Scaling up is tough – beware the funding gap

Running a successful trial is one thing, scaling up is quite another. So we have been told by several commentators. So, we’ve made sure we are ready for the key issues people pointed out that we would face. These include:

  1. Getting a manufacturer on board, to make the product their own.
    Creating a new design, and procuring it for a trial is one thing – establishing it in production in the longer term is quite another.
  2. Avoid making the manufacturer dependent you – and on donor funds.
    Many NGOs and health agencies rely on donor funding to buy from manufacturers. In many cases we have found that local manufacturers prefer this model; and so do NGOs, while donor funding lasts. But what happens then?
  3. Avoiding the subsidy conundrum.
    When running a trial, there are development and start-up expenses, the cost of prototyping and small-scale production, the cost of learning and dissemination, and on top of that, subsidy to make the new product affordable to customers. How to cut costs to make a product viable in the real market?
  4. ‘Trial-itis”
    Academics love a trial – and often, so do donors. It’s easy to get caught up in the exciting prospect of yet more research, more findings, more proof, trying out in different countries. When do you say: we know enough. It will work. And let the market take over?

These are potential ‘scale-up traps’ that we saw as potential threats. So, they have informed our strategy.

For the Zambian trial, we put a lot of effort, right from the outset, into recruiting and supporting a willing manufacturer – not just for the trial, but potentially for the longer term. We were looking for a partner, not just a supplier. On the one hand, we were warned against creating a monopoly; on the other, our experience is that finding even one willing partner wasn’t easy. This was in spite of offering to share what is called, in market development circles, ‘early stage risk’ – for example, supporting development costs, educating retailers, running community awareness. And – highly unusual in development circles – we were willing to transfer the design and brand once proven. After liaising with potential manufacturers both big and small, we finally found a willing partner in Pharmanova – one of Zambia’s few, small pharmaceutical manufacturers. The partnership has been – and continues to be – a two-way learning exchange. But as a relatively small business, they can only invest a little in market development for scale up. We are willing; they are willing. But where is the investment to be found?

This links directly into the second potential ‘scale-up trap’: persuading a manufacturer to sell and distribute to ‘the market’ not simply manufacture and supply to ColaLife, as a donor-funded NGO. We have resisted the temptation to ‘insert ourselves’ into the local market as a buyer, taking a cut from Kit Yamoyo for our own sustainability. Instead, we have persuaded Pharmanova to look more widely for customers: existing wholesalers; other NGOs already well-established in Zambia, like Marie Stopes International and Society for Family Health (PSI), and the Ministry of Health. We see our role as linking up what is already there in the market. This seems like common sense to us, but this ‘non-traditional’ approach has already cost us one funder!

On the third point, we have worked hard with Pharmanova to cut the cost of production drastically to ensure that the product is affordable by mothers and carers, profitable for everyone involved WITHOUT the need for perpetual subsidy. We know this is achievable; we know Pharmanova is willing. But time is of the essence.

Our challenge is that we need to quickly establish the product in the market and to do this we do need a one-off injection of finance to ensure the scale up takes off. This is why.

Although the Kit Yamoyo anti-diarrhoea kit is profitable, it is very low value and so to be viable we need to stimulate high sales volumes quickly. The market for diarrhoea treatment in Zambia is estimated at between 7m and 10m treatments per year – let’s say it’s 8.5m. Up to 3m treatments are distributed by the existing public sector. That leaves 5.5m per year. Within 3 years we think we can reach 40% of this market or 2.2m. Why is this not of huge interest to our manufacturer – and indeed others? It is, but the education piece that still needs doing is beyond the resources of Pharmanova. For a low-value product like Kit Yamoyo, the return on investment (ROI) would be too slow, and too low. Yet the social ROI for a funder or social investor is huge: for every 1,000 kits sold, 3 lives are saved. So, a one-off investment to get Kit Yamoyo established in the market would save 6,600 lives per year, every year. And we have seen already how mush easier it is to educate small rural shop keepers and mothers where a desirable, affordable, easy to use product is there: a simple, practical solution to the ‘behaviour change’ that health experts want to see.

And what of the lure of ‘trialitis’? We quickly jettisoned our original idea of running several consecutive trials in different countries. It seemed obvious to us that to get impact quickly, for what is already a decade-old recommendation, what we needed to do was share findings openly – as widely and as quickly as possible, and let others take forward the learning and designs, adapted to their own country. We are surprised that so far, and in spite of interest from a range of organisations in Tanzania, Uganda, Kenya and Angola, this isn’t happening ‘by itself’. It’s going to need ColaLife to push it forward and keep the opportunity in the public eye. Active sharing is what’s needed: visits to other countries, invitations to see what’s happening in Zambia, speaking opportunities, active dissemination.

So why are we struggling to get donor support for scale-up? In spite of the rigorous evidence we’ve produced, the openness on design and findings, and our readiness to tackle the usual scale-up issues, we seem to have fallen into a funding gap. Here it is:

The scale-up funding doughnut

All donors, understandably, have their own priorities (or themes), they have their own programming schedules (timing) and places they want to work (geographies). So far, we have been unable to find a donor that is interested in ORS/Z scale-up, in Zambia, right now, despite the compelling findings of the ColaLife trial in Zambia.

We do have a funding application pending but a decision has been delayed (timing!) and we are also working on an offer, which we hope will be of interest to private social and impact investors which we will be announcing shortly.

Despite these challenges, our frontline partner, Keepers Zambia Foundation (KZF) have activity started in 10 districts (up from the 2 in the trial) and in 12 of the compounds (townships) around Lusaka and in Aug-14 Pharmanova sold the 50,000th kit. However, at the end of Sep-14 KZF had to start laying off staff in Kalomo (Southern Province) – who had done such a great job – due to a lack of funding and before Kit Yamoyo had been launched in all of the districts in the province.

We remain determined that we will raise the investment we need one way or another. As a senior development professional said to me recently: “ColaLife is the most exciting development in child health I have seen in all my time in Zambia”.