Strengthening Supply Chain Resilience to Safeguard Health in Low- and Middle-Income Countries

The following report was made possible by financial support from Chemonics, a private international development firm. It was produced by FP Analytics, the independent research division of the FP Group. FP Analytics retained control of the direction of the research. Foreign Policy’s editorial team was not involved in the creation of this content.

All public health activities and operations depend on an effective supply chain, making resilience- and capacity-building vital for health outcomes. In low- and middle-income countries (LMICs), especially fragile settings, managing risks to health supply chains, filling gaps in commodity access and quality, and facilitating inclusive growth are essential to safeguarding public health as well as socioeconomic stability. The challenge before governments and the international community, however, is not simply to mitigate vulnerabilities to complex, often intersecting risks such as climate disasters, protracted conflict, or pandemics and epidemics, but indeed to build long-term, systemic resilience into the global health supply chain. This is crucial to enabling greater health system access and equity in LMICs.

As the world emerges from the COVID-19 pandemic, drawing on lessons learned about the conditions needed to ensure resilient health supply chains will be key not only to enhancing global health security, including improving pandemic preparedness, but also to enabling Universal Health Coverage (UHC) and more broadly achieving the Sustainable Development Goals (SDGs).¹ This issue brief, produced by FP Analytics with support from Chemonics, examines the characteristics of resilient health supply chains and identifies opportunities for effective multi-sectoral partnerships to transform health systems in LMICs.

Reimagining public health supply chains in LMICs through a systems-approach

LMICs have historically endured a disproportionate and growing number of disruptions to health commodity supplies, threatening lives and livelihoods and undermining progress on sustainable development.² In addition to recent global crises such as the COVID-19 pandemic, persistent challenges such as sudden changes in demand, price increases, political instability, corruption, and disruptions to international trade and shipping continually undermine socioeconomic recovery and stymie sustainable development efforts.³ As the fragility of health supply chains has become increasingly apparent, global public health stakeholders have acknowledged the need to rethink traditional supply chain management approaches, such as the “just-in-time” model for inventory. This approach, which dominated health supply chains leading up to the COVID-19 pandemic, prioritized supply chain efficiency through cost-cutting and waste-reduction measures, encouraging suppliers to eliminate redundancy and replenish inventory only when reserves ran low.⁴

By contrast, maintaining stockpiles of critical medicines and raw materials, or “just-in-case” supply chain models that are anchored in preparedness, has shown to be more resilient to price volatility, geopolitical instability, and climate-related disruptions.⁵ This is important because supply chains are situated within, and shaped by, a country’s health system, socioeconomic conditions, and political institutions. Significant functional challenges—for example, underdeveloped transportation networks, shortages of skilled labor, obscure regulatory environments, and weak governance mechanisms—demonstrate the need for a systems-approach to building resilience.⁶ Strategies to strengthen supply chain resilience therefore need to be informed by contextually relevant evidence and inclusive of the specific needs of local populations. This is especially true in LMICs, where vast inequities persist between rural and urban settings, and across religious, racial, ethnic, and gender divides, thereby shaping communities’ quality of, and access to, health systems and commodities.

One promising approach to building resilience is to invest in and develop absorptive, adaptive, and transformative capacities across international development activities, including public health supply chains.  Investing in absorptive resilience entails reducing vulnerability to shocks and stresses by prioritizing prevention of disruptions in the long-term and developing coping mechanisms in the short-term. Investing in adaptive resilience entails developing the capacity to make informed choices and pivot strategies as socioeconomic and environmental conditions change. Investing in transformative resilience entails strengthening governance and creating policy and regulatory environments conducive to systemic change.⁷ Taking these capacities into consideration, the next section highlights and analyzes pathways for improving health supply chain resilience in LMICs.

Designing impactful interventions to bolster supply chain resilience

There are a range of opportunities, spanning blended financing, data digitization, procurement diversification, and beyond that can be leveraged to design targeted interventions that bolster the capacity and resilience of health supply chains in LMICs. For example, strengthening domestic financing and decision-making over health supply chains can reduce long-term inefficiencies, increase quality of care, and amplify the impact of existing investments in health systems, including to buttress health system infrastructure, improve workforce performance, increase data visibility, and enhance technology.⁸ It can also help communities repurpose existing infrastructure, diagnostic tools, and health worker capacity in order to anticipate and respond to the next crisis.⁹ This is critical because inconsistent and inadequate cycles of short-term crisis spending tend to undermine public and private stakeholders’ ability to pre-position investments in supply chain resilience.¹⁰ Often, specific disease programs such as HIV/AIDS, tuberculosis, and malaria are prioritized over holistic initiatives that strengthen the health system overall, including primary and preventative care.¹¹ In contrast, the 2021 CHAI HIV Market Report notes that the resilience of national health programs, specifically community-led innovations in service delivery, preserved the continuity and progress of lifesaving HIV care during the COVID-19 pandemic. Increased HIV self-testing, telemedicine, virtual training, and multi-month medication dispensing are examples of long-term investments in health and community systems that directly contribute to health system resiliency.¹²

Progress on Global HIV Commitments

Data from 9 PEPFAR high burden countries demonstrates the resilience of HIV programming, even during the pandemic.

