PRESIDENT’S 

EMERGENCY PLAN 

FOR AIDS RELIEF

Drug Supply Chains 

Are Stronger, but 

More Steps Are 

Needed to Reduce 

Risks

Report to Congressional Requesters

April 2013

GAO-13-483

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-13-483, a report to 

congressional requesters

April 2013 

PRESIDENT’S EMERGENCY PLAN FOR AIDS 

RELIEF

Drug Supply Chains Are Stronger, but More Steps 

Are Needed to Reduce Risks 

ue

Why GAO Did This Study

PEPFAR, first authorized in 2003, has 

supported significant advances in 

HIV/AIDS prevention, treatment, and 

care in over 30 countries, including 

directly supporting treatment for about

5.1 million people; however, millions 

more people still need treatment. 

PEPFAR has allocated more than half 

of its funding to care and treatment and 

has spent over $1.2 billion to purchase 

ARV drugs. In addition to supplying 

ARV drugs directly in some countries, 

PEPFAR also helps partner countries 

manage their drug supply chains. GAO 

was asked to review PEPFARsupported ARV drug supply chains. 

GAO examined (1) actions PEPFAR 

has taken regarding ARV drug supply 

chains and (2) partner-country ARV 

drug supply chain operations. GAO 

reviewed PEPFAR and the U.S. 

Agency for International Development 

(USAID) guidance and supply chain 

studies; analyzed 16 supply chain 

evaluations conducted in seven

countries and published in 2011 and 

2012; interviewed officials from OGAC,

USAID, and other agencies; and 

conducted fieldwork in three countries

selected on the basis of program size 

and other factors. 

What GAO Recommends

The Secretary of State should direct 

OGAC to require country teams to (1)

develop and implement plans to help 

partner countries improve inventory 

controls and record keeping; and (2)

track the progress partner countries 

are making in measuring ARV drug 

consumption, waste, and loss. State 

generally agreed with the intent of both 

recommendations; GAO revised the

second to make it broader and more 

feasible to implement in differing 

partner-country contexts. 

What GAO Found 

The President’s Emergency Plan for AIDS Relief (PEPFAR) has worked with 

U.S. implementing agencies, international donors, and partner countries to 

increase the efficiency and reliability of antiretroviral (ARV) drug supply chains. It 

has done so by improving drug supply planning and procurement as well as incountry distribution of drugs (see figure). First, PEPFAR has consolidated supply 

chains for ARV drug procurement for more than 20 partner countries to enhance 

efficiency and reduce costs and has begun further consolidation with other U.S. 

global health programs. Second, PEPFAR has improved coordination among 

donors by creating an information-sharing network to help detect and resolve 

supply gaps and other supply chain weaknesses and by developing an 

emergency drug procurement mechanism. Third, PEPFAR has provided partner 

countries with technical assistance, such as assessment tools and training, to 

help them better manage drug supply planning, procurement, and distribution. 

Elements of PEPFAR Drug Supply Chain 

Evaluations of partner-country supply chains reflect weaknesses in inventory 

controls and record keeping, which may increase the risk of drug shortages, 

waste, and loss. The Department of State’s Office of the U.S. Global AIDS 

Coordinator (OGAC) has issued guidance for PEPFAR emphasizing the 

importance of effective information management for efficient ARV drug supply 

chain operations. However, 11 of the 16 supply chain evaluations GAO reviewed

cited weaknesses in partner countries’ inventory controls; 7 of these 11 

evaluations also cited weaknesses in record keeping, including incomplete or 

inaccurate data on the consumption of ARV drugs. These weaknesses can 

increase the risks of drug shortages, waste, and loss of inventory. In one country, 

an evaluation team identified losses valued at about $265,000. Human resource 

constraints contribute to these weaknesses, and PEPFAR is addressing them

through technical assistance and training. However, OGAC does not require 

PEPFAR interagency teams in each country to develop plans to strengthen 

inventory controls and record keeping. Nor does OGAC require country teams to 

track the progress partner countries are making in measuring ARV drug 

consumption, waste, and loss. Thus, OGAC cannot ascertain the extent of 

partner-country supply chain weaknesses and take appropriate action to mitigate 

risks. For PEPFAR and partner countries to continue expanding treatment 

programs to serve up to 23 million eligible people, further improving drug supply 

chains is critical, particularly the efficiency of elements managed by partner 

countries. These improvements will become increasingly important as partner 

countries assume more responsibility for managing supply chains. 

