Overcoming Economic

Bottlenecks in Delivering Medical

Products to Address Microbial
Threats across Africa
US NATIONAL ACADEMIES

Presentation | 12/13 June 2018, Washington D.C

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company
is strictly prohibited
Amina

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McKinsey & Company 2
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Malaria
Vaccines Essential
medicines

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HIV and TB
Emergency
Reproductive Health
MNCH

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McKinsey & Company 3
 CMS Central Medical store Twice a year Thrice a year Quarterly
The complex system Bi

Bi-monthly
T

Monthly
Q

PW Private warehouse B M Deliver Collection

Malaria HIV TB RH Vaccines

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NMEP DFID PMI PEP
NACA GF/GON UNFPA GON
FAR

Bi

CMS PW CMS PW CMS PW CMS NSCS

B B B B Q Q Q¹ T Q

Zonal store PW Zonal store

B B Q Q

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State Central Medical Store
B
Bi B Q T M

LGA stores M

Q T
M

Health facilities

~8000 5154 ~3000 ~1300 ~7,472 ~4000 21 7250 ~10,000

1 Laboratory commodities and some drugs are distributed directly to 8 reference labs and 13 treatment centres from GHLI warehouse in Abuja
2 Some states (e.g. Kano, Bauchi) bypass LGA stores and deliver to zonal satellite stores within the states. 3PLs then deliver vaccines from the satellite stores to the health facilities.

SOURCE: NSCIP 2015 (diagnostic) McKinsey & Company 4

Incorporating a human centered approach in costing economic bottlenecks

1 2 3 4
The The The supply The program

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healthcare patients chain officers
workers managers

 Out of pocket  Lost income from  Use their own  Use their own
payments for going to clinic funds and phone to call

Printed
transportation and being turned reimbursed by around to
 Lost time with away without a Gov’t without collect data
patients product interest rates  Pay per diems
 Use personal  Increased DALYs  Use their own for
phone to call from consuming personal cars to quantification
state sub-standard distribute meetings
government products  Store products
people in their offices
Source: Team analysis
McKinsey & Company 5
The costing Iceberg

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Warehousing

Fuel

Lost patient time by

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skilled HRH

Transport costs
reimbursed by patient
charges

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Taking different perspectives to what it cost

What it really
cost

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Reducing
What a minister bottlenecks
sees

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Above the surface Above & below the surface Potential redesigned system

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What could reduce economic bottlenecks

1
Zero-based budgeting incl. a human centered costing:
Understanding the true economic costs of operating the
system as is today to remove hidden economic costs

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2 Integration: Between various vertical supply chains for
warehousing and last mile delivery

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3 Outsourcing: To the private sector to operate supply chain
services

4 Data: Invest in shared electronic data platforms to reduce

wastage, improve quantification and reduce inventory

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Cost savings from integration of last-mile delivery

Analysis of overlap of last mile delivery across 1,121 primary health facilities in Nigerian State

Significant overlap- 12% of facilities offer all 5 programs Insights

Moderate overlap- 48% of facilities offer 3-4 programs ▪ Up to N16 million (USD 80,000) of
Limited overlap- 40% of facilities offer 1-2 programs the combined annual cost of
Reproductive delivery in State can be saved by
Health consolidating last-mile delivery to
those facilities offering all five
program services1
HIV ▪ Integrating for facilities with 3- and
RI 4- program overlap could save an
44% 1%
annual total of N76 million (USD
380,000)
▪ Full delivery integration in state
12% could save N120 million (USD
605,000) annually
1% ▪ Extrapolating nationally, full last-
mile integration could save N2.13
billion (USD 10.6 million)
annually
2%

Tuberculosis Malaria

1 Assumes weighted average cost per shared monthly deliveries across all programs with a base of N7,000 per delivery
SOURCE: State data 9
The donors’ in-country logistics spend is valued ~USD 0.7-1.2 billion p.a.

In-country health commodities supply chain market size1

USD million, 2016 (high-level estimate)

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Upper case
Base case 500 1,210

20 10 275
25 5
60 10
10
120 35

165 70

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310 90 670

175

USAID2 Global GAVI United BMGF DFID CIDA Other Total

Fund Nations
1 In-country logistics spend shown for each donor includes major disease programs only; smaller or unclassified programs or categories for all donors (incl. those
named) are listed under other category
2 May include other US government spending
SOURCE: Financing Global Health 2016 by IHME; United Nations; GAVI Disbursemnts report; Team analysis McKinsey & Company 10