Long and variable lead times were addressed by encouraging robust forecasting and considering non-price factors in evaluation of suppliers’ tender bids. A weighted system was used to account for past performance factors such as supplier delivery metrics and breadth of country registrations (e.g., 70 percent weight on price, 15 percent weight on delivery metrics, and 15 percent on breadth of registration). The weighting strategy encouraged suppliers to improve their delivery performance and reduce delays in trying to improve their weighted scores for the next round of tendering.
Tender Splitting to Aid Market Entry
Ripin explained that minimum batch sizing is a particularly crucial barrier in the pediatric HIV market (as it is for MDR TB), both for new products and for suppliers seeking to enter the market. The batch-size requirements for validation purposes are often greater than preexisting volume of demand for a new product. This increases the risk that some of the material produced in the validation batches will expire before being sold, potentially resulting in higher pricing at the time of market introduction to offset this risk. The higher cost for a new supplier that has not yet achieved efficiencies of scale can put new market entrants at a disadvantage when entering the market. Therefore CHAI used a strategy of splitting tenders to encourage new market entrants; Ripin illustrated the benefits of that strategy on price using a case study (Figure 3-3).
For this product (LPV/r), there was a monopoly price in the market that was low enough to prevent new suppliers from entering the market at a competitive price. A second supplier was added to the program by splitting the tender award across a primary and a secondary supplier, with the secondary supplier paid a higher price than the primary supplier for the first 2 years. The investment in bringing additional suppliers into the market led to price declines for both the primary and secondary suppliers, which has resulted in an overall market savings. Ripin emphasized that though splitting tenders may result in a marginal increase in short-term spending, it can result in a long-term decrease in the amount that will be spent.
Affordable Medicines Facility-malaria (AMFm)25
AMFm was founded in response to the developing resistance to chloroquine and to the fact that the newer class of treatments (artemisinin-
25 This subsection is based on the presentation by Olusoji Adeyi, Sector Manager, Health, Nutrition, and Population, World Bank.