Financing Global Health -- Trends and Directions Maureen Lewis, PhD Visiting Professor, Georgetown University March 26, 2015

Global health financing is in flux Big increases in donor financing for health 2000-2012 – led by the US

Much of the financing tied to specific diseases

However: The global disease burden is shifting

New players emerging notably philanthropic organizations and the private sector

Developing world is becoming more Middle Income and middle class – that changes the demands, needs and players

Who is spending on developing countries, and on global health?

Foreign direct investment, remittances and private equity investments in developing countries dwarf ODA from 2004

Source: Development Prospects Group, World Bank

0

100

200

300

400

500

600

700 FDI

Private debt & portfolio equity

Recorded Remittances

US$ billion

Even LICs relying less on ODA

Source: Leo and Moss, CGD, 2015

Health Overseas Development Assistance (ODA) Trends and Priorities

ODA Disbursements by Sector 2002-2010

Source: Kaiser Family Foundation, Donor Funding for Health in Low- & Middle-Income Countries, 2002-2010

ODA Disbursements for Health & Year-to-Year Percent Change, 2002-2010

10 DONOR FUNDING FOR HEALTH IN LOW- & MIDDLE-INCOME COUNTRIES, 2002–2010

Figure 5:

$4.4 $5.8 

$7.1 

$9.4 

$10.9 

$13.5 

$15.4 

$17.0 $18.4 

32%22%

32%

16%

23%14%

10% 8%

2002 2003 2004 2005 2006 2007 2008 2009 2010

US$ Billions

Annual ODA Disbursements for Health & Year‐to‐Year Percent Change, 2002‐2010

Note: Amounts in gross US$ disbursements. Health ODA combines data from three OECD CRS sub‐sectors: (1) Health; (2) Population Policies/Programs and Reproductive Health (includes HIV/AIDS & STDs); and (3) Other Social Infrastructure and Services ‐ Social Mitigation of HIV/AIDS Source: Analysis of data obtained via online query of the OECD Development Assistance Committee (DAC) Database and Creditor Reporting System (CRS), November 7, 2012.

Figure 6:

United States34.6%

Global Fund16.5%

United Kingdom

6.6%

World Bank5.1%

GAVI3.8%

EU Institutions

2.6%Germany2.6%

Canada2.5%

France2.3%

Japan2.1%

All Other DAC12.1%

All Other Multilaterals

8.8%

Non‐DAC0.4%

United States31.7%

World Bank21.2%

United Kingdom

9.5%

UNFPA5.9%

Netherlands3.5%

France3.0%UNICEF

2.8%

Japan2.7%

Germany2.2%

Norway1.9%

All Other DAC12.8%

All Other Multilaterals

2.8%

2002 2010

Total = $4.4 billion Total = $18.4 billion

Top 10 Donors for Health ODA, 2002 & 2010

Note: Amounts in gross US$ disbursements. Health ODA combines data from three OECD CRS sub‐sectors: (1) Health; (2) Population Policies/Programs and Reproductive Health (includes HIV/AIDS & STDs); and (3) Other Social Infrastructure and Services ‐ Social Mitigation of HIV/AIDS Source: Analysis of data obtained via online query of the OECD Development Assistance Committee (DAC) Database and Creditor Reporting System (CRS), November 7, 2012.

ANNEX 1: FIGURES

Source: Kaiser Family Foundation, Donor Funding for Health in Low- & Middle-Income Countries, 2002-2010

Sub-sectoral breakdown, 2008-09

December 2011, OECD-DAC, www.oecd.org/dac/stats/health

Table 2. Main aid providers and recipients in the health sector 2008-09 average commitments in million USD, constant 2009 prices

Note on Tables 1 and 2. Bill and Melinda Gates refer to 2009 only.

Chart 2. Regional breakdown of aid to health

2008-09, bilateral and multilateral commitments, constant 2009 prices

Chart 3. Sub-sectoral breakdown of aid to health

2008-09, bilateral and multilateral commitments, constant 2009 prices

Chart 4. Total aid flows to health: grants, loans and non-concessional flows 2008-09, bilateral and multilateral commitments, constant 2009 prices

