What is the role of the commercial sector in reproductive health?

In even the poorest countries, the commercial sector makes products and services available to consumers around the world. (The “commercial” sector refers to for-profit entities, while “private” sector may also include any non-government organisation, such as non-profit organisations.) These are market development approaches in their purest form. Donor and government support to the commercial sector can enhance its ability to reach consumers across social, economic and geographic groups.

Virtually all health approaches have some degree of commercial involvement. Even the most public sector based approach generally has some minimum level of commercial involvement: for example, there are very few approaches involve manufacturing products within the public sector.

Commercial entities may be involved in all steps of the value chain to deliver reproductive health to consumers including financial support, manufacturing, distribution, retail and promotion. In other words, commercial companies take part at all stages that lead to product and service delivery to the consumer.

Funders ⇒ Manufacturers ⇒ Distributors ⇒ Retailers ⇒ Promoters

Many commercial health approaches receive some degree of public funding. MDAs aim to expand the role of the commercial sector to:

• enhance financial sustainability by lowering costs to consumers and/or donors/governments,
• improve access by making products more available and affordable
• expand choice by making a wider array of products available.

A good starting point for thinking more about how markets can be used to meet the needs of the poor and how support to the commercial sector can support this transition is DFID's work on making markets work for the poor. See Making markets work better for the poor (M4P): an introduction to the concept, 2005.

Private sector participation in health, considers how the private sector (including commercial) can be involved in delivering health care. Chapter two looks at private sector health expenditures in low- and middle-income countries and how poor people make decisions about expenditures. The document examines a range of possible approaches open to donors and governments, some of which are already supported by KfW.

While the commercial sector can be highly effective in the delivery of health care products and services, it is important to consider the trade-offs of public and private provision of health care. For MDAs, a key issue is the degree of commercial involvement and the resulting effectiveness and efficiency. Hanson et al, in Ends versus means, provides an overview of some of the pros and cons of private and public contraceptive delivery.

Another important consideration for MDAs is the impact of public funding on commercial markets. The commercial sector has been used to varying degrees to increase availability and choice of contraceptives in financially sustainable ways. But sustainability can also have trade-offs; high level of commercial involvement may have high financial sustainability from the donor and government viewpoint, but may also be expensive to the consumer.

An important consideration is the long-term impact of public/donor support to markets. While there is some concern that donor/government funding (i.e. subsidy) distorts markets, the evidence of the results of MDAs and particularly their impact on markets is inconclusive. In Supplying subsidised contraceptives, Hanson et al discusses the impacts of subsidy and reflects on the results of contraceptive subsidisation, including the impacts on cost-effectiveness and on markets. 'Crowding-in' (the entry or growth of more brands and contraceptives on a market) and '“crowding-out' (the exit or absence of brands and contraceptives from a market) due to the presence of a subsidised product are discussed.