A Smart Investment: Unveiling Supply Chains Costs to Finance Delivery of Health Supplies to the Last Mile

In September 2016, JSI co-led the Latin American and Caribbean Conference in Cartagena, Colombia, to raise awareness about and find solutions to inequity in Latin America and the Caribbean countries. One of the main topics was financing and accountability, and this is where investing in public health supply chains come into play.

Why Invest in Public Health Supply Chains?

One of the aspects of inequity in health is the insufficient funding to move health supplies, medicines, and services to the last mile. In 2014, countries in Mesoamerica and the Dominican Republic spent roughly $600 million on essential medicines, investment that can only be protected if governments prioritize a well-functioning supply chain. However, because of underfunded public health supply chains we often find these medicines are available only in capital cities or they remain in regional warehouses rather than reaching the people that need them in remote areas.

Effective Supply Chains Require Adequate Investments

To manage effective public health supply chains, we must respond to two questions: How much does it cost governments to deliver health supplies through every step of the supply chain? And, why is it important to know these costs?

We worked with Guatemala to determine that the cost of the existing public health supply chain is thirty-three cents for every dollar worth of essential medicines distributed through the supply chain (known as “throughput”).  This cost includes functions such as procurement, management, warehousing, transport, and information systems. By doing this analysis, Guatemala could uncover hidden costs and more effectively influence – in the future – public health budget decisions based on evidence.

The Ministry of Health (MOH) in Peru, unlike Guatemala, was concerned about the lack of funding for transportation and warehousing in their results-based budgets, thus asked us to help them focus on the costs of transportation and warehousing in one region, La Libertad. The results showed that the cost of transportation and warehousing is US$477,200 to adequately deliver US$1.5 million worth of medicines. This means that the MOH results-based budget in La Libertad should set aside a total of US$1.97 million to cover costs of medicines, warehousing, and transportation processes each year, and adjust the figure annually based on the inflation rate. In 2016, because of the costing analysis, La Libertad region budgeted three times more funding to cover transportation plans –  resulting in what we call “a smart investment”.

In brief, procuring medicines is not enough to make them available to the last mile. When functioning and fully funded public health supply chains are in place, the population, especially the most vulnerable, will receive the medicines when and where they need them.

If we believe that investing in public health supply chains is a smart investment, let’s continue supporting countries to make supply chain costs visible and prioritize national health supply chain strategies, because ultimately, we cannot achieve public health outcomes and sustainable development goals without supply chains that reliably forecast, procure, store, transport, and deliver medicines, vaccines, and health supplies to those who need them.

We invite you to learn more below:

• Supply Chain Costing: Visibility and Advocacy for the Public Health Supply Chain
• Getting Essential Medicines to Customers: Why Mesoamerica and Dominican Republic Should Increase Their Investment in Supply Chains
• Putting Cost into the Equation: Case Examples of Economic Evaluation of Public Health Supply Chains in Three African Countries

Written by Anabella Sánchez and Nora Quesada