USD million

average 2008-09

United

States

Global

Fund

Bill &

melinda

Gates

Foundation

United

KingdomIDA

Other

donors

All

donors

% of aid to

health to

all

recipientsNigeria 426.5 235.5 45.9 145.8 230.6 119.3 1203.5 6

Tanzania 292.1 242.7 5.7 2.0 46.0 269.3 857.8 4

Kenya 531.5 62.9 24.1 46.6 0.0 78.1 743.3 4

Ethiopia 346.4 138.9 8.2 39.6 20.0 145.2 698.3 3

India 79.5 85.3 119.4 87.8 255.4 168.7 796.2 4

South Africa 535.6 25.2 0.9 15.1 0.0 56.5 633.3 3

Uganda 297.6 100.6 0.0 4.9 10.7 89.4 503.3 2

Mozambique 222.5 9.2 0.0 20.7 22.3 203.4 478.1 2

Zambia 223.9 158.6 8.4 6.2 0.0 78.6 475.8 2

Congo, Dem. Rep. 61.1 83.7 0.0 26.4 92.4 187.1 450.7 2

Pakistan 93.3 10.7 34.0 81.7 37.3 188.9 445.9 2

China 17.9 235.2 46.2 17.4 0.0 123.6 440.4 2

Malawi 56.2 205.1 2.2 24.8 17.0 69.4 374.8 2

Afghanistan 133.1 34.3 0.0 0.0 19.8 169.6 356.9 2

Ghana 38.5 136.9 7.0 39.7 8.8 102.9 333.8 2

Other recipients 3545.8 1404.6 1393.9 626.3 298.1 4754.9 12023.5 58

Total amount 6901.5 3169.6 1695.9 1185.2 1058.4 6804.9 20815.4 100

% of health aid

from all donors33 15 8 6 5 33 100

Africa, South of Sahara

49%

Africa, North of Sahara

1%

South & Central Asia

11%

Far East Asia8%

Middle East2%

America5%

Europe2%

Oceania1%

Other21%

HIV/AIDS control

41%

Reproductive health other

than HIV/AIDS

11%

TB, malaria and other infectious diseases

19%

Other basic health

18%

Health, general

11%

87 % 4% 8%

Grants Concessional loans Non-concessional loans

Source: OECD; Note: bilateral and multilateral commitments, constant 2009 prices

Top 10 Donors for Health ODA, 2002 & 2010

Source: Kaiser Family Foundation, Donor Funding for Health in Low- & Middle-Income Countries, 2002-2010

Changes in types of contributions 1990-2013

Source: IHME DAH Database 2013

ODA for health channel of assistance, 1990-2013

Source: IHME DAH Database

Disease burden shift – implies need for new priorities

Distribution of NCD Deaths in Low and Middle Income

Countries, 2012

19

higher income, and successful preventive and treatment investments over the past few

decades, but better diagnoses and understanding of disease pathogens has contributed as

well.

Figure 4: Distribution of NCD Deaths in Low and Middle Income Countries, 2012

Source: Institute of Health Metrics and Evaluation (Anonymous2014)

Latin America’s explosion in chronic conditions, cardiovascular disease and diabetes in

particular, is forcing a restructuring and reconsideration of country health care systems

(Montenegro et al. 2011). Through training, engaging community health providers and

providing clinical backup hospitals build capacity and structure clinical management for

chronic conditions. That kind of leadership boosts countries’ abilities to reinvent health care

for the 21st Century and offers a foundation for future changes in response to evolving

circumstances. Latin America is not alone in discovering chronic conditions and the need for

radical change. In India a re-examination of causes of death reveals higher than expected

levels of cancer among young adults in rural areas (Dikshit et al. 2012), a chronic disease

requiring very different forms of intervention and treatment. Aging populations further

contribute to the rise in chronic conditions and particularly poly-chronic illnesses.

Another rising challenge is trauma, often from road accidents. Road traffic incidents (RTI)

represent the leading cause of death of young people ages 15-19 worldwide, and is the 8th

Source: Institute of Health Metrics and Evaluation (Anonymous 2014)

Non-communicable disease health ODA per DALY by region, 1991–2010

Source: IHME DAH Database 2013 and Global Burden of Disease Study 2010

Foreign direct investment surging in and among developing countries

2013 Total Global FDI Flows

Source: UNCTAD Stat Database, Accessed March 21, 2015

Developing, 778, 54%

Developed, 566, 39%

Transition, 108, 7%

2013 FDI Inflows ($ Billions)

Developing, 454, 32%

Developed, 858, 61%

Transition, 99, 7%

2013 FDI Outflows ($ Billions)

Health Services Inward FDI1

Source: UNCTAD Stat Database, as published in Zimny, Zbigniew. 2011. “Foreign Direct Investment in Health Services Background Paper Prepared for UNCTAD”

1,053

5,887

0

7,339

1990 2009

FDI Inward Stock in Health Services ($USD millions)

Developed Developing

2,635

1,461

572

1,489

Developed Developing

2008-102 FDI in Health Services ($USD millions)

M&A Greenfield

1: Also includes social services such as job training, vocational and rehabilitation services, child-care services, residential care and individual and family social services 2: Annual Average

Greenfield Global FDI last 24 months

Source: FDI Markets pulled February 15, 2015

Pharmaceuticals, $16,262

Biotechnology, $5,524

Medical Devices, $4,967

Healthcare, $2,613

Capital Expenditures US$

398

116

283

95

Pharmaceuticals

Biotechnology

Medical Devices

Healthcare

# of Projects

Company Company Overview Example Outward FDI

Malaysian-based healthcare provider that is the 2nd largest listed healthcare operator in the world by market cap, operates over 7k beds in 38 hospitals across 10 countries

