This edition of the Commodity Gap Analysis (CGA 2019) is the fifth in a series dating back to 2001. Over the last two decades the report has reflected the evolving priorities and questions of our community. The first two reports, in 2001 and 2009, focused on donor supported countries and predominantly public sector supplies. More recent iterations of the CGA have expanded this scope to cover a wider set of countries, and they have looked at users, quantities, and costs in both the public and private sectors. These reports have broadened our understanding of the wider market; yielded insights from retail data acquired from IQVIA, and, helped start conversations about what the future might hold as the community looks to meet the Sustainable Development Goals.

With this edition, we take a new approach. While this CGA presents similar findings—current spending, users, consumption quantities, costs and gaps—it does so in new ways that better position these findings to inform the critical discussions happening within our community.

New analytical approaches allowed us to explore how spending, users, and costs vary across not only the public and private sectors, but within the private sector as well, offering greater visibility into the role of donor-subsidized products in the private sector.

This edition also breaks new ground by offering a more nuanced understanding of different patterns in spending, use, and cost across the 135 low- and middle-income countries (LMICs) comprising our analysis.[1] In order to highlight fundamental differences that can help inform future planning, we’ve segmented these countries into the World Bank’s categories of Gross National Income per Capita (GNI): low-income countries (LICs), lower-middle-income countries (L-MICs), and upper-middle-income countries (U-MICs).

Lastly, we’ve extended the time horizon for this report to 2030 in order to help inform pressing conversations about how we plan for the future and set out strategies for reaching the Sustainable Development Goals (SDGs).

The issues at the center of this analysis are the issues that will define the new decade for commodity security: the relative role of the public and private sectors; the declining role of donors in commodity procurement; the prospects for increased financial support from country governments; the impact of subsidized supplies on the total market; the evolution of method choice, etc.

The rich findings of this report help illuminate pertinent facts about the world today, and what changes may happen over the coming decade. From these results, five critical themes emerged, themes so important to the conversations about the future of our sector that we made one final departure from past CGA reports and structured the report itself around these themes.

Our community is at a pivotal moment: we are on the cusp of reaching 2020 and beginning to look towards reaching the 2030 Sustainable Development Goals. The conversations and decisions that are made over the coming years will shape the future of contraceptive use and the landscape of reproductive health supplies. The critical themes and findings from this report can help inform and nuance these conversations. And, just as with the past reports, we hope that this CGA will solicit new questions that our next report can seek to answer.

Conversations within the reproductive health community suggest that donor support for commodity procurement is declining and will likely continue to decline or, at best, remain stagnant in the decade to come. In the context of shrinking donor funding for commodities, it is important to understand the role donors play in different countries and what can be done to minimize the impact of limited funding on those women who need it most. Nearly half of spending within low-income countries comes from donors, and collectively the public sector accounts for 66% of spending. Looking across the three GNI groups, the role of the public sector—namely, the donor community—diminishes as income increases. Prioritizing donor funding amongst lower-income countries, therefore, will be critical, as will encouraging country governments to play a larger role in funding family planning commodities.

The new data and analytic approaches used in the CGA 2019 report have allowed us to unpack our spending estimates to examine variations within and among each GNI country group, sector, and source of funding.

The amount currently spent on contraceptive supplies across the entire LMIC market is $3.33 billion. Over 80% of this amount—four out of every five dollars—comes from individuals purchasing supplies from private sector entities. Within the private sector, most supplies (80%) are sold at full commercial prices. Only a small percentage of supplies—just 2% ($46.7 million)—are sold at subsidized prices. These supplies are typically but not exclusively sold through social marketing agencies. The balance of spending comes from public sector sources, which include both donors and country governments. Governments, however, spend nearly three times more than donors.

The Impact of Donor Spending within GNI Groups

Within each GNI Group, there are pronounced differences in public versus private sector spending and thus the impact of donor spending also varies. The public sector accounts for the largest share of spending in low-income countries. This is related in large part to the contribution of donors, which accounts for nearly 50% of all spending in this GNI group. The remaining public sector spending—roughly 17%—comes from governments. Amongst lower-middle-income countries, public sector spending accounts for a relatively small share (6%) of total spending in large part as a result of declining donor support. But the increase in country government expenditures (to 29%) relative to that in low-income countries ensures that public sector spending remains significant overall. In upper-middle-income countries, the contribution of public sector resources is negligible: out-of-pocket purchases from private sector entities (92%) dominates all spending.

While these patterns can easily be interpreted to imply some sort of natural, inevitable transition from public to private sector spending as country GNI increases, they are by no means a prescription for what the future holds. These patterns are all moments in time and representative of those countries currently falling within each GNI group today.