DATA SOURCE: KAISER FAMILY FOUNDATION AND PEPFAR

Supply chain stakeholders across the public and private sectors can augment their decision-making capacity by developing reliable and transparent data systems, which are key to identifying bottlenecks, anticipating disruptions, and tracking fluctuations in flow.¹³ Collecting and sharing robust, real-time data across the supply chain are essential for accurately measuring and optimizing supply chain performance. Supply chain stakeholders can then allocate resources more efficiently and effectively, in sourcing and manufacturing as well as distribution and delivery.¹⁴ Leveraging digitization in the supply chain, including for bolstering surveillance capacities such as forecasting and monitoring, can also improve inventory management and provide insights into key performance metrics. A study based on data obtained from PMA2020 survey reports, or from country reports by UNFPA Supplies, found that inefficiencies in supply chains result in stockouts for modern contraceptives, including condoms, implants, injectables, and oral medication, in African countries such as Burkina Faso, Niger, Nigeria, and Togo, thus undermining reproductive choice and sexual health.¹⁵ Investing in better data management tools and strategies is therefore imperative to bolstering supply chain resilience and improving family planning outcomes. 

Contraceptive Commodity Use Versus Cost by Sector, Method, and Income Group

Ensuring equitable and affordable access to and choice of contraceptives requires cross-sectoral collaboration.

Note on data: “All income levels” refers to low, lower-middle, and upper-middle income countries aggregated across 129 countries. The cost is in US dollars and reflects the last price paid for a contraceptive before it is actually used or obtained by the user. Data is from 2019 and does not reflect pandemic-era changes.

DATA SOURCE: Reproductive Health Supplies Coalition

Increasing data visibility and expanding the digitization of logistics-management information systems (LMIS) can inform stakeholders, optimize interventions, increase responsiveness, and influence key health outcomes.¹⁶ For example, since the Covid-19 pandemic began, the USAID Global Health Supply Chain Program Procurement and Supply Management (GHSC-PSM) has supported countries such as Pakistan and Nepal to leverage digital tools for data visibility, surveillance, forecasting, and monitoring as part of the public health response.¹⁷ As billions of people globally, including increasingly in LMICs, spend significant time on their mobile phones and on the internet, expanding infrastructure for, and access to, telehealth, especially for primary care, will be key to ensuring public health access. Adapting health supply chains to meet this reality is essential, but it is hardly a risk-free proposition, with cyber threats such as ransomware and malware presenting serious concerns. Enhancing cybersecurity to coincide with digitization therefore represents another critical component of building health supply chain resilience.

Developing and maintaining effective multi-sectoral partnerships have many other implications for building supply chain capacity and resilience, such as helping to facilitate the trade of goods and exchange of services in regulatory environments that ensure quality without impeding flow. One strategy for simultaneously reducing sourcing costs and strengthening resilience is regionalization, which entails shortening distances in global value chains by manufacturing products within or close to regions where they will be used.¹⁸ Reorienting sourcing and other partnerships to be more proximate, though a long-term process requiring sustained investment, builds local capacity and creates infrastructure, yielding multiple benefits over time. For example, in its efforts to end malaria, the Global Fund has worked with some pharmaceutical companies to enable the production of medication and insecticide-treated nets in Africa, as well as pre-positioning therapeutics on the continent for faster deployment, thereby reducing costs and boosting the regional supply chain.¹⁹

Redundancy is another type of diversification strategy that trades off cost-minimization in favor of maintaining more expansive supplier networks, excess inventory, and capacity.²⁰ When key inputs for the manufacture of medicines or other essential health products are sourced from limited and distant places, this can increase the supply chain’s vulnerabilities to raw material shortages or exogenous shocks. It can also make those inputs subject to additional taxation, trade restrictions, customs delays, and other administrative disruptions, which in turn risk procurement becoming a prolonged, expensive, or inefficient process.²¹ Currently, most Active Pharmaceutical Ingredients (APIs) for essential medicines are produced in just two countries: India and China.²² This concentration of manufacturing creates compounding risks in the event of emergencies, such as a pandemic or an environmental disaster, which have been shown to threaten sourcing and shut down production of essential medicines.²³ It is important to recognize, however, that acquiring the requisite technologies and infrastructure are costly for LMICs, with a 2020 report from the OECD suggesting that it would be exceedingly cumbersome and costly for every country globally to develop the necessary production capacity to create a self-sufficient in-country health supply chain.²⁴ Therefore, scaling access to innovative and cost-saving technologies requires sustained commitment from and engagement with multi-sectoral partners. Strong and diversified procurement channels are fundamental to health supply chain resilience, including geographic diversification.

