44143 The Business of Health in Africa Africa in Health of Business The Public Disclosure Authorized The Business of Health in Africa Partnering with the Private Sector to Improve People’s Lives | | Partnering with the Private Sector to Improve People’s Lives Lives People’s Improve to Sector Private the with Partnering Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Health and Education Department 2121 Pennsylvania Avenue, NW MSN 9K-907 Washington, DC 20433 USA www.ifc.org/HealthinAfrica Contents Message from the Executive Vice President and CEO iii In Acknowledgement v Executive Summary vii Project Scope and Approach xi Introduction 1 Section I: The Role and Likely Evolution of the Private Sector in Health Care in Sub-Saharan Africa 5 Section II: Actions Needed to Enhance the Private Sector’s Participation in Health Care 17 Section III: The Case for Investing in the Private Health Care Sector in Sub-Saharan Africa 35 Conclusion 51 Annex 1: Examples of Successful Business Models in Health Services Provision 56 Annex 2: Examples of Successful Business Models in Risk Pooling Arrangements 68 Annex 3: Examples of Successful Business Models in Life Sciences Manufacturing and Innovation 75 Annex 4: Examples of Successful Business Models in Distribution and Retail 88 Annex 5: Examples of Successful Business Models in Medical and Nursing Education 98 Annex 6: Methodology for Market Sizing 105 Glossary 111 Notes 117 Bibliography 121 Acknowledgments 130 The Business of Health in Africa Partnering with the Private Sector to Improve People’s Lives This report describes opportunities for engaging and supporting a well managed and effectively regulated private sector to improve the region’s health. We hope that governments, donors, investors, nongovernmental organizations, and health care providers will find this research a useful addition to traditional public sector approaches. Message from the Executive Vice President and CEO ub-Saharan Africa has about 11 percent of the world’s people, but it carries 24 percent of the global disease burden in human and financial costs. Almost half Sthe world’s deaths of children under five take place in Africa. This challenge is significant but not insurmountable. There is a tremendous oppor- tunity to leverage the private sector in ways that improve access and increase the financing and quality of health care goods and services throughout Africa. In a region where public resources are limited, the private sector is already a sig- nificant player. Around 60 percent of health care financing in Africa comes from pri- vate sources, and about 50 percent of total health expenditure goes to private provid- ers. Just as important, the vast majority of the region’s poor people, both urban and rural, rely on private health care. A poor woman with a sick child is as likely to go to a private hospital or clinic as to a public facility. This report describes opportunities for developing, engaging, and supporting a well managed and effectively regulated private sector to improve the region’s health. We hope that governments, donors, investors, nongovernmental organizations, and health care providers will find this research a useful addition to traditional public sector ap- proaches. We look forward to exploring partnerships with African companies, banks, and investors, as well as policy experts and other stakeholders in health care. Despite the scope of Africa’s health challenge, I am optimistic about what can be achieved in the next few years. I want to thank the partners and colleagues who made this report possible. Their diverse contributions are a powerful example of the value of collaboration. Lars H. Thunell Executive Vice President and CEO The Business of Health in Africa ( iii There are many who deserve recognition for the help they provided us in developing this report. Lastly, we extend our gratitude to the individuals who shared their thoughts with our team on the many issues we examined to develop a picture of this most complex of issues. In Acknowledgement here are many who deserve recognition for the help they provided us in develop- ing this report. Foremost is the Bill & Melinda Gates Foundation, which provided Ta significant part of the funding that made this work possible. Their support evolved into an intellectual partnership and a mutual commitment to improve the quality of health care in Sub-Saharan Africa. We greatly appreciate the trust they placed in us by funding this work and we value the intellectual leadership they have demon- strated every step of the way. We would also like to thank the management consulting firm of McKinsey & Com- pany. Over the course of six months their team traveled throughout Sub-Saharan Africa to gather information and help us to understand the challenges and opportuni- ties facing the private health sector. The independent analysis conducted by McKinsey & Company provided a critical fact base for this report, and we thank them for