Aligning ACT Supply and Demand: Short and Long Term Options, July 2005
(2005; 52 pages)

Abstract

Forty-nine countries have now adopted ACTs in their policy, and 24 are currently implementing it. The rapid increase in forecast demand for ACTs, and the need to match this with increased supplies have led to a number of problems. Although the GFATM financing is there to support ACT scale-up and roll-out, there have been problems in getting final approval of GFATM grants, in getting the supply side to respond quickly to the increase in finance (due to the 18 month cycle between artemisinin planting and finished product availability) and various other country level bottlenecks. Consequently, while a number of countries have expressed their intention to order ACTs, only a small fraction of the GFATM funds approved for ACT purchase has already been translated to actual orders. The potential for a vicious cycle was therefore recognised, since the potential consequence of this lack of orders may be a reluctance of manufacturers to make financial commitments necessary to increase production.

The GFATM has been making efforts to better align supply and demand. In mid- 2004, the GFATM created a "Memo account", an accounting mechanism within the World Bank, which effectively consolidated the funds that would be used for ACT treatments, and sent a clear signal to industry and other partners on the availability of funds for malaria grants in developing countries. In addition, since the problems in early 2005 seemed to stem from countries inability to place orders due to delay in processing and receiving their GFATM funds, the GFATM responded by initiating "6- point restructuring exercise" with the aim of speeding time between GFATM Rounds and actual orders. Simultaneous to the GFATM’s re-engineering, stakeholders have been considering whether further, more immediate, mechanisms are needed to align supply and demand. This was the subject of the MMSS presentation at the April RBM Board meeting which focused on an idea to create a “revolving fund”, or a noncountry specific mechanism to pre-purchase ACTs immediately (i.e. before September 2005, when investment decisions are taken for 2007 supply.) The aim of this consultancy assignment has been to analyse the existing ACT situation and to consider whether and how restructuring the financing or procurement of ACTs might improve alignment of supply and demand. The report begins by breaking out various short-term (i.e. interventions that could be implemented over the next few months, with the intention to bring 2007 supply and demand into alignment) and long-term (post 2007) options, and describing the situations that would justify selection of the different options. The report then analyses the ACT demand and supply situation, from 3 angles: Has industry and will industry make sufficient investment to meet the financed demand for 2007? Is the financing available to countries to place orders? Will the orders come in to support the financed level of demand?

 
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