Coordinating action among partners is key to improve health outcomes

Supply chains comprise an ecosystem of interdependent actors and therefore benefit from a high degree of coordination, collaboration, and integration. Public-private partnerships and expanded investments can help LMICs efficiently source needs through more cost-effective strategies for concerted action, while securing their in-country supply chains through digitization and data visibility. Though national governments remain the stewards of public health supply chains, the private sector has taken an increasingly active role in supply chain management as financiers, innovators, and implementing partners.²⁵ One key strength of private sector actors is their ability to introduce, finance, and scale innovative technologies to improve service delivery and access to essential medicines. Governments and multilateral partners can leverage this expertise to address gaps in service coverage. For example, research suggests that during the pandemic, national health systems that had existing working relationships with the private sector were able to respond more effectively to the outbreak.²⁶

As donors, development partners, and governments seek to make coordinated investments in resilience, one opportunity for greater collaboration is in growing the research and development (R&D) and availability of essential medicines in LMICs, including those used to treat noncommunicable diseases (NCDs).³¹ LMICs are experiencing an epidemiological transition characterized by a growing incidence of NCDs: research shows that one in three diseases affecting the poorest billion people globally is an NCD, including cancers.³² However, people in LMICs do not have access to more than 50 percent of the cancer medications on the World Health Organization’s (WHO) Essential Medicines List (EML).³³ The EML consists of those medicines that are necessary for health systems to function, with efficacy and cost-effectiveness as key considerations. It acts as a guide for national governments to develop EMLs that fit their country’s specific health needs, which over time can inform medicine procurement and insurance coverage decisions.³⁴

NEMLs Crucial Role in Accessibility and Affordability of Medicines

National Essential Medicines Lists (NEMLs) in LMICs (116 countries) deviate significantly from the WHO’s Model Essential Medicines List

DATA SOURCE: GLOBAL ESSENTIAL MEDICINES DATABASE

National governments can facilitate access to essential medicines by developing policy environments that are conducive to R&D, improving domestic regulatory capacity, and investing in a skilled workforce.³⁵ In Rwanda, the national government was able to redirect foreign investments for HIV/AIDS programs toward broader health system initiatives, such as workforce development and data management systems, leading to major improvements in premature mortality.³⁶ Effective partnerships have been key to driving this change, such as the implementation of USAID’s National Product Catalog (NPC), which facilitates end-to-end transparency by standardizing all product information across national health supply chains.³⁷ The introduction of a digital platform with consolidated, consistent product data has helped to facilitate interoperability and improve planning decisions, thereby mitigating stockouts and shortages.

On the supply side, public health companies and investors have historically neglected LMICs, which are not seen as lucrative markets, leading to excessively high out-of-pocket spending for patients in those countries to obtain high-quality, patented medicines.³⁸ Generic and bio-similar medicine manufacturers are well positioned to advance equitable access, as they are already responsible for producing 80 percent of the world’s essential medicines and are a crucial pipeline for lifesaving health products in LMICs.³⁹ Generic medicine suppliers have been critical to advancing universal access to antiretroviral therapy for HIV/AIDS, and they now have a similar opportunity to help governments in LMICs reduce their growing NCD burden.

With limited domestic manufacturing capabilities, a diversified supplier base, and reliable funding streams, LMICs have increasingly turned to pooled procurement to address high-cost barriers to critical medicines. Pooled procurement mechanisms are a type of collaborative platform whereby countries or sub-national units leverage their combined purchasing power to negotiate favorable supply conditions, specifically as they relate to cost, availability, quality, and efficiency.⁴⁵ Government agencies and international non-governmental organizations (INGOs) such as USAID, Gavi, the Vaccine Alliance, and the Global Fund have successfully driven down costs and increased access, but regional- and national-level pooling efforts face significant challenges in coordinating collective supply and demand.⁴⁶ Though there are several types of pooling mechanisms, generally an effective approach allows governments to share knowledge, procurement costs, and supplier risks, thereby freeing resources for capacity-building and innovation. For example, South Africa began aggregating demand for antiretrovirals (ARVs) to treat HIV across all nine provinces in 2011.⁴⁷ The national government then gradually cut the price of ARVs and passed regulations to encourage healthy supplier competition. A decade later, South Africa pays a lower average unit price for ARVs than both the Global Fund and USAID.⁴⁸

Looking ahead

Resiliency in public health supply chains is crucial to safeguarding health and saving lives. Without targeted strategies and comprehensive measures to ensure continuous access to quality and affordable health commodities, developing economies face greater incidence of disease, increased antimicrobial resistance, and higher mortality.⁵² By redoubling efforts across the public and private sectors, health supply chains in LMICs can become more agile, robust, and efficient, to improve commodity availability and service delivery during shocks. To that end, ensuring that all programs, levels, organizations, and processes are highly integrated within LMICs is vital.⁵³ Relatedly, resilience can be strengthened by ensuring that decision-making in the health ecosystem is driven by comprehensive data management systems and aligned around a common strategy, thereby allowing stakeholders to anticipate, withstand, and overcome risks in a timely and effective manner. Mobilizing multi-sectoral partnerships for innovation and capacity-building can fortify national and community health systems and catalyze progress on global commitments to sustainable development.

Publication date: April 2023

By Anjana Nair (Policy Fellow) and Dr. Mayesha Alam (Vice President of Research), illustration by Andrei Cojocaru

This issue brief was produced by FP Analytics with support from Chemonics.
FP Analytics retained control of the direction of the research.