Procurement Institutions and Essential Drug Supply in Low- and Middle-Income Countries (In-person seminar)

Note: This talk is also offered as a virtual webinar on April 4 at 6 p.m.

International procurement institutions have played an important role in drug supply. This paper studies price, delivery, and procurement lead time of drug supply for major infectious diseases (antiretrovirals, antimalarials, antituberculosis, and antibiotics) in 106 developing countries from 2007-2017 across four procurement institution types. We find that pooled procurement institutions lower prices: pooling internationally is most effective for small buyers and more concentrated markets, and pooling within-country is most effective for large buyers and less concentrated markets. Pooling can reduce delays, but at the cost of longer anticipated procurement lead times. Finally, pooled procurement is more effective for older-generation drugs, compared to intellectual property licensing institutions that focus on newer, patented drugs. We corroborate the findings using multiple identification strategies, including an instrumental variable strategy, the Altonji-Elder-Taber-Oster method, and reduced-form demand estimation. Our results suggest that the optimal mixture of procurement institutions depends on the trade-off between costs and urgency of need, with pooled international procurement institutions particularly valuable when countries can plan well ahead of time.

Coauthor: Nahim Bin Zahur (Queen’s University).

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Dr. Lucy Xiaolu Wang is a tenure-track Assistant Professor at University of Massachusetts Amherst, a Faculty Research Fellow at the Max Planck Institute for Innovation and Competition, Germany, and a Faculty Associate at the Canadian Centre for Health Economics. Her research focuses on the economics of innovation & digitization in health care markets (national and global), particularly in the biopharmaceutical and digital health industries. Dr. Wang earned her PhD in economics from Cornell University, her master’s degree in economics from Duke University, and her bachelor’s degree in applied economics (specialty: insurance) from Central University of Finance and Economics in Beijing, China.