Private sector drives health changes

To promote economic growth and reduce poverty, governments and policymakers in developing countries need to reform inefficient pharmaceutical supply chains and the private sector needs to play a role in activating this change. There is a powerful link between health and economic development; improvements in healthcare solutions and systems that directly benefit the economy. 

“There is an increasingly strong body of evidence that shows how better health contributes to more rapid growth of GDP per capita,” says Dr Iain Barton, managing director of Imperial Health Sciences. 

“Through its contribution to maintaining individual wellbeing and enhancing life expectancy, good health makes a significant contribution to the efficiency and productivity of labour.”

While investments in health lead to diminishing returns as societies develop and populations age, in poor countries there appears to be a virtuous cycle where health improvements contribute to economic growth and this, in turn, boosts further improvements in health. It is at this point that the private sector can step in, playing a role in transformation and growth.

“In contrast to developed economies, private pharmaceutical markets in developing countries tend to be too fragmented and disorganised to provide services at prices the poorest can easily afford, effectively denying [them] many of the treatments they need to maintain good health and lead fully productive lives,” says Barton. “In developed economies, these supply chains tend to be highly structured and the economies of scale and tight competition among wholesalers ensure patients are able to access medication through retail outlets and hospitals at affordable prices.”

The solution is to create a more streamlined pharmaceutical supply chain with supply channelled through fewer, but larger, distributors. The development of regional and national pre-wholesaler services is one solution, as this allows manufacturers to aggregate their supply to a region or country through a single logistics service provider and to distribute to multiple wholesalers and distributors.

“While this may appear to add another layer to the supply chain, the benefits of consolidation flowing from this actually streamlines and simplifies the distribution system, benefitting all,” concludes Barton. “The manufacturer benefits because consolidating their distribution channel extends their market reach and they can achieve higher sales. This model has been successfully implemented in countries such as Kenya, and is an approach that warrants attention for its potential to improve healthcare delivery in developing countries.”

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