Procurement institutions and essential drug supply in low and middle-income countries

Abstract

International procurement institutions play an important role in drug supply. We study price, delivery, and procurement lead time of drug products for major infectious diseases (antiretrovirals, antimalarials, antituberculosis, and antibiotics) in 106 developing countries from 2007–2017 across procurement institution types. We find that pooled procurement lowers prices: pooling internationally is most effective for small buyers and concentrated markets, while pooling within-country is most effective for large buyers and unconcentrated markets. Pooling can reduce delays, but at the cost of longer anticipated procurement lead times. Finally, pooled procurement is more effective for older drugs, compared to patent pooling institutions that target newer drugs. Our findings are robust to alternative fixed effects specifications, instrumental variable estimation, selection-on-unobservables tests, and additional analyses accounting for heterogeneity in demand elasticities across buyers and interactions with major global health initiatives.