View GAO-13-483. For more information, 

contact David Gootnick at (202) 512-3149 or 

gootnickd@gao.gov, or Marcia Crosse at 

(202) 512-7114 or crossem@gao.gov. 
Page i GAO-13-483 PEPFAR Supply Chains

Letter 1 

Background 4

PEPFAR Has Taken Steps to Strengthen ARV Drug Supply Chains 7

Information Management Weaknesses in Some Partner Countries’ 

ARV Drug Supply Chains Pose Risks of Shortages, Waste, and 

Loss 12

Conclusions 19

Recommendations for Executive Action 20

Agency Comments and Our Evaluation 20

Appendix I Objectives, Scope, and Methodology 24

Appendix II Comments from the Department of State 27

Appendix III GAO Contacts and Staff Acknowledgments 32

Related GAO Products 33

Figure

Figure 1: Elements of a Health Care Drug Supply Chain 6

Contents 
Page ii GAO-13-483 PEPFAR Supply Chains

Abbreviations

2008 Leadership Act Tom Lantos and Henry J. Hyde United States 

 Global Leadership Against HIV/AIDS, 

 Tuberculosis, and Malaria Reauthorization Act of

 2008

AIDS acquired immunodeficiency syndrome

ARV antiretroviral

CDC Centers for Disease Control and Prevention

DELIVER USAID DELIVER PROJECT

Global Fund Global Fund to Fight AIDS, Tuberculosis and 

 Malaria

HHS Department of Health and Human Services

HIV human immunodeficiency virus

NGO nongovernmental organization

OGAC Office of the U.S. Global AIDS Coordinator

PEPFAR President’s Emergency Plan for AIDS Relief

State Department of State

SCMS Supply Chain Management System

USAID U.S. Agency for International Development

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-13-483 PEPFAR Supply Chains

United States Government Accountability Office

Washington, DC 20548

April 26, 2013 

Congressional Requesters:

Now nearing the end of its second 5-year authorization,1 the President’s 

Emergency Plan for AIDS Relief (PEPFAR) has made significant 

contributions to international treatment goals for HIV/AIDS.2 As of 

September 2012, the Department of State’s (State) Office of the U.S. 

Global AIDS Coordinator (OGAC) reported that PEPFAR’s multibillion 

dollar investments in partner countries’ programs had provided treatment 

for about 5.1 million people, more than half of all individuals enrolled in 

treatment in low- and middle-income countries.3 As part of this 

assistance, PEPFAR purchased over $1.2 billion in antiretroviral (ARV) 

drugs during fiscal years 2005 through 2011 to treat people living with 

HIV. OGAC is leading PEPFAR’s shift from an emergency program 

primarily providing direct treatment to one that increasingly supports 

partner countries’ capacity to manage their treatment programs. In 

passing the Tom Lantos and Henry J. Hyde United States Global 

Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization 

Act of 2008 (2008 Leadership Act), Congress directed OGAC to continue 

to expand the number of people receiving HIV care and treatment support 

while also making it a major policy goal to build partner-country capacity 

to deliver services and promote a transition toward greater sustainability 

of country-owned HIV/AIDS programs.4 On the basis of recent 

international guidelines, an estimated 15 million people in low- and 

middle-income countries are eligible for ARV treatment. Moreover, 23 

million would be eligible if programs expanded eligibility to include groups 

such as all pregnant and breastfeeding women and certain high-risk 

 

1

Congress first authorized PEPFAR in 2003. See United States Leadership Against 

HIV/AIDS, Tuberculosis, and Malaria Act of 2003, Pub. L. No. 108-25, 117 Stat. 711; and 

Tom Lantos and Henry J. Hyde United States Global Leadership Against HIV/AIDS, 

Tuberculosis, and Malaria Reauthorization Act of 2008, Pub. L. No. 110-293, 122 Stat. 

2918.

2

In this report, “treatment” refers to the services delivered to HIV-positive individuals who 

are receiving antiretroviral (ARV) drugs. 

3

The ARV drugs used to treat these people were paid for by PEPFAR, other donors, and 

partner-country governments.

4

Pub. L. No. 110-293, §§ 301 and 403.

 
 

Page 2 GAO-13-483 PEPFAR Supply Chains

populations, consistent with recommendations in recent updates to World 

Health Organization guidelines.5

In the House committee report on the 2008 Leadership Act, Congress 

directed OGAC to work with others6 to develop effective, reliable publicsector drug supply chain management systems owned and operated by 

partner countries and to provide ongoing technical assistance and 

sustained support to ensure the functioning of such systems.7 In addition 

to helping partner countries develop and manage their own supply chains 

for ARV drugs and other health care commodities,8 PEPFAR supplies 

ARV drugs directly in some countries through supply chains operated by 

contractors. PEPFAR’s efforts to develop and augment partner countries’ 

supply chain systems are critical to support continued progress in the 

fight against HIV/AIDS because inadequate or poorly functioning supply 

chains pose risks to individual as well as to public health outcomes. 

