Procurement Institutions and Essential Drug Supply in Low and Middle-Income Countries

37 Pages Posted: 21 Sep 2021 Last revised: 6 Dec 2021

See all articles by Lucy Xiaolu Wang

Lucy Xiaolu Wang

University of Massachusetts Amherst - Department of Resource Economics; Max Planck Institute for Innovation and Competition

Nahim Zahur

Queen's University

Date Written: November 23, 2021

Abstract

International procurement institutions have played an important role in drug supply. This paper studies price, delivery, and shipment time of essential drugs supplied 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 shipment times. Finally, pooled procurement is more effective for older generation drugs, compared to IP licensing institutions that focus on newer, patented drugs. We corroborate the findings using multiple identification strategies, including an instrumental variable strategy as well as the Altonji-Elder-Taber-Oster method for selection on unobservables. 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.

Keywords: global drug diffusion, procurement institutions, pooled procurement, IP and non-IP barriers

JEL Classification: I11, O19, H57

Suggested Citation

Wang, Lucy Xiaolu and Zahur, Nahim, Procurement Institutions and Essential Drug Supply in Low and Middle-Income Countries (November 23, 2021). Available at SSRN: https://ssrn.com/abstract=3926761 or http://dx.doi.org/10.2139/ssrn.3926761

Lucy Xiaolu Wang (Contact Author)

University of Massachusetts Amherst - Department of Resource Economics ( email )

Stockbridge Hall
80 Campus Center Way
Amherst, MA 01003
United States

HOME PAGE: http://www.lucyxiaoluwang.com/

Max Planck Institute for Innovation and Competition ( email )

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Munich, Bayern 80539
Germany

Nahim Zahur

Queen's University ( email )

94 University Ave, Kingston
Kingston, Ontario K7L 3N6
Canada
3435801077 (Phone)

HOME PAGE: http://nahimzahur.github.io/

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