There are also suggestions that the relatively smaller contribution of public sector expenditures within upper-middle-income countries may be specific to spending on contraceptive supplies. A wider analysis of health commodity expenditures suggests a potential resurgence of government spending not seen in this analysis among upper-middle-income countries.[23] This may be due to unique policy decisions about the role of public sector spending on contraception among some of the large upper-middle-income countries.

Because the level of spending varies so much across GNI groups, it is useful to look at not only how things are distributed within GNI groups but also how spending by each sector is distributed across GNI groups. Overall, two-thirds of total spending comes from upper-middle-income countries, most of which is private sector spending (76%).

More than half of government spending (54%) comes from lower-middle-income country governments. While government spending ($170 million) only makes up a small share (8%) of total spending in upper-middle-income countries, it represents 37% of total government spending

Currently, donor funding appears to be well targeted towards those who need it most: nearly 60% of spending by donors on contraceptive supplies is spent to procure commodities for low-income countries, with most of the rest spent in lower-middle-income countries.

These findings suggest that shortfalls in donor funding that may appear minor in the overall context could have a disastrous impact should they occur in low-income country group. At the same time, these findings also suggest that because of their larger revenue bases, governments in middle-income countries—both upper and lower—may be better positioned to provide funding for supplies and thus may be more capable of absorbing costs previously borne by donors.

Funding Gaps

If the amount spent annually on contraceptive supplies remains at the current level while the number of women who need supplies continues to grow, a funding gap of $178 million will emerge in 2020. As the discrepancy between total consumption costs and the actual funding spent on supplies continues to grow, so will the funding gap, reaching $266 million in 2025 with the cumulative gap over five years (2021–2025) reaching $1.17 billion. A funding gap of this size could have devastating consequences for women who wish to prevent or delay pregnancy.

Funding Gaps by Sector

Currently, women purchasing their own contraceptives from private entities make up the largest share of spending. Looking forward, this group will account for the largest share of the gap. The amount that will need to be spent out-of-pocket in the private sector will increase to $2.85 billion in 2025, meaning women will need to spend $144 million more than they currently do. Because of differential patterns of growth across countries, however, a smaller share of the cumulative gap (59%) is attributed to private out-of-pocket expenditure than the current share of spending attributed to this group (80%).

The remaining 41% of the cumulative gap attributed to public sector entities ($481 million) is more than double the share of current public sector spending (19%). Because increases in consumption costs are concentrated in countries with a higher reliance on public sector funding, the gap will also be concentrated in these countries.

Despite the fact that governments account for a larger share of current spending than donors they end up over the 2021–2025 period with a similar cumulative gap ($240 million versus $241 million). This is due to the differences in growth patterns between low-income countries, where donors account for the majority of public sector funding, and lower-middle-income countries, where governments account for the majority of public sector funding. Donors will thus need to increase their funding more than governments—in both relative and absolute terms—in order to maintain their share.

Funding Gaps by GNI Group

A closer look at the different patterns of change in consumption costs within each GNI group provides a varied view of future funding gaps.[24] Because the total consumption cost is declining in upper middle-income countries, the gap in these countries will shrink over time; by 2025 the spending gap will equal only 1% of the cost share. On the other hand, low-income countries will incur the largest increase in consumption costs, thus causing the gap in these countries to grow the fastest. In 2020, low-income countries will have the smallest gap, representing 18% of the total cost share that year. By 2025, their gap will be the second largest nearly as large as that in lower-middle-income countries. By 2025, the gap will represent 37% of low-income countries’ total cost share. Therefore, in order to keep up with the growing needs in low-income countries, spending will need to grow much more rapidly relative to current spending levels.

Across all low-and-middle-income countries the cumulative five-year gap (2021–2025) will total $1.17 billion. The cumulative gap will be largest in lower middle-income countries ($521 million), followed by low-income countries ($419 million). The remaining gap ($233 million) will be in low-income countries.

Out-of-pocket by individuals from private entities accounts for the largest share of the cumulative gap within lower-middle-income countries (65%), as well as upper-middle-income countries (92%). In contrast, within low-income countries nearly half of the gap is attributed to donors.

As with other results by GNI Group, it is also useful to look at how the gap attributed to each sector will be distributed across each GNI group. As seen earlier, both donors and governments will have a similar cumulative 5-year gap. The donor gap, however, will be almost entirely concentrated within low-income countries, where it will account for nearly half of the funding gap in those countries. Meanwhile, just under two-thirds (63%) of the government gap will be concentrated in lower-middle-income countries.

Despite the majority of private sector consumption costs coming from upper-middle-income countries, they will only account for 31% of the private sector gap. The gap will skew more towards the other two GNI groups, where the largest increases in cost will take place.

These results show the important role that donors play, especially within low-income countries. Should donors fail to increase their spending, governments or women paying out-of-pocket in the private sector will have to make up the shortfall. Governments must already increase their spending, just to keep up with the growing costs.