Patients on treatment receive daily doses of ARV drugs on a continuing, 

lifelong basis. Skipped doses due to gaps in supply and expired or 

otherwise unusable ARV drugs can lead to ineffective treatment and 

increased viral resistance, necessitating newer, more expensive drugs. 

Inefficient supply chains can also waste scarce public health resources. 

For example, overstocking of drugs can lead to waste as drugs expire 

and can no longer be used, potentially resulting in fewer patients 

receiving treatment.

 

5

For a broader description of the guidelines for treatment eligibility, see World Health 

Organization, The Strategic Use of Antiretrovirals to Help End the HIV Epidemic (Geneva, 

Switzerland: 2012).

6

These include the Partnership for Supply Chain Management Systems (an association of 

entities with supply chain expertise), PEPFAR partner countries, and nongovernmental 

organizations.

7

The report also directed OGAC to provide technical assistance and sustained support to 

ensure the functioning of existing supply chains operated by nonpublic-sector entities, 

including humanitarian and faith-based organizations. Committee on Foreign Affairs, 

Leadership Act of 2008, H.R. Rep. No. 110-546, Part 1, at 54 (2008) (Supp. Rep.). 

8

For the purposes of this report, “supply chains” refers specifically to those that supply 

ARV drugs and other health care commodities needed by treatment programs. In some 

cases, these commodities flow through supply chains providing a wide range of health 

care commodities, and in other cases, they flow through supply chains dedicated 

exclusively to HIV programs.
 

Page 3 GAO-13-483 PEPFAR Supply Chains

You asked us to review HIV/AIDS treatment programs supported through 

PEPFAR. This is the last of three reports responding to your request.9 In 

this report, we examine (1) actions PEPFAR has taken regarding ARV 

drug supply chains and (2) partner-country ARV drug supply chain 

operations.

To address these objectives, we reviewed reports and guidance issued 

by PEPFAR and its partners, including PEPFAR country and regional 

operational plans for fiscal year 2012. We analyzed nine U.S. government 

global health supply chain studies and identified six key elements and 

three supporting processes of effectively functioning supply chains. We 

used these elements to conduct a content analysis of 16 evaluations 

relevant to PEPFAR-supported supply chains. To identify these 16 

evaluations, we reviewed 68 evaluations and selected the most recent, 

those published in 2011 and 2012, which cover seven countries 

supported by PEPFAR.10 We also compared the actions taken by 

PEPFAR to the performance metrics and supply chain best practices 

identified in U.S. Agency for International Development (USAID) reports. 

We reviewed agreements between PEPFAR and partner-country 

governments, including partnership framework agreements between the 

United States and 22 PEPFAR partner countries or regions.11 In addition, 

we conducted fieldwork in three PEPFAR partner countries—Kenya, 

South Africa, and Uganda—in June 2012 to obtain information about the 

management of partner-country supply chains and efforts taken to 

improve them. The results of our fieldwork cannot be generalized to all 

 

9

The other reports are GAO, President’s Emergency Plan for AIDS Relief: Per-Patient 

Costs Have Declined Substantially, but Better Cost Data Would Help Efforts to Expand 

Treatment, GAO-13-345 (Washington, D.C.: Mar. 15, 2013) and GAO, President’s 

Emergency Plan for AIDS Relief: Shift toward Partner-Country Treatment Programs Will 

Require Better Information on Results, GAO-13-460 (Washington, D.C.: Apr. 12, 2013. 

10These seven countries are China, Côte d’Ivoire, Kenya, Mozambique, South Africa, 

Uganda, and Zambia.

11The 2008 Leadership Act authorized but did not require the U.S. government to 

establish partnership frameworks with host countries to promote a more sustainable 

approach to combating HIV/AIDS, characterized by strengthened country capacity, 

ownership, and leadership. As of February 2013, partnership frameworks had been signed 

with the following 22 partner countries and regions: Angola, Botswana, the Caribbean 

region, the Central American region, the Democratic Republic of the Congo, the 

Dominican Republic, Ethiopia, Ghana, Haiti, Kenya, Lesotho, Malawi, Mozambique, 

Namibia, Nigeria, Rwanda, South Africa, Swaziland, Tanzania, Ukraine, Vietnam, and 

Zambia.
 

Page 4 GAO-13-483 PEPFAR Supply Chains

PEPFAR partner countries but provided insights into various aspects of 

specific supply chain operations. We selected these countries based on 

PEPFAR budget and spending allocations, disease burden estimates, 

and PEPFAR’s role in procurement of treatment commodities and supply 

chain management. We interviewed representatives of the contractor that 

manages the bulk of PEPFAR’s ARV drug procurement, and PEPFAR 

officials from OGAC, the Centers for Disease Control and Prevention 

(CDC) of the Department of Health and Human Services (HHS), and 

USAID. For additional details on our scope and methodology, see 

appendix I. 

