Breakthrough on Procurement to Save $140 Million
05 November 2013
GENEVA – In a ground-breaking approach to procuring tools to fight AIDS, tuberculosis and malaria, the Global Fund and partners have established a new framework to systematically organize the purchase of massive amounts of mosquito nets, anti-HIV drugs and other products that will improve delivery and make significant savings.
In a first step, the Global Fund will sign contracts with 7 manufacturers for the largest-ever bulk purchase of mosquito nets treated with insecticide, with immediate costs savings of US$51.2 million, and projected overall savings of US$140 million for the Global Fund over two years.
The initial contracts, for 90 million mosquito nets, will be part of an overall purchase of 190 million nets by partners in 2014. The new framework reduces base prices across the board, for all partners, and also reduces bottlenecks and shortages in countries where malaria threatens the lives of millions of children under the age of 5.
By using large-scale purchasing power, the new framework provides tremendous value for money. It is expected to lead to greater savings for all partners, and that can translate into even greater impact against malaria.
“We can defeat malaria, if we all work together,” said Mark Dybul, Executive Director of the Global Fund. “This kind of collaboration across sectors, between partners and manufacturers, is essential to controlling malaria and sharply reducing the number of children who die from it each year. And it’s good business, too.”
The new framework emerged from a special partnership launched in May 2013 between the Global Fund, the UK’s Department for International Development, the U.S. President’s Malaria Initiative and UNICEF, who collectively represent about 87 percent of the purchases of insecticide-treated nets. Other partners also participated, including the Clinton Health Access Initiative (CHAI), Roll Back Malaria Partnership and the office of Raymond G. Chambers, the UN Secretary-General’s Special Envoy for Financing the Health MDGs and for Malaria.
Christopher Game, Chief Procurement Officer of the Global Fund, is directing a more proactive approach to sourcing and procurement, which accounted for roughly US$2 billion of $3 billion in grant expenditures by the Global Fund last year. He said that long-term contracts in the new framework improve visibility, production, capacity planning, and competitive pricing.
“The transparency and single voice that we presented as a coalition facing the manufacturers was very powerful,” said Mr. Game. “The locus of control has shifted from seller to buyer. It enables us to invest more strategically, and concentrate in areas with high impact.”
Mr. Game said the Global Fund is currently in similar negotiations with the U.S. President’s Emergency Response to AIDS Relief (PEPFAR) and the government of South Africa – both major purchasers of antiretroviral drugs – and manufacturers, and has initiated similar processes to leverage its purchasing power for diagnostics and male circumcision devices.
The new framework also moves toward a well-balanced sustainable supply, evenly spread among a number of suppliers, supporting innovation, optimizing capacity and reducing risk.
In addition, it also supports moves toward growing domestic production in countries with high demand for mosquito nets, which lowers transportation costs and incorporates advice from local experts. The selected suppliers include AtoZ Textile Mills which produces Olyset Net in Tanzania, and other domestic manufacturers.
“We applaud the Global Fund’s ability to use its market presence so effectively, in cooperation with other purchasers and manufacturers,” said Mr. Chambers.
There are approximately 200 million cases of malaria each year, of which 80 percent occur in sub-Saharan Africa. Malaria causes 660,000 deaths each year, the majority of which are children under 5. In countries where malaria is prevalent average life span can be as low as 30. Huge progress has been made against malaria over the past decade, driven by scientific advances like mosquito nets treated with insecticide. Since its inception, the Global Fund has supported partners in distributing more than 340 million nets.