​David Ripin / Danielle Kuczynski

CHAI as a Disruptive Market Force (Part 1): Ensuring access means more than getting the right drugs to the right people at the right time

Lack of access to medicines is an issue of life and death, with far-reaching impact on individuals around the world:

• The proportion of children with malaria receiving Artemisinin-based Combination Therapies (ACT) was only 16 percent between 2010-12. Of the 627,000 malaria deaths in 2012, 77 percent were children under the age of 5.

• In 2013, it was estimated that there were 3.2 million children living with HIV and that 240,000 become infected every year. Only 24 percent of all children living with HIV are on Antiretroviral Treatment (ART).

• Approximately 29 percent of global deaths of children younger than 5 are vaccine preventable. While routine immunization schedules are improving through the addition of new vaccines, the cost of vaccinating a child has increased 20 fold since 2001.

Why market shaping?

By actively engaging stakeholders on the supply and demand sides of the market, we can help overcome access challenges and get health care commodities to the people who need them the most. One logic trap about health programming is that lack of funds is the biggest barrier to treating more patients and increasing global impact. This argument overlooks the fact that existing programming dollars can yield additional value if they are invested in low-cost, high-efficacy commodities. Without external interventions, markets for health commodities may contain inefficiencies that prevent optimal value for money from being realized. The Clinton Health Access Initiative (CHAI) Access team works to address this issue through market-based solutions that improve the returns on health investments by focusing on a leading cause of inefficiency: high prices for medicines and diagnostics.

Ensuring access means not just that the right drug or diagnostic gets to the right people at the right time. It also means getting the commodities for the right price to maximize donor and domestic resources, ensuring a sustainable market, and making sure that the health benefits of those commodities are realized without unnecessary wastage. Information transparency is a critical component to a market-shaping approach. Partners on both the supplier (i.e. pharmaceutical and diagnostic companies) and buyer (i.e. demand from national treatment programs) sides have become highly sophisticated and evidence-based. Good decision-making is contingent upon these partners accessing all data necessary to come to a solid understanding of tradeoffs of different courses of action, including costs and benefits to using available or potentially available products at potentially achievable prices. To the extent possible, CHAI helps ensure that both parties have the information that they need to make informed decisions.

When CHAI began in 2002, our mission was focused on addressing the HIV/AIDS crisis in low- and middle-income countries by increasing access to diagnosis and treatment through market-shaping interventions. At the time, only about 100,000 people living with HIV were on treatment outside of Latin America and the Caribbean, and prices for Antiretroviral (ARV) drugs used to combat HIV were far too high for most low- and middle-income countries to scale up treatment to the patients who needed it. By June 2014, 13.6 million people were on treatment and annual per-patient ARV costs were as low as $100-$150. CHAI helped facilitate this progress by working with pharmaceutical companies to lower drug and diagnostic prices, as well as countries and global buyers to ensure uptake. Today, 8.2 million people in more than 70 countries have access to CHAI-negotiated prices for HIV/AIDS medicines.

CHAI’s work has since evolved to address drug and commodity access issues in health areas beyond HIV. These areas include TB, family planning, maternal and child health (MCH) commodities, vaccines, malaria and other infectious diseases. Through this work, CHAI aims to optimize patient health outcomes while improving the effectiveness of health investments.

How CHAI shapes markets

CHAI works on both supply- and demand-side market issues in order to achieve an impact that is larger than what would be achieved if we worked on one dimension alone. CHAI’s approach is supported by like-minded donors including UNITAID, the UK Department for International Development (DFID) and the Bill and Melinda Gates Foundation, and enables CHAI to act as a disruptive market force.

CHAI takes the following steps to help shape markets:

1) Analyze market failure. CHAI first assesses the supply- and demand-side drivers that are contributing to a particular market failure. Potential drivers of market failure may include information asymmetry, a low-volume/high-cost market trap, inefficient manufacturing processes, insufficient production capacity or fragmented demand.

2) Identify high-potential interventions. Once CHAI identifies the causes of a market failure, a market scoping analysis is conducted to identify high-potential and targeted interventions that could be leveraged to address this failure.

3) Identify specific manufacturers to target. On the supply side, CHAI undertakes a discovery phase to assess potential manufacturing partners and prioritize engagements. The evaluation is based on criteria established in steps one and two, and includes deeper analysis and scoping of relevant manufacturers and products suited to address the market failure.

4) Develop and implement focused strategies. CHAI then develops supply- and demand-side strategies that will help stimulate or improve the efficiency of a specific market. Market intelligence is also used to provide a compelling case for engagement, where we work with parties to implement supply- and demand-side market shaping strategies.

The supply-side strategies that CHAI employs include:

Improving efficiency through scale. Working with suppliers to spread capital, research and development, and operating costs over higher volumes helps to lower production costs per unit. Automation may also help lower unit costs at scale. These lower costs can in turn be linked to lower prices for developing country buyers.

Improving capacity utilization. If a factory runs at less than 100 percent capacity or at unpredictable levels from week to week, the costs of production, storage and raw materials can go up. One way to address this issue is to improve access to market information. Demand forecasts made possible by our partnerships with governments lead to predictable order flows and ultimately reduce costs.

Mitigating market risk. Companies often add a premium to their pricing when they lack confidence in conventional market mechanisms. A number of approaches can be taken to minimize risk to different players in the market, including volume guarantees.

Lowering barriers to market entry. Existing monopolies, extensive quality certification requirements and other market conditions can act as barriers to market entry for manufacturers. Providing market intelligence, supporting business case development and facilitating certification can dramatically lessen manufacturers’ aversion to market entry.

On the demand side, CHAI employs strategies such as:

Supporting in-country adoption. New health commodity product adoption in-country often requires consensus building by key decision makers and leaders. CHAI works closely with government partners to support both the initial advocacy and the ultimate follow through to development of national guidelines, testing algorithms and training requirements, to support the introduction of new health commodities.

Strengthening country systems. Changes often need to be made to in-country systems in order for governments to be able to handle increased product volumes, introduce a new product or switch efficiently from one product to another. CHAI supports this by helping to improve forcasting, quantification, procurement and data management systems and enhancing the capacity of supply chains, labs and health care professionals.

Generating demand. When new products enter the market, communication strategies or targeted outreach is often needed to ensure that governments, implementing partners, clinicians and key populations are aware of product availability and benefits. CHAI works to increase the awareness of these stakeholders.

CHAI remains engaged in market shaping because we see it as an important complement to other global health approaches, and because our strong partnerships with governments, donors and private sector counterparts make us strategically well placed to understand the landscape and effect change. Attempting to shape markets without the insight and trust of our partners would result in limited success. In our next post, we will discuss further how these complex and dynamic partnerships have led to successes and elaborate on existing opportunities and challenges within the market-shaping space.

David Ripin (primary author) is the executive vice president of Access programs and chief science officer at CHAI and Danielle Kuczynski (supporting author) is a senior program manager at CHAI.

Health Care
supply chains