The Donor-Funded Dilemma: What’s Stopping Emerging Countries from Developing Private Markets for Contraceptives?
In sub-Saharan Africa, the private sector is a common provider of family planning solutions, used by almost 40 percent of women in the region. But this isn’t the case in Malawi.
To find out why, we spent two weeks in-country this past September, exploring Malawi’s private sector landscape for family planning and reproductive health commodities through work sponsored by the Reproductive Health Supplies Coalition’s Innovation Fund, in a project titled “Total Market Approach: Private Sector Distributor Landscape Analysis.” This project is a part of larger efforts to expand access to contraceptives by utilizing the private sector in Malawi (and countries like it) that have historically been dominated by donor-funded commodities. This work will seek to develop recommendations on how the private sector may be expanded in settings like Malawi.
Accompanied by a local pharmacist, we were able to engage in conversations with wholesalers, private retailers, social marketing and faith-based organizations, manufacturers and government representatives, allowing us to gain a “total market” view of Malawi’s current family planning provision. Through this, we witnessed a family planning market dominated by free, public-sector products, alongside a capable yet under-utilized private sector. During our many conversations with key stakeholders in the country, we observed five crucial environmental and policy-related factors that may be directly contributing to the private sector’s ability (or lack thereof) to provide family planning commodities. While we saw this in our visit to Malawi, it may apply to other countries with long histories of donor-funded healthcare.
A Majority Rural Population with Low Ability to Pay
Malawi has a population greater than many of its African neighbors, including Zambia and Zimbabwe, yet it represents a challenging market. In 2017, the World Bank estimated that 83.2 percent of Malawi’s population lives in rural and hard-to-reach areas. And World Bank measures from 2016 estimated that over 50 percent of the population lives below the national poverty line. These combined factors show that only a limited portion of the population may actually have the ability to pay for and access contraceptives provided in the private sector. Low levels of visible demand for family planning may then prevent private sector actors from investing more into the provision of these products.
The Dominance of Free Products
All Malawians, regardless of ability to pay, are able to acquire their contraceptives free-of-charge in the public sector – or for a very modest service fee from NGOs and faith-based organizations. This severely limits the private sector’s ability to attract customers for family planning products, even among those who do have the ability to pay. Additionally, all of Malawi’s public sector family planning commodities are donated to the country through larger procurement entities like USAID and UNFPA, which often source each contraceptive product from a single manufacturer. This means Malawi is greatly impacted by global product shortages – as illustrated by the widespread shortages of Depo-Provera that we saw and heard about during our travels. And because the private sector market is not well-developed for these critical products, there may not be a back-up option for women when the public sector is experiencing stock-outs, particularly in the rural areas of the country.
No Family Planning Inclusion on Private Insurance Schemes
Perhaps due to the public sector’s free provision of family planning, the primary health insurance schemes in Malawi do not include contraceptives as a covered service. This challenge, also evident in other countries, may work to force Malawians (even those with an ability to pay) to use the public sector, because they cannot get a portion of their services covered by their insurance. On a visit to one of Lilongwe’s well-regarded private clinics, the sole gynecologist described how even his regular patients seek their contraceptives from public clinics rather than pay out of pocket.
No Price Controls for Wholesalers or Retailers
While speaking to wholesalers across Lilongwe, we found reports of retailers charging up to 100-200 percent margins on many products, including family planning. No regulations currently exist to limit the sometimes-excessive margins that private sector retailers are prone to charging. Exorbitant prices may then work to place the private sector as only a “last resort” outlet for many products. The underlying cause of high margins may be pharmacy operating costs, such as the challenge we heard regarding the difficulty of retaining skilled pharmacists, a profession in relatively short supply in Malawi.
Difficulty Discerning Market Opportunity
Poverty rates and donor presence lead to cautious manufacturer views on the private market opportunity for contraceptives. We heard concerns that contraceptive manufacturers may perceive that the costs of bringing products to Malawi are greater than the potential market returns – significantly reducing the contraceptives available for wholesalers to supply. A focus on the development of funded demand by government and NGO players may help to incentivize the private sector to bring product to the Malawian market. To take one example, the Malawi government’s “Buy Malawi” campaign, which prioritizes medicine purchases from local manufacturers (for a selection of products), could help ensure a market – if manufacturers were to invest in local production capacity. With appropriate methods of demand generation and market segmentation, Malawi has the opportunity to achieve the same market appeal as some of its neighbors.
Despite these barriers, we noticed that many actors within Malawi’s private sector (both wholesalers and retailers alike) are ready, willing and able to provide contraceptive products when a strong market need is evident. For example, within Malawi’s public sector it can be difficult for women to access emergency contraception due to stock-outs, stigma or long travel and wait times. The private sector has responded through a consistent supply of emergency contraception, with at least three wholesalers providing it, and two more currently working on registering the product for sale in the country. Retailers and wholesalers perceive emergency contraception as a fast-moving product with tremendous market opportunity. Here we can see that when free product is not at the forefront, the private sector has the ability to step in and fill the gap.
If development efforts wish to prepare countries and their private sectors for eventual reductions in global funding, we need to focus more attention on how past (and current) development efforts may inhibit the private sector from fully developing and serving populations that are able and willing to pay.
Andrea Bare is a Senior Advisor with the William Davidson Institute at the University of Michigan (WDI).
Erika Beidelman is a Research Associate for the Healthcare sector at WDI.
Note: WDI is NextBillion’s parent organization.
Photo courtesy of Frank Douwes.
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