1. Mechanisms for “Better Money” in Financing & Procurement of Reproductive Health Supplies Update Fall 2006 Meeting of the Reproductive Health Supplies Coalition

2. Reproductive Health Supplies Coalition – Vision  Vision “ensuring sustained access”  Objectives “Increase … financial resources and their more effective use …” “Strengthen global, regional, and country systems …”

3. Systems Strengthening Work Group – Objectives  Objectives “Develop solutions to drive increased reliability, predictability, and efficiency of public financing …”

4. Defining the Problem  2004-05 Research on global financing and procurement (DFID, Gates)  Highlight inefficiencies  Scope for improvement in global architecture

5. Finding Solutions  The Hague, 2005 Technical design options to alleviate inefficiencies in financing & procurement (“better money”) In tandem with work to develop options to mobilize “more money”

6. Two Options  New York, 2006 Minimum volume guarantee (MVG)  Sub-optimal prices due to small, unpredictable orders Pledge guarantee (PG)  Uncertainties in timing of funding  Financing and procurement not in sync

7. Minimum Volume Guarantee  Aggregate demand forecasts of “preferred customers”  Provide minimum volume guarantees (advance commitment) to manufacturers Pre-negotiated contracts Lower prices Reduce lead times  Requires reliable forecasting

8. Pledge Guarantee  Advance money to purchaser More stable flows of funds Improve prices, reduce emergency orders, enhance supply chain management Assume risk of non-repayment

9. Need More Data  New York, 2006 Collect additional information on potential impacts  Impact on prices and lead times UNFPA – manufacturers  “Downstream” country-level impacts JSI – country advisers

10. Overall Findings  Pricing and system inefficiencies Wide variation in procurement prices Unreliable financing and supplies => ripple effects  Potential to make financing more effective Political, bureaucratic, practical challenges

11. Manufacturer Perspectives  Five manufacturers Condoms, IUDs, orals  Advance commitments could: Lower prices 1-10% Reduce production lead times  Prerequisites Upfront purchase order (some) Standardisation of packaging and branding (some) Accurate forecasting and planning of delivery schedules (all)

12. Field Perspectives – Minimum Volume Guarantee – Impact  Lower prices for some products (70% of country advisers)  More predictable supplies and better management (56%) Reduce warehouse costs, expired products, multiple procurements  Potential to further fragment financing/procurement (63%)

13. Field Perspectives – Minimum Volume Guarantee – Feasibility  Legal and regulatory barriers Amend donor, government  UNFPA as operator – varied support (50%) Bypass barriers, assume coordination Need to reinforce capacities

14. Field Perspectives – Pledge Guarantee – Impact  Consistent availability of funds big improvement  Forward funding Improve long-term planning (81%) Smooth financing, more predictable supply flows (63%) “help guarantee products arriving on schedule”

15. Field Perspectives – Pledge Guarantee – Impact  Increase profile of reproductive health (78%) “help position RH” “raise the profile of contraceptive procurement” “create more of a sense of responsibility and obligation”

16. Field Perspectives – Pledge Guarantee – Feasibility  Realities and risks Uncertainties about donor, government funding Accessing SWAp funds Risk of non-repayment

17. Recap  No clear disadvantages  Benefits case-by-case; will not solve everyone’s problems  More favorable response for pledge guarantee

18. Now What?  Not ready to bury the ideas  Hypothetical => Empirical Mechanisms need to be tested, proven to work, then more broadly applied Reality of large contracts, with upfront payment may loosen pricing further

19. Next Steps  Design and implement proof-of-concept Combined minimum volume/pledge guarantee Meaningful in scale, managing risk Operationalize, apply not-so-new concepts Build on, strengthen existing architecture Focus on UNFPA procurements, expandable to “UNFPA+”  Not endorsing McKinsey business model  Not necessarily a permanent solution

20. Roles of Partners  UNFPA Existing practices and performance What capacities to reinforce What to seek in other partners  Other partners

21. Implications for Reproductive Health Supplies Coalition  Next steps will need: Key individuals to champion the process Funding for design and implementation Technical assistance The “ask” – Stakeholder buy-in (donors, potential users) Evaluation plan Clear milestones

22. Questions? Comments?