One More Look at the CHAI Playbook & Why It Matters Today

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• How CHAI’s turned leverage into lower sustainable price

  22:01

  So, let's pull this all together. CHAI was pursuing a very specific goal. The products largely existed. The job was to make them accessible through reliable supply at the lowest sustainable price. The overall sequence was simple to say but hard to do. Build buying power. Align the buyers around the same products. Use market intelligence to give the suppliers a credible view of demand. And then remove the obstacles keeping the market from working better. CHAI's three-part method was how it did that last part. Understand what the supplier's unit costs could become and negotiate from there. Remove costs and risks, both inside the factory and across the broader system. And use shuttle diplomacy to coordinate the buyers, suppliers, regulators, funders, and others whose decision determined what was possible. The sequence created leverage and credibility. The three-part method turned that leverage into lower sustainable price. Now, when it worked, suppliers would earn a reasonable return on much, much larger volumes. Buyers could treat far more people with the same budget, and patients gained access to products that had previously been out of reach. It was never simply about negotiating a discount or hammering suppliers on their margins. It was about changing the conditions that determined the price.

• The price of uncertainty

  15:32

  If a tender is complicated or delayed or uncertain, or if it comes in small purchase batches, your costs can go up. Sometimes, suppliers look at that and they just don't bid at all, especially when there's a lot of uncertainty. Now, you've got less competition and the country pays more.

• Why price isn't fixed

  24:30

  I remember getting a slap on my shoulder and turning around, and there stood John Martin, the CEO of Gilead. He said, “In a million years, I never would’ve expected that these Indian generic suppliers that you work with could make and sell the drug that we created below what our cost of making it is.” Let’s put this in perspective. The volumes that these Indian generic producers supplied to the market was smaller than what Gilead was doing at the time. And yet, they were able to make it and sell it for a profit below what the originator company Gilead’s cost of making it was. It shows what’s possible when you engage the right suppliers and appreciate that price isn’t fixed — it’s a function of the way you engage suppliers and how you structure demand.