Over summer 2021 students from London Business School and the Graduate School of Business at the University of Zambia worked with the Zambia Medicines and Medical Supplies Agency (ZAMMSA) to develop a budget mechanism to increase transparency and control in the Zambian public health supply chain.
The challenges of Zambia’s public health system
Zambia has a population of 16 million people and annual per capita health expenditure of $76. ZAMMSA is a statutory agency responsible for the procurement, storage and distribution of medicines and medical supplies across the whole of the country’s public health sector, representing 80% of the country’s total medical products. The 2,600 facilities that ZAMMSA serves range from University Teaching Hospital in Lusaka with over 1,700 beds to rural health posts that are little over 1m3 in size.
The public health sector faces challenges that are common across the developing world. First, demand for essential medicines far exceeds supply. Second, demand is significantly affected by seasonality, with malaria and other common illnesses becoming more prevalent in the rainy season. Third, supply is challenging, with remote health posts hard to reach, particularly after poor weather.
The existing distribution process is not optimal
The current distribution system is a mixture of push and pull mechanisms. A minimum level of essential medicines is supplied through standardised health centre kits distributed to health centres monthly. In addition, centres may order supplies from a centralised system that calculates replacement orders based on usage in recent months and current stock levels. No prices are applied to these orders, and there are no limits to the quantities that can be ordered by facilities. Orders are then fulfilled on a first-come-first-served basis. Research has shown that the system is not responsive to seasonality or local demographic characteristics. Centres are left with inappropriate medicines or with unnecessary stock, meaning patients cannot access required medicines, even where these are available in the system as a whole.
Developing a virtual budget mechanism
ZAMMSA approached the Wheeler Institute for Business and Development to assist with developing a virtual budget mechanism for use in the supply chain. Each health facility would be allocated an annual budget to use when ordering products from ZAMMSA. Facility managers could see the value of their orders as they place them and couldn’t order more than their allocated amounts. Similar mechanisms are in place in other countries, including Uganda and Tanzania.
Students worked with ZAMMSA to develop an allocation methodology that could be used in the mechanism. The initial allocation to facilities would be on the basis of catchment populations for smaller facilities and capacities for larger hospitals. This proposal forms part of a wider programme of systems integration projects that will link procurement, storage and distribution information and improve the transparency of reporting to stakeholders in Government and co-operating partners.
Future developments in technology and financing
There are two areas in which ZAMMSA plans to further develop the budget mechanism – technology and financing.
Technology will play a much more central role in the supply chain over the next few years. ZAMMSA has already piloted systems that automatically record stock levels and generate replenishment orders using barcoding. These could operate alongside the virtual budget to ensure optimal re-ordering by facility managers.
ZAMMSA is working with the Ministry of Health to implement the revolving fund and health insurance scheme that were first proposed as part of the Act that established ZAMMSA in 2019. A more resilient health sector will enable ZAMMSA to distribute more medical products and to improve service level outcomes for patients at the facility level. This article is based on the Development Impact Platform team’s report for ZAMMSA management (2021).
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David Jones (MBA 2022) is a Classics graduate and has worked as a teacher in Malawi, an accountant at Deloitte and in the finance function at the Science Museum in London. He completed an internship with the Wheeler Institute’s Development Impact Platform in Zambia over summer 2021 and is now continuing as an intern for the Wheeler Institute, contributing to the creation of content that amplifies the role of business in improving lives
The Wheeler Institute is seeking to understand, illuminate and offer solutions to the challenges faced by the developing world, with an aim to identify the role of business in addressing these challenges and a focus on the implications and actions for those in developing countries. In support of our students, we approach this blog section as a reflective platform and a space where individuals can generate debate as long term agents of positive change.