Populations in developing countries are set to rise and, at the same time, their health needs will change. Health markets must adapt with them and find new, sustainable models to meet this increased and different demand.
Governments in emerging economies are increasingly investing their own money in health care systems. Data from the Global Fund, for example, shows low-income countries increased their domestic investment in HIV, tuberculosis and malaria treatment, and the general health sector by 47 percent for 2015-2017, compared to the previous three years. In the same period, low-to-middle-income countries increased spending by 80 percent.
Devex heard from a leading donor, a nonprofit organization and a private sector partner about the role domestic funding may play in the future.
Development implementers as intermediaries
Michael Holscher, senior vice president and chief strategy and resources officer, at Population Services International, said domestic financing is a current theme of almost all the work it does across 50 countries.
“The number of references we see in global and national plans to some assumption of domestic financing is now widespread,” he told Devex.
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One example is Tanzania, where PSI has set up service-level agreements between private providers and district-level governments. “It’s more of a contracting-out arrangement where we ensure quality services are being provided by the providers, and the government then pays performance-based payments to providers,” said Holscher.
PSI’s role will increasingly be one where it works as an intermediary to link quality provision with nascent domestic financing schemes, Holscher predicted. It will help governments contract the right services and manage that network of providers for governments.
Holscher pointed out that each country will need its own, tailored approach.
“Historically we would have come with a package of solutions in a box and assumed that most of that would work everywhere, but because markets are so different now we have to start in a different place,” he said. “We have to ask central questions such as, who is the primary health care market failing, how is it failing?”
Holscher also said the relationship between the delivery of services and financing will change, as development implementers may not have previously had the purchasing experience the new model requires. He suggested development practitioners may partner with other organizations with that knowledge. “We’re actively seeking such partnerships right now,” he said.
Private sector as industrializer
Walter van Kuijen, senior vice president for global government, public affairs and international business development at health technology leader Philips, said private sector actors will also act as facilitators in future health markers, though in a different way.* He suggested private investors have the capacity to ensure pilot projects for innovative health care solutions can be scaled and built to last.
“In this world we create pilots, celebrate pilots, but we don’t get to a point where we think about how we can industrialize the impact,” said van Kuijen. “Building up a one-time success to thousands or hundreds of thousands. Building from a community of 50,000 to a whole continent — that is what we can bring to the table.”
Van Kuijen said companies such as Philips are well placed to work in partnership with other development actors to deliver more sustainable health services. One example is work Philips has done with UNICEF, when Philips was requested to innovate a low-cost device that health workers in the field could use to diagnose pneumonia in children. Philips developed the Philips Children’s Respiration Monitor, or ChARM.*
In May, Philips announced it had received a grant from the government of Canada, through nonprofit Grand Challenges Canada, to scale ChARM’s manufacturing and distribution to make it affordable and accessible for community based health workers in low-resource health facilities around the world.
Driving down delivery costs through partnerships
Hisham Moussa, managing director at global equity investor The Abraaj Group, said the private sector has an important role in driving down delivery costs in future health markets. He suggested governments can increase efficiencies within primary health care, while also saving money, by outsourcing certain clinical departments inside hospitals to speciality health care companies. This is especially important in markets where the disease burden has shifted from communicable to noncommunicable diseases. According to the World Health Organization, almost three-quarters of NCD deaths occur in low- and middle-income countries.
Moussa gave the example of India, where a public-private partnership model has driven down the cost of radiology outsourcing tenders. He described this model as “shop-in-shop.”
“First tenders saw rates at $60 for CT scans, for example,” said Moussa. “Recent tenders are at $25 to $30, which leads to better access to low-income groups.”
This is achieved, said Moussa, because a private partner puts up the initial investment in expensive equipment. In India, the volume of patients is high, so the private investor knows the number of paying patients using the service will make the investment worthwhile.
As well as providing domestic funding towards such models, Moussa said governments should underwrite minimum volumes of users as a guarantee for the private investor. In return, the investor underwrites the cost of services if the volumes are met. To ensure the volumes, the government would have to make sure it was directing patients to the service by having the correct referral facilities in place.
“The outsourcing of some of the hospital service, or some of the clinical services within public hospital, is a trend that will continue to grow,” Moussa predicted.
The challenges and solutions of future health markets are wide and varied, and the actors and funding sources set to answer those challenges will also be more diverse. As PSI’s Holscher recommended, professionals working in health should follow an “agnostic” approach.
* Update, Nov. 16, 2016: This article has been updated to clarify that Walter van Kuijen is the senior vice president for global government, public affairs and international business development at health technology leader Philips. It has also been updated to clarify that ChARM was developed by Philips.
Making Markets Work is an online conversation to explore what’s being done to make global health care markets accessible to people at the base of the pyramid. Over 10 weeks, Devex and its partners — The Abraaj Group, Philips and Population Services International — will amplify the discussion around effective health financing, analyze key challenges blocking universal market access in the health care supply chain, and explore the key strategies to make markets more effective. Join us as we look at this important issue, and share your thoughts by tagging #MakingMarketsWork and @Devex.