Strategies to reduce risks in ARV supply chains in the developing world

B etween September 2005, when the United States Agency for International Development (USAID) awarded the Supply Chain Management System (SCMS) project, and August 2014, the SCMS project delivered over US$1.9 billion in HIV/AIDS commodities, approximately $1.1 billion of which were antiretroviral (ARV) drugs to support the treatment of people with HIV and AIDS. This total sum of ARVs accounted for approximately two-thirds of the ARVs delivered with funding from the US President’s Emergency Plan for AIDS Relief (PEPFAR). The SCMS project is led by the Partnership for Supply Chain Management, with 13 private-sector and nongovernmental partners. One of the primary challenges to achieving a reliable, cost-effective, and secure supply chain of HIV/AIDS commodities has been the high cost of commodities. The US Department of Health and Human Services and the US Food and Drug Administration (FDA) made a significant initial response to the issue of cost in May 2004, when they introduced a new initiative to facilitate global ARV manufacturers’ access to an expedited product review and inspection process. This tentative approval process to determine the quality of ARVs produced by manufacturers anywhere in the world was designed to increase access to high-quality medications globally. Under this initiative, if products meet the FDA’s quality assurance standards, they are eligible for purchase under PEPFAR. As generic products obtained approval for use under PEPFAR, stakeholders began to procure more generic ARVs and fewer branded ones, resulting in rapid and substantial savings to PEPFAR. A 2010 study estimated that between 2005 and 2008 PEPFAR saved over US$323 million by procuring approved generic ARVs instead of equivalent-branded ARVs. As of September 30, 2013, 6.7 million people were receiving antiretroviral treatment through the PEPFAR program—up fourfold from 1.7 million in 2008. Addressing demand-side challenges while simultaneously mitigating supply risks (production and shipping delays) as well as cost risks has been essential to meeting the needs of antiretroviral therapy (ART) programs and ensuring that a stable supply of ARVs is available to patients. This article describes the practices employed by USAID and the SCMS program to mitigate ARV supply chain risks. From the program’s experience in numerous PEPFAR countries, the risks can be grouped into 3 categories of supply, demand, and cost (Table). The program’s risk mitigation approaches represent integrated supply chain strategies that take advantage of economies of scale to improve cost and quality. In particular, pooled procurement and the use of regional distribution centers (RDCs) are common strategies across the 3 risk categories, illustrating the interconnectedness of risks. For example, inaccurate forecasting (demand risk) may lead to under-procurement (supply risk), eventually resulting in the need for a costly emergency order (cost risk) to remedy a product stock-out.