We conducted this performance audit from May 2012 to April 2013 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe the 

evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

OGAC sets overall PEPFAR policy and strategies and coordinates 

PEPFAR programs and activities, allocating funds to PEPFAR 

implementing agencies, primarily CDC and USAID.

12 As of fiscal year 

2012, these agencies executed PEPFAR program activities through 

agency headquarters offices and interagency country and regional 

teams13 in more than 30 countries and regions with PEPFAR-funded 

programs.14 OGAC coordinates the activities of these country teams 

 

12Other PEPFAR implementing agencies are the Departments of State, Defense, Labor, 

and Commerce, and the Peace Corps. Additional HHS offices and agencies involved in 

PEPFAR implementation are the Office of Global Affairs, the Food and Drug 

Administration, the Health Resources and Services Administration, the National Institutes 

of Health, and the Substance Abuse and Mental Health Services Administration.

13For the purposes of this report, we refer to PEPFAR country and regional teams and 

their implementing partners collectively as “PEPFAR country teams.” 

14This includes the three regions and 33 countries that submitted PEPFAR annual 

operational plans or performance reports for fiscal year 2012. The 33 countries were 

Angola, Botswana, Burundi, Cambodia, Cameroon, China, Côte d’Ivoire, the Democratic 

Republic of the Congo, the Dominican Republic, Ethiopia, Ghana, Guyana, Haiti, India, 

Indonesia, Kenya, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Russia, Rwanda, 

South Africa, South Sudan, Swaziland, Tanzania, Thailand, Uganda, Ukraine, Vietnam, 

Zambia, and Zimbabwe. The three regions were the Caribbean, Central America, and 

Central Asia.

Background 
 

Page 5 GAO-13-483 PEPFAR Supply Chains

through its approval of operational plans,15 which document work plans, 

budgets, and the anticipated results of HIV/AIDS-related programs. 

OGAC provides annual guidance on how to develop and submit 

operational plans. In fiscal years 2009 through 2012, OGAC approved 

country operational plan budgets totaling over $16 billion.

USAID and CDC obligate the majority of PEPFAR funds through grants, 

cooperative agreements, and contracts with implementing partners, such 

as U.S.-based nongovernmental organizations (NGO) and partnercountry governmental organizations and NGOs. With regard to supply 

chains for treatment programs, USAID and CDC typically provide 

assistance in different ways. USAID purchases the majority of ARV drugs 

and is the primary funder of supply chain services to partner countries 

through centralized contracts with large international NGOs, for-profit 

development assistance firms, and NGOs in partner countries. CDC 

provides funding to purchase ARV drugs and related commodities,

including laboratory equipment and test kits, through cooperative 

agreements. Both USAID and CDC provide technical assistance to 

partner countries to support supply chain management.

Health care drug supply chains involve the following six key elements 

(see fig. 1):

• product selection: selecting drugs based on national treatment 

guidelines and approval;

• forecasting and supply planning: estimating the quantity of drugs 

needed to ensure an uninterrupted supply;

• procurement: contracting with suppliers to obtain drugs within 

agreed-upon production and delivery time frames and costs, including 

freight;

• warehousing: maintaining appropriate security and environmental 

conditions (e.g., temperature and humidity);

• inventory management: monitoring for shortages and waste due to 

expired products, keeping accurate records of available and 

anticipated stock, and preparing orders for distribution; and

• distribution: managing the flow of drugs from the point of production 

to the end user for consumption (i.e., facilities where the drugs are 

dispensed to patients).

 

15Thirty-five of the 36 PEPFAR country teams submitted operational plans for fiscal year 

2012.
 

Page 6 GAO-13-483 PEPFAR Supply Chains

Figure 1: Elements of a Health Care Drug Supply Chain

All or most of these six elements involve the following three processes:

• information management: generating and analyzing the data 

needed to manage the supply chain from both a cost and service 

standpoint (for example, gathering consumption and inventory data to 

determine how much of a drug to order);
 

Page 7 GAO-13-483 PEPFAR Supply Chains

• human resource management: training and supervising staff 

responsible for placing orders, monitoring stock, and providing drugs 

to patients, and ensuring that key positions are filled; and

• quality assurance: ensuring that drugs are approved for use in a 

partner country, meet certain standards, undergo testing, and are 

monitored as they move through the supply chain.

