The Global Fund to Fight AIDS, Tuberculosis and Malaria recently raised $12.2 billion for its work between 2014 and 2016, the most ever committed to fighting these diseases. Beyond raising money, the Global Fund is extracting more value from its investments by transforming its procurement and fostering a healthy marketplace for lifesaving commodities.
About half of Global Fund grants go toward purchases of health products, equipment and services. Nearly $600 million is spent annually on drugs. Another $500 million is spent on other needs – from insecticide-treated bed nets to diagnostics and laboratory equipment. By leveraging its purchasing power and emphasizing its role in the sourcing of core health products, the Global Fund is reshaping markets and providing a greater return on its own and donors’ investments. The possibilities for cost savings, reduced stock-outs and increased access to vital health products are significant.
To achieve these efficiencies, the Global Fund began by building its internal sourcing capacity and consolidating procurement efforts, saving $22 million in contracting costs. The organization also improved its engagement with manufacturers, giving it a better position in procurement negotiations and enabling it to enter into long-term agreements with suppliers.
Last year, the Global Fund initiated a consortium approach to insecticide-treated bed net purchases. By working with partners – including the United States, the United Kingdom and UNICEF – it helped clarify global demand forecasts to improve suppliers’ production plans, lower costs and make procurement more efficient. This effort marked the institution’s first shift from spot tendering to two-year framework contracts with suppliers, and led to lower costs for the Global Fund and other purchasers. This has helped to lower the cost of insecticide-treated nets to $2.83 per net, below UNICEF’s average of $3.06. The changes are projected to save the Global Fund $140 million over two years — savings that can be directed to the core job of saving lives.
This consortium approach is allowing the Global Fund and its partners to better plan their needs for insecticide-treated nets and make the production cycle more manageable for manufacturers. Firmer upfront commitments for products give manufacturers greater predictability. Better production planning helps ensure that those most vulnerable to malaria — largely children under five in Africa — will get the malaria prevention tools they need. Similar efforts are underway for the procurement of antiretroviral drugs and HIV/AIDS prevention and diagnostic tools, in partnership with the President’s Emergency Plan for AIDS Relief and the South African government.
The Global Fund is also encouraging countries to better utilize its pooled procurement mechanism to lower costs and reduce institutional risk. One year ago, just 27 per cent of countries it identified as high-risk participated in the pooled procurement program. Today, 59 per cent of these countries are participating — representing 84 per cent of the Global Fund’s overall disbursements.
Furthermore, the Global Fund has introduced an electronic “track and trace” system for health product purchases, enabling implementing partners to monitor the status of their orders. It is also working with Interpol and the private sector to combat counterfeiting, theft and diversion of drugs.
The Global Fund’s improved procurement performance has streamlined processes and saved $133 million in 2013 alone, but these are first steps. Clearly, much can be achieved when global health partners collaborate to address market challenges. The Global Fund is deeply committed to expanding these efforts, because every success offers the potential to save more lives.
Photo (top): The Global Fund has distributed more than 360 million insecticide-treated nets to those most in need, like this mother and child in the Philippines. Procurement cost savings enable the Global Fund to provide more bed nets – as well as other treatment and prevention programs – to more families. Photo credit: The Global Fund / John Rae.
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