Kanika Bahl

In Market Dynamics, Creativity Matters: Global organizations using a variety of interventions to leverage their work

Private sector markets are known for their efficiency in reaching the far corners of the globe. If you’re looking for soap, soda or shampoo, there aren’t many places where you’ll have trouble finding any of these products – including countries with limited infrastructure and challenging regulatory environments. To achieve this omnipresence, private sector companies such as Unilever and Coca-Cola rely on a value chain of importers, wholesalers, distributors and retailers that ensure successful market entry and that supply meets demand.

Yet in the international development context, vital products that are proven to have dramatic impacts on nutrition, health and sanitation are often not accessible to those who need them most. For example, every year more than 1 million children under age 5 die of pneumonia, an illness that can be simply and effectively treated with antibiotics for as little as 21 cents per treatment course. These deaths could be easily averted, but a complex and sometimes poorly functioning marketplace – involving manufacturers, regulators, country purchasers and donors – currently prevents this.

This is just one of many challenges that our market dynamics team at Results for Development is actively working to solve.

Our team focuses on ensuring widespread access to products like antibiotics for children by improving product markets in health, nutrition and sanitation. We work across the global value chain to align the needs of manufacturers, countries, financiers and regulators. Our goal is to ensure that the most marginalized populations have reliable, high-quality, affordable access to products such as HIV/AIDS treatment, neglected diseases drugs and sanitation technologies.

Consider the potential impact of this approach for funders of health programs, such as the Global Fund to Fight AIDS, Tuberculosis and Malaria, which spends $2 out of every $5 of its multibillion-dollar portfolio (U.S. $3.9 billion in 2013) on products such as medicines and diagnostics. These strategies ensure the organization can spend its dollars effectively on purchasing and delivery, achieving significant savings that can contribute to protecting and treating millions more people.

(Market dynamics is all about getting life-saving products in the hands of those who need them. Photo courtesy of R4D)

One application of market dynamics is to ensure a cost-effective and efficient marketplace which dramatically increases product access. For example, in 2012 a 40 percent global funding gap meant that millions of families and children would not receive life-saving anti-malaria bed nets. Our team at R4D engaged actively in the bed net market, working across more than 100 different actors to understand opportunities for efficiencies.

R4D identified two key issues which were undermining efficiency in the marketplace. First, there were more than 200 colors, shapes and sizes of bed nets. This fragmentation was driving much higher costs and prices, despite the fact that this diversity had little impact on net usage. Second, there was effectively a race to the bottom because suppliers were only rewarded on the basis of price rather than price and performance – undermining bed net quality. We developed and are now implementing global strategies which address these issues and achieve more than $600 million in savings, which in turn can purchase bed nets to protect more than 300 million additional people.

Market dynamics can also be utilized to accelerate market entry of vital products. For example, when a new treatment technology is developed, getting it into the market at scale can often take decades. This is in part because activities to address challenges in global and in-country regulation, supply capacity, financing and demand generation often occur in disjointed or sequential fashion.

In 2007, the Clinton Health Access Initiative (CHAI) recognized this challenge with pediatric AIDS drugs. Low demand and insufficient financing drove low supply and high costs of $600 per child per year, fueling a vicious cycle which made these drugs virtually inaccessible to the hundreds of thousands of children in need. With UNITAID support, CHAI engaged simultaneously across the marketplace to rapidly advance adoption of a breakthrough drug treatment. CHAI worked with suppliers on new child-friendly formulations, facilitated international and in-country guideline changes to drive demand, and jumpstarted donor financing, dropping pediatric drug prices from $600 to $60 per patient per year in the process. As a result of this work, in just two years the global community went from a situation where only a handful of children were receiving treatment to one where more than 100,000 children were reached.

There are many other examples of the power of market dynamics, from traditional mechanisms like pooled procurement and volume guarantees to new, innovative methods of financing and targeting product improvements. All of these strategies have the potential to be applied not only to health, but also nutrition, water and sanitation, and education.

The success of creative interventions like these has created a global push to institutionalize market dynamics as an approach. This progress can be seen in the strategic plans of important global actors like UNICEF Supply Division, the Global Fund and UNITAID, which are all investing in market dynamics as a way of improving the impactful work they already do. As market dynamics becomes more established, its value as an approach will only be limited by the applications we can find to extend its impact.

Kanika Bahl is a principal and managing director at the Results for Development Institute, where she established and leads the market dynamics practice.

Environment, Health Care
impact investing, supply chains