PEPFAR has taken three key steps to make ARV supply chains for 

treatment programs more efficient and reliable for all PEPFAR partner 

countries. First, PEPFAR and USAID have consolidated supply chains for 

PEPFAR’s ARV drug procurement, enhancing efficiency and reducing 

operational costs. Second, PEPFAR has improved donor coordination by 

creating a network to facilitate information sharing and by developing an 

emergency procurement mechanism. Third, PEPFAR has provided 

partner countries with technical assistance, such as assessment tools 

and training, to help strengthen their supply chains and manage them 

more effectively.

PEPFAR has consolidated supply chains for ARV drugs across partner 

countries to increase the efficiency of ARV drug procurement and 

shipping. In 2005, USAID contracted with the Partnership for Supply 

Chain Management, a nonprofit consortium of over a dozen 

organizations, to create the Supply Chain Management System (SCMS) 

project, which pools procurement across more than 20 partner countries 

on a voluntary basis. According to USAID, this central procurement 

system provides those countries having less procurement capacity and 

smaller markets with the opportunity to benefit from the lower prices and 

consistent supply associated with bulk purchases. SCMS consolidated 

forecasts and established long-term supplier contracts to obtain favorable 

pricing and delivery conditions. SCMS has provided HIV/AIDS treatment 

supply chain services for PEPFAR-supported programs, procuring and 

distributing $1.43 billion in HIV/AIDS-related products, including $858 

million in ARV drugs, as of March 31, 2013, according to USAID; these 

products include 74 percent of the ARV drugs purchased using PEPFAR 

funding in fiscal year 2012.

In addition, USAID has taken initial steps to consolidate supply chains for 

PEPFAR with USAID’s other global health programs to reduce overall 

PEPFAR Has Taken 

Steps to Strengthen 

ARV Drug Supply 

Chains 

PEPFAR Has Consolidated 

Supply Chains for ARV 

Drug Procurement
 

Page 8 GAO-13-483 PEPFAR Supply Chains

management time and operational costs. These steps include reviewing 

its current supply chains and developing a consolidation proposal.16

Specifically, USAID announced in June 2012 a plan to offer a new, 

consolidated contract that is to combine supply chains managed by 

SCMS with those managed by the USAID DELIVER PROJECT 

(DELIVER), which works with over 20 national and international 

organizations to procure non-ARV health care commodities, such as 

condoms, for PEPFAR and other USAID health programs.17 According to 

USAID, consolidating these supply chains will help ensure an 

uninterrupted supply of health commodities for PEPFAR and the other 

programs, reduce costs to the U.S. government, and mitigate risk through 

collaborative strategies that will include forecasting, warehousing, and 

distribution.

PEPFAR has also coordinated with other donors to improve those 

elements of the supply chain that operate within the control of partner 

countries. In particular, it has developed an information-sharing network 

and established an emergency procurement mechanism. 

• Information-sharing network. In June 2006, PEPFAR developed an 

information-sharing network with the Global Fund to Fight AIDS, 

Tuberculosis and Malaria (Global Fund) and the World Bank called 

the Coordinated Procurement Planning Initiative. Since then, other 

key organizations, including OGAC, USAID, the Global Fund, three

UN entities, and two NGOs,18 have used the network to identify and 

address ARV drug supply chain weaknesses. SCMS facilitates 

information sharing within the network. The network has taken a 

number of steps to improve supply forecasting and procurement to 

support the availability of ARV drugs and other health care 

 

16Global Health Technical Assistance Project, USAID Supply Chain Architecture Expert 

Review (Washington, D.C.: April 2011).

17In addition to PEPFAR, the combined supply chains will incorporate three other U.S. 

global health programs: Population and Reproductive Health, Avian Influenza and 

Pandemic Response, and the President’s Malaria Initiative. 

18The three UN entities are the Joint United Nations Programme on HIV/AIDS, the United 

Nations Children’s Fund, and the World Health Organization. The two NGOs are the 

Clinton Health Access Initiative and UNITAID, a global health organization that seeks to 

provide greater access to treatments and diagnostics for HIV/AIDS, malaria, and 

tuberculosis in low-income countries. 

PEPFAR Has Improved 

Coordination of ARV 

Procurement with Other 

Donors 
 

Page 9 GAO-13-483 PEPFAR Supply Chains

commodities needed by HIV/AIDS patients. For example, network 

members have met quarterly to discuss potential gaps in delivery of 

ARV drugs and solutions to these gaps, including emergency 

disbursement of funds to procure drugs and avoid shortages. In 

addition, the network developed tools that alert key donors to 

treatment interruption crises and enable members to share best 

practices regarding potential approaches to address and mitigate 

these crises.

