Why use the private sector in healthcare? Jeff Barnes, Deputy Director of PSP-One, discusses the issue and touches upon whether it is better to sell mosquito nets or give them out for free. His main points are that: (1) if someone pays for something with their own money they will use it better, (2) “free” distribution is never free - there are always transaction costs, and (3) that the private sector is more efficient and more financially sustainable.
In a private sector distribution mechanism, every wholesaler and distributor in the chain puts his/her own money into the product and has every incentive to store the product properly to ensure that the consumer will ultimately buy the product. No donor or government has to pay them to handle the product carefully. They are paid by what they earn on the margin of reselling the product. In a public sector or free distribution system, you have to pay people to store the product and ship it. You have to buy and maintain vehicles to deliver the products. I suppose if you are running a well-funded vertical program to deliver commodities to Millennium Development Villages, this is not a concern. However, in the world of scarce resources, pushing products through a public sector system with poorly paid functionaries who get no benefit and additional work from moving those products is very difficult. It shouldn’t be surprising that in such circumstances, a lot of those products will “get lost in warehouses” or “fall off a truck.” You probably won’t have enough trucks for the products to fall off of.
Let him know what you think.
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