While the public and private sectors each play equally important roles in the reproductive health market, the two are not interchangeable. The public sector primarily provides long-acting and permanent methods (LAPMs), while the private sector focuses more on short-term methods (STMs).

We must take caution in assuming that in the context of shrinking donor funding, the private sector can simply take the place of what donors are supporting. Work is needed to ensure that as the funding landscape shifts, women are still able to access a full range of contraceptive methods.

Publication of the 2018 edition of the CGA offered our community greater visibility into private sector provision of contraceptive supplies. New data from IQVIA revealed the higher prices paid by those who secured their supplies through private sector entities. The CGA 2018 analysis applied these higher prices to a proportion of private sector consumption, recognizing that this sector comprised both subsidized and non-subsidized products. But it left an incomplete picture, in large part because uncertainties remained over the exact size the private market for of the subsidized and non-subsidized supplies. The 2018 edition of the CGA also treated the social marketing sector as a subset of the private sector when in fact the work of social marketing agencies straddled both the public and private sectors.

This edition of the CGA breaks new ground by setting aside the distinctions between the social marketing and full commercial sectors, focusing instead on the supplies themselves: whether they are sold at full commercial price, or whether they benefit from some sort of public sector subsidy. For this analysis, who sells in the private sector is less important that the cost structure of what they sell.

Informed by data and insights from SMO actors and other private sector experts, the CGA 2019 is now able to tease out those circumstances where products received or purchased by individuals from private sector facilities were subsidized by either donors or country governments. Because of wide diversity in international NGO and SMO models for service delivery and product sales, only a subset of the supplies they distribute or services they provide fall into the classification of subsidized private sector- that proportion of their work where public sector funding reduces the price to users within the private sector.[25]

Of the 199 million users of contraception who obtain supplies from private sector entities, 88% (174 million) purchase non-subsidized supplies. Overall, subsidized supplies play only a small role in low- and middle-income countries, largely due to the fact that most countries have no institutions (such as SMOs) through which subsidized products enter the private market. Among those that do, the size of the private market—which itself can vary greatly from country to country—often pales in comparison to the public sector.

Of the 135 LMICs, only 49 have contraceptives available at subsidized prices within the private sector. Nonetheless, 24.5 million users of contraception do currently purchase supplies at subsidized prices from the private sector. And, at least for certain contraceptive methods, the role of subsidy is not insignificant: 32% of implant users and 23% of IUD users who get their method from private sector entities purchase subsidized products.

When it comes to income groups, just as the size of the private sector varies, so does the role of subsidized services within the private sector. Not surprisingly, the subsidized private sector plays the largest role in low-income countries, where 40% of private sector users purchase subsidized supplies. Within lower-middle-income countries the role of the subsidized private sector shrinks by about half, and virtually disappears within upper-middle-income countries. However, while the subsidized private sector plays a larger role within low-income countries, in absolute terms there are more users of subsidized supplies living in lower-middle-income countries (19 million versus 5.32 million) due to the larger number of users in this GNI group.

The Impact of Subsidies on Consumption Costs

Whether private sector users access subsidized or non-subsidized products has important implications for private sector consumption costs, since for any given method the subsidized price is lower than the non-subsidized price. Drawing on an expanded range of data sources country and regional estimates of both subsidized and non-subsidized private sector prices have been incorporated into the consumption cost analysis. There is wide variation in both the subsidized and non-subsidized prices across countries and regions.[26]

Comparing the subsidized and non-subsidized private sector price within each region gives a sense of the magnitude of the subsidy. Overall, injections have the lowest subsidy. Those who consume subsidized products (subsidized users) from private sector entities pay on average 31% of the non-subsidized price. IUDs and pills both have the greatest subsidy, with subsidized users paying less than 5% on average of the non-subsidized price. Subsidized implants are on average priced at 12% of the non-subsidized price, however only a quarter of implant users purchase their methods from private entities.

Across low-and-middle-income countries only 2% of private sector costs come from spending on subsidized commodities. While this may seem small, it still equates to a total of $46.7 million. And for many of the women purchasing these subsidized supplies, especially those in the poorest countries, these products may have been unaffordable at higher prices.

Supplies from private sector entities plays the largest relative share within low-income-countries. In this GNI group, subsidized supplies account 40% of private sector users but only 16% of private sector costs. The discrepancy can be attributed differences in prices paid between subsidized and non-subsidized products and differences in method mix. Like with users, the largest absolute costs from subsidized supplies comes from lower-middle-income countries ($36.6 million). However, in this GNI group, only 6% of private sector costs derive from users purchasing subsidized supplies.

In addition to out-of-pocket spending by individuals who purchase supplies at subsidized prices from private sector entities, an additional $44.2 million is incurred by the public sector to cover the subsidy. In this analysis, we include this cost within the total public sector consumption costs.