• Emergency procurement mechanism. In 2010, PEPFAR established a 

funding mechanism called the Emergency Commodity Fund, whose 

primary aim has been supporting emergency purchases of ARV drugs 

when threats arise to the continuity of patient treatment or critical 

prevention programs. According to USAID, this funding mechanism 

has been used to assist five countries with emergency ARV 

procurement when they faced problems with Global Fund grants.19

PEPFAR country operational plans for fiscal year 2012 reported that 

six other countries came close to experiencing shortages of ARV 

drugs and other HIV-related commodities due to Global Fund delays. 

For example, the Democratic Republic of Congo’s ministry of health 

requested that the U.S. government ensure a buffer stock of ARV 

drugs because the Global Fund, which was the source of a majority of 

the country’s commodities, had become slow in processing grants and 

was experiencing difficulties forecasting drug supply and keeping ARV 

drugs in stock. PEPFAR has also provided technical assistance to the 

Global Fund to improve its procurement system, with the goal of 

reducing the need for further emergency support from PEPFAR. 

According to USAID officials, in September 2012, PEPFAR helped the 

Global Fund develop a proposal for its own emergency procurement 

mechanism. As of March 2013, the Global Fund had not notified 

PEPFAR whether it had established this mechanism.

As partner countries assume greater responsibility for managing supply 

chains, PEPFAR is moving from a direct supply role to a more advisory 

role. PEPFAR’s long-term aim is to develop effective, reliable partnercountry-owned and -operated supply chain systems at the national, 

 

19As of March 2013, PEPFAR had approved funding requests for 11 countries. According 

to OGAC, it is not uncommon to address initial requests for funding without resorting to 

the emergency funding mechanism, for example, by moving up already scheduled SCMS 

orders or expediting orders funded by other donors. 

PEPFAR Helps Partner 

Countries Improve Their 

Supply Chains
 

Page 10 GAO-13-483 PEPFAR Supply Chains

regional, district, and local levels. At present, PEPFAR’s role in 

supporting partner-country HIV program supply chains ranges from direct 

control of major supply chains to providing training and technical 

assistance. PEPFAR generally relinquishes control of the ARV drugs 

once they reach a partner country’s central warehouse; from that point 

on, partner countries are responsible for ensuring that the drugs reach 

patients.

PEPFAR determines the level and type of supply chain assistance 

primarily on the basis of each country’s treatment program and supply 

chain capacity and the state of its HIV epidemic. For example, in some 

countries, PEPFAR may directly procure almost all ARV drugs and 

centrally control supply chains through an implementing partner such as 

SCMS. In other countries, PEPFAR may provide no procurement support 

for ARV drugs and only training and technical assistance for specific 

elements of the partner country’s supply chains, which carry out all supply 

chain functions with funding from PEPFAR, other donors, and/or the 

partner-country government.

PEPFAR country teams provide technical assistance to support public 

and private drug supply chains for medical supplies, including USAIDpurchased commodities. This assistance includes tools to assess supply 

chains and identify any weaknesses, and other types of training and 

advice.

USAID and its implementing partners have developed and begun 

implementing tools for identifying any needed improvements in partner 

countries’ supply chains. The following are examples of two such tools:

• The Supply Chain Capability Maturity Model is used to identify 

performance problems by rating each element of a supply chain 

against best practices. The tool also helps identify and prioritize areas 

in need of strengthening and provides a method for tracking progress. 

In 2012, USAID piloted the Supply Chain Capability Maturity Model in 

three countries—Botswana, Paraguay, and South Africa—and used it 

to assess their supply chains. In addition, USAID used the tool to 

recommend targeted solutions in South Africa.

• The Supply Logistics Internal Control Evaluation was developed to 

assess the effectiveness of internal controls to mitigate supply chain 

Supply Chain Assessment Tools
 

Page 11 GAO-13-483 PEPFAR Supply Chains

risk in each element of the supply chain in countries across subSaharan Africa.20 This tool generates a series of score cards 

representing the estimated risk in a system and identifying strengths 

and weaknesses. Beginning in 2011, this tool was piloted in several 

countries, including Benin, Mozambique, and Zambia. 

PEPFAR also provides other training and advice to help partner countries 

strengthen their supply chains, such as audit checklists to improve supply 

chain management and training in how to use them, warehousing 

assistance, and stakeholder coordination to help partner countries identify 

workable solutions to supply chain problems. For example, in Nigeria, 

PEPFAR’s fiscal year 2012 plan includes organizing and hosting a 

workshop with multiple stakeholders to assist the government in 

identifying private-sector warehouse operators that could operate a new 

central warehouse with the capacity to serve the country’s treatment 

program.21

In all three partner countries we visited, PEPFAR has taken steps through 

its technical assistance to increase efficiencies by strengthening specific 

steps in the supply chain process.

