Intern
Chair of Logistics and Quantitative Methods

New Research Initiative: Procurement of Essential Medicines

15.01.2014

In a new research initiative researchers at the Chair of Logistics and Quantitative Methods investigate how global health procurers can improve the supply of essentials medicines to low income countries through innovative procurement mechanisms.

(Photo: DFID/Vicki Francis / flickr.com / CC BY 3.0)

Global health organizations such as The GAVI Alliance, The Global Fund to fight AIDS, Tuberculosis and Malaria, UNICEF, UNFPA or USAID aim to improve health in low and middle income countries with a set of different strategies. A cornerstone of their efforts is the donor funded procurement of large quantities of essential medicines to treat, for example, HIV/Aids, Tuberculosis, or Malaria and to provide contraceptives to reduce mother and child mortality. On behalf of the recipient countries these large procurement organizations negotiate contracts with big pharmaceutical manufacturers to achieve lower prices and better supply conditions (e.g., reliable supply, shorter lead times, and higher quality). This consolidation of procurement volumes of multiple countries creates substantial market power on the side of the procurement organizations – in many cases they are the sole procurer of demand originating from low and low-middle income countries.

Being a large procurer not only comes with benefits, but also bears a huge responsibility. Their purchasing decisions can influence the long-term market structure (e.g., the number of potential suppliers, available market capacity, investments into technology and R&D) and, in the worst case, tilt the market into unfavorable directions. To ensure a long-term functioning market, procurers often consider splitting the volume among multiple suppliers, for example, to mitigate default risks, or to induce and sustain competition among suppliers. But what is the right number of suppliers and good split? What effect do these decisions have on competition, supply risk, innovation, etc.?

These questions not only occur at not-for-profit organizations that procure essential medicines, but also in the private sector. Researchers at the Chair of Logistics and Quantitative Methods have tackled these problems in the private sector and now explore how concepts, models and insights from the private sector can be utilized and adapted to solve procurement problems of global health procurers.

Contacts:

Prof. Dr. Richard Pibernik, Chair of Logistics and Quantitative Methods in Business Administration, Phone: +49 931 31-86969, richard.pibernik@uni-wuerzburg.de

Dr. Alexander Rothkopf, Chair of Logistics and Quantitative Methods in Business Administration, Phone: +49 931 / 31 – 89038, alexander.rothkopf@uni-wuerzburg.de

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