is affected as poor countries improve economically, say the researchers.
(At the time of the report's writing, the World Bank classified Senegal as a low-income country, while the others were lower-middle and upper-middle income. Since the report was published, the World Bank has upgraded Senegal to "lower-middle income" status.)
Although the source for the data, IMS Health Data, prohibits the researchers from disclosing the drug prices in each country, the price discrepancies send a clear message, say the researchers.
The system in which countries procure its drugs is "hobbled by inefficiencies that leave some of the poorest countries paying some of the highest drug prices in the world," according to the report.
"There was some element of surprise that the [price discrepancies were] so high," says Prashant Yadav, a medicine supply chain researcher from Harvard Medical School and the Bill & Melinda Gates Foundation (a funder of NPR and this blog). Yadav did not work on the report.
A 2017 analysis from CGD found that in Ghana, for example, a commonly prescribed high-cholesterol medicine costs the government 11 cents per capsule – nearly double the U.K. National Health Service's listed price: 6 cents per capsule. If the price is adjusted for inflation, Ghana is actually paying 50 times more than the U.K.
High drug prices are a major factor in why at least one-third of the world population – primarily in developing countries – doesn't have regular access to medicines, according to the World Health Organization..."