• In South Africa, PEPFAR, through SCMS, helped the government 

institute procurement reforms that enabled it to cut in half the prices it 

pays for ARV drugs. Although South Africa was the largest single 

market for these drugs, it had been consistently paying prices well 

above the international standard.22

• In Uganda, USAID reports that the country team has helped the 

Ugandan government and local NGOs successfully implement a 

simplified distribution network by streamlining the supply chain to 

create clear lines of responsibility and accountability. Previously, there 

were more than four ARV drug supply chains serving three types of 

facilities from three separate warehouses, and some facilities received 

 

20The team that developed the tool and conducted assessments with it was contracted 

jointly by USAID and the Global Fund.

21According to the plan, the Nigerian government could not operate a reliable, secure, and 

adequately resourced central commodity warehouse, but the government was willing to 

work with the private sector. 

22With more than 1.7 million people estimated to be on ARV treatment at the end of 2011, 

South Africa represents more than one-fifth of the total world demand for ARV drugs. 

Other Assistance
 

Page 12 GAO-13-483 PEPFAR Supply Chains

supplies from more than one supply chain. USAID reported that these 

overlapping supply chains involved duplication of efforts and led to 

confusion in ordering and reporting. In addition, PEPFAR is 

supporting the national rollout of a new web-based ARV bimonthly 

reporting and ordering system, whose purpose will be to enable 

stakeholders to track the status of ARV supplies in all treatment sites 

and provide early warning of shortages to authorities at the central 

level. 

• In Kenya, the country team has helped the national government 

establish clear and consistent distribution lines from the two central 

entities that procure ARV drugs and create a system whereby stock 

can be shifted at the central level to avoid supply gaps.

OGAC guidance stresses that effective information management is 

essential for the efficient operation of ARV drug supply chains. However, 

11 of the 16 evaluations of partner-country supply chains that we 

reviewed identified weaknesses in inventory controls;23 7 of these 11 

evaluations also cited weaknesses in record keeping, including missing or 

inaccurate drug consumption data.24 These weaknesses may increase 

the risks of shortages, waste, and loss.25 Human resource constraints 

contribute to these weaknesses, and PEPFAR is making efforts to 

address them over the long term. OGAC operational plan guidance calls 

on PEPFAR country teams to describe plans to assist their respective 

partner countries in developing effective and sustainable treatment 

programs. However, this guidance does not specifically require country 

teams to develop plans to strengthen partner countries’ inventory controls 

and record keeping that adversely affect the availability of reliable data on 

drug consumption, waste, and loss. In addition, because OGAC does not 

require country teams to monitor partner countries’ progress in measuring 

ARV drug consumption, waste, and loss, OGAC may not be able to 

 

23These 11 evaluations include all seven countries represented in the evaluations we 

reviewed.

24These seven evaluations include all seven countries represented in the evaluations we 

reviewed. 

25According to supply chain guidance and evaluations we reviewed, “shortage” is defined 

as insufficient inventory to meet demand; “waste,” as expired or damaged inventory; and 

“loss,” as unaccounted for inventory that could be lost to diversion or theft between the 

point of entry in the country and the end user. 

Information 

Management 

Weaknesses in Some 

Partner Countries’ 

ARV Drug Supply 

Chains Pose Risks of 

Shortages, Waste, and 

Loss 
 

Page 13 GAO-13-483 PEPFAR Supply Chains

reliably ascertain the extent to which supply chains in partner countries 

are affected by shortages, waste, and loss and take appropriate action to 

mitigate these risks.

PEPFAR guidance directs country teams to assess the extent to which 

partner countries experience shortages of drugs and report steps the 

teams take to address this problem.26 OGAC’s Next Generation Indicators 

Reference Guide recommends that country teams track the percentage of 

ARV distribution sites that report on inventory consumption, quality, 

losses, and adjustments on a monthly basis.27 Several U.S. and partnercountry officials and implementing partners we spoke with agreed that 

drug consumption data, particularly at the health facility level, are 

essential for ascertaining and meeting demand. Two implementing 

partners involved in managing health care commodities also noted the 

importance of record keeping for avoiding wasted or lost drugs.28

 

26PEPFAR, Fiscal Year 2012 Country Operational Plan Guidance Appendices 

(Washington, D.C., 2011) and PEPFAR, Fiscal Year 2013 Country Operational Plan 

Guidance Appendices (Washington, D.C., 2012). In addition, the House Committee 

Report on the 2008 Leadership Act stated that one activity supported by PEPFAR is 

technical assistance to establish data management systems that are meant to ensure data 

quality and strengthen data reporting, especially in new partner countries where 

experience managing U.S. foreign assistance programs may be lacking. Committee on 

Foreign Affairs, Leadership Act of 2008, H.R. Rep. No. 110-546, Part 2, at 65 (2008) 

(Supp. Rep.). 

