Whether poor people in developing countries receive adequate health care depends in part on whether they have access to crucial medical technologies, such as drugs, vaccines and diagnostics. Despite increased donor funding and an array of new products, weak links in the global health supply chain continue to restrict access to essential health products, including those needed to prevent and treat AIDS, malaria, TB and other deadly diseases. One of the weakest links is in demand forecasting--the process of predicting, often more than a year in advance, which products will be purchased in what quantities.
Predicting demand is tricky: it means figuring out far in advance how much of which products governments, private consumers and donors will want to buy, and how much they will be willing to pay, often even before these decisions have been considered. It is made trickier by the recent entry of many new sources of funding and advice, a broad range of new products, and new actors in procurement. The lack of accurate forecasts has several damaging effects. It increases risks for suppliers, resulting in higher costs and supply shortages. It discourages firms from investing in research and development for new health products that poor people need. And it creates obstacles for donors and national governments as they seek to spend aid effectively to improve health and save lives.
This brief reviews the findings of CGD's Global Health Forecasting Working Group, which was first convened in early 2006 to study the challenges surrounding demand forecasting. The group concluded that better forecasting requires wider sharing of the risk involved in producing drugs, and aligning incentives among those who influence market dynamics. The group offered three key recommendations:
- Improve the capacity to develop credible forecasts by acting in specific ways to take forecasting seriously;
- Mobilize and share information about product demand in a coordinated way through the establishment of an infomediary; and
- Share risks and align incentives through a broad range of contractual arrangements.
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