March 2015 – IHH acquired 51% stake in India’s Continental Hospitals for $45.5M through its subsidiary firm Gleaneagles Development

Publicly listed on the Hong Kong Stock Exchange after an IPO in 2012, Fosun Pharma is one of the top 5 domestic pharmaceutical companies in PRC by revenue

April 2014 – China hospital chain Chindex, a Maryland-based healthcare company, accepted buyout offer from Shanghai Fosun Pharma and PE firm TPG Capital for $466M

Fortis is an Indian healthcare provider currently operating in India, Singapore, Dubai, Mauritius and Sri Lanka with 55 healthcare facilities, approx. 10k beds and 270 diagnostic centers

August 2012 - Becomes 1st Indian hospital chain with Greenfield Hospital abroad with the launch of Fortis Colorectal Hospital in Singapore

Emerging Market Examples of Outward Health FDI

Source: Company Websites, Healthcare Business International, China Business Review, Fortis Press Release

Examples of Different Types of FDI

Source: Wall Street Journal, Reuters, Company websites,

Greenfield

Capital Acquisition

Joint Venture

Equity Acquisition

Gleneagles Hong Kong Hospital, a 500-bed facility opening in 2016, is a joint venture between Parkway Pantai, NWS Holdings Limited, and the University of Hong Kong

Seattle-based Columbia Pacific Management is launching Columbia China and plans to build two-250 bed hospitals with an investment of up to $200M in China

TPG Capital, a global private investment firm, announced in 2015 that they will buy a “significant minority stake” in Indian Hospital operator Manipal Health Enterprises for $145.86 million

Columbia Asia, owned by Columbia Pacific Management, acquired Gleni International hospital (238 beds) in Medan, Indonesia in 2008

Remittances: rapid growth in household discretionary spending for health care

Remittances permit higher household health care expenditures

Comparing 46 countries, higher remittances are associated with greater access to healthcare treatment

Across 12 African countries households dedicate 5-12% of remittances received from outside Africa to healthcare

In Kwa-Zulu Natal, South Africa remittances improved poorer household’s access to quality (private) medical care

Guatemalan HHs receiving internal remittances spend 22 % more on health than do non- remittance households

Source: Ratha, D. (Ed.). (2011). Leveraging migration for Africa: remittances, skills, and investments. World Bank; Adams, R. 2005. "Remittances, household expenditure and investment in Guatemala." World Bank PRWP; Drabo, A., and C. Ebeke. "Remittances, public health spending and foreign aid in the access to health care services in developing countries." (2010)

In Mexico healthcare expenditures rise in response to remittance earnings

With each peso rise in international remittances primary healthcare expenditures rise $.06 - $.09 hospitalization expenditures rise $ .12 - $ .20

Remittances increase household health spending 3x more than do other sources of income

Households receive an increase in remittances with a health crisis

Remittances play an important role in financing household catastrophic care

Source: Amuedo-Dorantes, C., T.Sainz, and S. Pozo. 2007. Remittances and healthcare expenditure patterns of populations in origin communities: evidence from Mexico (Working Paper ITD 25). BID-INTAL; Knaul, F. et al . 2006.. Evidence is good for your health system: policy reform to remedy catastrophic and impoverishing health spending in Mexico. The Lancet, 368(9549), 1828-1841.

Remittances induce shift to the private sector

Elasticity of access to health care services with respect to remittances positive for total and private health care

Remittances have no impact on access to public health care services.

Remittances improve overall access to health services inducing a “sectorial glide” from the public to private sector.

Remittances reduce need to finance hospital treatment with debt

Households with nuclear family in the US did not increase their debts due to health shocks.

This is consistent with remittances responding to households’ demand for financing emergencies, making them less reliant on debt financing.

Source: Ambrosius, C., & Cuecuecha, A. (2013). Are remittances a substitute for credit? World Development, 46, 143-152.

Remittances expected to growth rapidly

Ratha et al project rapid growth in remittances over the next decade

Implies strong funding for health care in remittance recipient countries, for both Low- and Middle-Income Countries

Conclusions

The future of global health spending Health ODA levels benefited from significant increases between 2000 and 2012 but higher growth unlikely

HIV/AIDS triggered much of increased ODA spending As the largest single donor US allocations were linked to PEPFAR

Focus of historical spending largely communicable diseases but that is shifting, will ODA respond?

Will OECD spending continue even if there is growth in OECD? Is there willingness to spend more on ODA?

Middle and Low Income governments are spending more

New players likely to dominate the future of health care spending

Demand coming from: rising incomes,

urbanization,

growing remittance earnings,

citizen preferences for quality diagnosis and treatment, including inpatient care

Philanthropy a major source of funding

Private sector will continue to expand – both domestically and globally

FDI will respond if governments and domestic investment does not

Thank you