their time and dedication. A Steering Committee of leaders in health, particularly in Africa, was established to oversee this work. In addition to IFC staff, the Steering Committee comprised: • Tadataka Yamada, M.D., President, Global Health Program, Bill & Melinda Gates Foundation • Eyitayo Lambo, Former Health Minister, Republic of Nigeria • Jack Shevel, M.D., Founder and Former CEO, Netcare, South Africa Throughout the course of the project, this committee gave significant input and assisted IFC in thinking through its strategy for health in Africa. We are grateful for the time they devoted to the project and the leadership they showed throughout the course of work. Our work was also greatly enhanced by the advice provided by a Technical Advisory Board consisting of a cross-section of experts with experience in the public and private sectors, international development, and academe. Their input was invaluable and we thank them for their dedication and for their many contributions, which made this report possible. We also give our thanks to our many colleagues at the World Bank who provided advice and insight that is unavailable elsewhere. Lastly, we extend our gratitude to the individuals who shared their thoughts with our team on the many issues we examined to develop a picture of this most complex of issues. Their help was essential in complet- ing this work. Together with the members of the Technical Advisory Board, they are listed in the Acknowledgements section of this report. Guy Ellena Director, Health and Education Department The Business of Health in Africa ( Sub-Saharan Africa accounts for 11 percent of the world’s population, yet bears 24 percent of the global disease burden and commands less than one percent of global health expenditure. It also faces a severe shortage of trained medical personnel, with just three percent of the world’s health workers deployed in Sub-Saharan Africa. Executive Summary ealth care in most of Sub-Saharan Africa re- as a result, quality can be inconsistent. Moreover, mains the worst in the world. Despite de- the lack of regulatory and accreditation frame- Hcades of foreign assistance, few countries in works combined with a largely uninformed patient the region are able to spend even the $34–$40 per population can sometimes allow an unscrupulous person per year that the World Health Organiza- minority to prevail over responsible providers—to tion (WHO) considers the minimum necessary to the detriment of the reputation of all. provide a population with basic health care.1 In The truth is, however, that for-profit compa- spite of the billions of dollars of international aid nies, non-profit organizations, and social enterpris- dispensed, an astonishing 50 percent of Sub-Saha- es, along with insurers, providers, and manufactur- ran Africa’s total health expenditure is financed ers, already play an important role in providing by out-of-pocket payments from its largely im- health care to the region. They account for as poverished population. In addition, the region much as 50 percent of health care provision, and lacks the infrastructure, facilities, and trained their role is growing. personnel necessary to provide and deliver even minimal levels of health services and goods. The Widening Gap This study, conducted by IFC with assistance from McKinsey & Company, estimates that over Sub-Saharan Africa accounts for 11 percent of the the next decade, $25–$30 billion in new invest- world’s population, yet bears 24 percent of the ment will be needed in health care assets, includ- global disease burden and commands less than one ing hospitals, clinics, and distribution warehouses, percent of global health expenditure.2 Increased to meet the growing health care demands of Sub- attention from outside donors has resulted in some Saharan Africa. remarkable initiatives, funneling billions of dollars This IFC report highlights the critical role the to help combat HIV/AIDS, tuberculosis (TB), and private sector can play in meeting the need malaria the worst health scourges of the region. for more and higher-quality health care in Sub- But most of the area lacks the infrastructure and Saharan Africa. It also identifies policy changes facilities necessary to provide and deliver minimal that governments and international donors can levels of health services and products. It also faces make to enable the private sector to take on an a severe shortage of trained medical personnel, ever more meaningful role in closing Africa’s with just three percent of the world’s health work- health care gap. ers deployed in Sub-Saharan Africa.3 It is important to acknowledge at the outset Furthermore, Sub-Saharan Africa’s improving that many in the public health community oppose economic performance means that the demand in principle a role for the private sector in health among all sectors of society for health care is care. Indeed, there are legitimate concerns about poised to increase still further.