NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Why are so many global public health experts talking about “market dynamics” these days?

Whether we call it “market shaping” or “market facilitation” or the “total market approach,” there is a large and growing interest in the idea that we’ll be more effective in improving health outcomes at the base of the pyramid if we frame challenges in terms of markets. Why?

First of all, the space where health care seekers meet health care providers – the health market – is big, even in developing countries. And it’s big not only because the public sector – the major market player for the BoP – is big. The poor in most developing countries depend heavily on the private sector to help meet their needs, especially for curative services. In many countries where Population Services International (PSI) works, the private sector can also provide anywhere from one-third to more than half of all modern contraception.

By understanding the forces that affect supply and demand in those markets – by understanding market dynamics – we’re better able to design, implement, monitor and evaluate interventions that improve health outcomes by improving the “health” of markets.

That’s important because many of these markets are underperforming – at least from a public health perspective. Products and services don’t reach many of those who need them most. Where they do reach them, quality can be very low and prices can be devastatingly high for families in precarious financial conditions. Even where there are effective health solutions theoretically within financial reach of the BoP, those solutions often don’t get there because supply chains are too weak or regulations too restrictive.

Organizations like PSI (where I serve as chief strategy and resources officer) have been using market-based approaches for decades to improve health outcomes. The standard approach of many of these programs has been to introduce a subsidized product into the private sector (to increase affordable access), and brand and promote it like many non-health goods (to increase consumer demand). But while this “gap-filling” approach may be appropriate for markets in early stages of development – where not only knowledge and awareness are low but infrastructure and supply chains are also weak – today many markets have evolved to where they can respond to “lighter touch” interventions that lead to sustained performance gains which are less dependent on external subsidies.

In a world where markets are evolving and developing at an ever fast pace, those who are serious about improving health outcomes in a transformative and sustainable way, must take a step back and consider where they can stop filling gaps. We must start asking what we can do for the current market to deliver products and services rather than ask what the market can do for us to deliver the same.

This can be challenging. For development partners to understand entire market systems and where they best add value to improve systems is a time-consuming and complex process. Even when systems are understood and decisions made on the best way to facilitate or catalyze a market (rather than be a gap filler) it will take time to produce large-scale, measurable impact on health outcomes. That means it is difficult to demonstrate the cost effectiveness of interventions. Meanwhile, people continue to get sick and die from preventable conditions.

But in the right conditions, a market development approach should lead to longer-term gains. It seems to many of us that market strengthening interventions based on an understanding of market dynamics in the health sector has the potential to reduce morbidity and mortality on a larger and more sustainable scale than traditional short-term projects. It may also have significant knock-on effects for the livelihoods of those working along the supply chain all the way down to the health provider.

Two examples from PSI’s current work illustrate how we are trying to put a market dynamics approach to work.

UNITAID has funded PSI to create private sector markets for malaria rapid diagnostic tests (RDTs) in five malaria endemic countries. An RDT is a simple test that can be used in the field outside of laboratory conditions to quickly detect if a patient has malaria. For example, a lay drug seller in a corner store can correctly administer the test. This project aims to increase both access to and demand for quality-assured RDTs, while improving private providers’ fever case management skills.

More than 40 percent of the population in endemic countries seeks care and treatment for fevers in the private sector. Appropriate use of RDTs is critical to ensure appropriate treatment. Currently, RDTs are either not available or, where available, are more expensive than the recommended frontline treatment for malaria – artemisinin combination therapy (ACT). This means consumers and providers presumptively treat fevers for malaria, wasting antimalarial drugs and contributing to resistance development – while not correctly treating the fever from which the patient is suffering.

To address this, we are taking a market dynamics approach. We are mapping Kenya’s RDT market to identify key systems constraints acting as barriers to RDT uptake in the private sector. This in-depth analysis reveals key barriers, such as:

• The regulatory environment does not allow certain types of outlets, such as informal drug shops, to stock or sell RDTs;

• Providers have no incentive to stock RDTs when demand is low and supply chains to restock are weak;

• Consumers do not demand a test because they may lack knowledge of the benefits of RDTs or are unable to afford one;

• Providers choose not to adhere to negative RDT results due to lack of confidence in the test results, loss of profit from a foregone ACT sale and/or demand from customers to treat with an ACT anyway.

Working with market development experts from the Springfield Centre, we have analyzed the key functions in the market and worked out who best performs the functions and who best pays for the functions. Moving forward, we want to leverage the natural incentives of the existing market players to perform key functions better in terms of serving the poor. Not replacing the existing market players or distorting their incentives offers a well-reasoned approach to sustainability – system change rather than gap filling.

Under the Gates-funded ACTwatch, my second example of a PSI market dynamics program, we are monitoring how ACT markets are responding to market-based interventions. Strong market development programs require robust market data to make informed decisions. ACTwatch provides this data to the global malaria community by measuring which antimalarials are available, where they are available, at what price, and who uses them. This data helps monitor the results of the system change interventions within the market.

Indicators are measured over time and across countries through three study components: outlet surveys, supply chain studies and household surveys. Nationally representative outlet surveys examine the market share of different antimalarials passing through both public facilities and private retail outlets. Research provides a picture of the supply chain serving these outlets and measures mark-ups at each level of the supply chain. On the demand side, nationally representative household surveys capture treatment-seeking patterns and utilization of antimalarial drugs, as well as respondent knowledge of antimalarials in the seven countries.

If we develop our understanding of market dynamics, design interventions using those insights, monitor those interventions effectively and make informed adjustments to our approaches along the way, we’ll go a long way to improving the performance of health markets, so that they sustain high performance even at the BoP.

Brian Smith is Population Services International’s chief strategy and resources officer.