Is Private Sector Engagement In Health Supply Chains in LMICs the Most Recent Panacea?

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In the past few years, the international donor community has doubled down on the idea of the private sector as an important advisor, executor, innovator, and financier for governments, donors and implementing partners to achieve sustainable health outcomes in low- and middle-income countries (LMICs).

Governments, NGOs, and civil society organizations are examples of entities that have made significant investments in reaching the United Nations Sustainable Development Goal of “[achieving] universal health coverage, including financial risk protection, access to quality essential health-care services, and access to safe, effective, quality and affordable essential medicines and vaccines for all.” Even with these investments, there are still gaps in stakeholders’ willingness, ability, and funding to ensure healthy lives and promote well-being. Traditionally, governments or parastatal agencies, with the support of donors, have managed public health supply chains in LMICs. This support has mostly focused on strengthening health supply chain operational capabilities such as forecasting and supply planning, procurement, and storage and distribution. Recently, however, donors are increasingly envisioning the private sector as an important advisor, executor, innovator, and financier for governments, donors, and implementing partners to achieve sustainable health outcomes.

Embracing Stewardship in Health Supply Chains 

Countries such as Nigeria and Zambia are testing and scaling private sector-led supply chain solutions to improve their health supply chain performance and health outcomes. In Nigeria, to ensure adherence to treatment, the Chemonics-implemented USAID Nigeria SHARP program partnered with 55 community pharmacies for antiretroviral therapy and reproductive health commodity distribution. In Zambia, we implemented an innovative health commodity distribution system in the Medical Stores Limited (MSL) for the USAID Global Health Supply Chain Program-Procurement and Supply Management project, using a third-party logistics (3PL) service model. The tripartite subcontract allowed easy information exchange among parties, as well as for MSL training in managing a 3PL contract. The 3PL subcontractor, Lechwe Express Zambia, provides fleets for distribution and uses a comprehensive live-tracking system to track shipments. In both cases, national governments have assumed a stewardship role, managing and monitoring private sector-run supply chain operations with support from donors and implementing partners.

 It is important to note that becoming a steward does not decrease a government’s responsibilities for key supply chain functions. When embracing a stewardship role, governments will usually identify the need to strengthen key functional capabilities such as governance, financing, workforce capacity, processes, and systems.

To ensure an effective and sustainable stewardship model, the public and private sectors must not only build a strong relationship based on trust, but learn to leverage their respective comparative advantages. It is important to note that becoming a steward does not decrease a government’s responsibilities for key supply chain functions. When embracing a stewardship role, governments will usually identify the need to strengthen key functional capabilities such as governance, financing, workforce capacity, processes, and systems. These functional capabilities typically take longer to develop, and if countries choose not to invest in them, the supply chain operation efficiency gained is likely to be diluted.

 

Assessing the Feasibility of Private Sector Engagement

Before engaging the private sector, we recommend conducting a government-led situational analysis to assess if all actors are ready to trust each other and work together; if the government has the capacity to become stewards of the health supply chain; if the right enabling environment for the private sector to thrive exists; and even if the private sector has the capacity to assume the expected role. Rather than a prescriptive approach, we suggest a pragmatic one that accounts for the root causes and proper sequencing of supply chain problems to be solved, as well as careful preparation for the financial mechanisms and management to enable PSE. This approach allows relevant actors to make informed choices about the timing and types of PSE that may be appropriate in a country’s broader context.

Diagram showing benefits and challenges of PSE.

Benefits and Challenges of Collaboration 

Perceived challenges in the collaboration between public and private sector actors still exist; trust is often lacking, as their motivations are not commonly aligned. Further, governments may have concerns about a loss of control over operations, while the private sector may worry that it will not receive the operational and financial support from government to reach expected returns on investment. However, the benefits of shared risks and opportunity for growth, access to innovation and expertise, and operational efficiencies can overcome these challenges. The private sector can help improve supply chain performance and accelerate supply chain maturity, creating a more mature supply chain that can facilitate greater PSE. Highlighting the bidirectional and dynamic beneficial nature of PSE is therefore critically important.

Embracing a government stewardship model and private sector-led health supply chain operations could be a game-changing innovation for countries in a variety of operating environments and of different health supply chain maturity levels. It is a useful tool for LMICs seeking to build resilient health supply chains and achieve scalable, sustainable, and impactful health outcomes.

Learn more about Chemonics’ thinking on Private Sector Engagement to Advance and Sustain Health Supply Chain Resiliency in our recent white paper here.

Posts on the blog represent the views of the authors and do not necessarily represent the views of Chemonics.

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About Giuliana Canessa Walker

Giuliana Canessa Walker is an international development practitioner with 18 years of experience designing and managing projects across Africa, Europe and Eurasia, Latin America and Middle East. She currently serves as the senior global supply chain practice lead. Previously, Ms. Walker led the Knowledge, Innovation, and Technology Department, which provides guidance and resources to integrate…