27Office of the U.S. Global AIDS Coordinator, The President’s Emergency Plan for AIDS 

Relief, Next Generation Indicators Reference Guide: Planning and Reporting, Version 1.1 

(August 2009), accessed March 20, 2013, 

http://www.pepfar.gov/documents/organization/81097.pdf. The guidance went into effect 

for the fiscal year 2010 planning and reporting cycle and was updated in February 2013.

28Supply chain guidance documents we reviewed cited information management as a key 

crosscutting process supporting supply chain management. According to guidance issued 

by a major USAID health commodity supply chain contractor, whenever possible, planning 

for future supply should be based on consumption data—which the contractor defines as 

the quantities of a product actually put in the hands of a customer—to ensure sufficient 

supply and avoid oversupply. The guidance emphasizes the importance of collecting 

information nearer the end-point of the supply chain. Specifically, tracking supplies as they 

move from district warehouses to health facilities, or from facility storage rooms to 

dispensaries, will better reflect customer demand than information related to supplies 

moved from a central warehouse to the districts. See USAID | DELIVER PROJECT, The 

Logistics Handbook: A Practical Guide for the Supply Chain Management of Health 

Commodities, 2nd ed. (Arlington, Va.: John Snow, Inc., 2011). 

Information Management 

Is Critical to Ensuring 

Efficient ARV Drug Supply 

Chains 
 

Page 14 GAO-13-483 PEPFAR Supply Chains

In two of the partner countries we visited, good record keeping, 

particularly the collection of reliable consumption data, led to increased 

efficiency. For example, in South Africa, a USAID initiative to monitor the 

consumption of ARV drugs at storage sites and health facilities reduced 

shortages of ARV drugs over a 2-year period and enabled health facilities 

to identify and cancel excess orders.29 In Kenya, a USAID official 

responsible for HIV/AIDS programs reported that PEPFAR had improved 

inventory management and consumption monitoring for PEPFAR- and 

country-managed supply chains. According to the official, PEPFAR 

coordinated information sharing at the national level and across major 

facilities to identify and resolve supply chain issues, virtually eliminating 

ARV drug shortages.

From our review of 16 supply chain evaluations conducted in seven 

PEPFAR partner countries since 2011, we identified inadequate inventory 

controls for monitoring drug supply, as well as missing or inaccurate 

record keeping, as key weaknesses in ARV drug supply chains controlled 

by partner countries. These weaknesses can increase the risks of drug 

shortages, waste, and loss. 

Eleven of the 16 supply chain evaluations we reviewed found that partner 

countries had inadequate inventory controls to prevent shortages, waste, 

and loss of ARV drugs.30 For example, an evaluation of Côte d’Ivoire’s 

supply chain indicated that inadequate supervision of drug transfers 

among treatment facilities and other inventory control weaknesses 

resulted in significant amounts of medication that could not be accounted 

for and were not available to intended beneficiaries. In another example, 

 

29According to a high-level USAID official in South Africa, the agency paid for a team of 

pharmacists to monitor and report on the status and consumption of ARV and tuberculosis 

drugs at provincial storage depots and health facilities. The team implemented a national 

database on the availability of drugs in stock, which allowed it to identify consumption 

patterns. Decisions could then be taken to plan procurement and redistribute drugs among 

the depots and health facilities as needed to avoid shortages. USAID reported that 

shortages of ARV drugs in South Africa decreased from 12 percent of the total volume of 

ARV drugs procured by SCMS countrywide in January 2010, when monitoring first started, 

to 2.4 percent in December 2011, when the assistance ended. The monitors also enabled 

the cancellation of unnecessary backorders by health institutions—a hoarding practice 

that SCMS had previously identified as an attempt to avoid shortages. The South African 

government has now taken over the funding for these monitoring positions.

30These 11 evaluations include all seven countries represented in the evaluations we 

reviewed. 

Inadequate Inventory 

Controls and Record 

Keeping in Some PartnerCountry Supply Chains 

May Increase the Risks of 

Shortages, Waste, and Loss
 

Page 15 GAO-13-483 PEPFAR Supply Chains

an evaluation team in Zambia found a lack of adequate inventory controls 

at all levels of the drug supply chain. The team was unable to rely on 

documentation at the facilities and had to conduct a physical count to 

determine the status of facilities’ drug inventories. The team identified 

ARV drug losses totaling about $265,000, or nearly 9 percent (by value) 

of the total ARV drug stock at the facilities the team visited;

31 the loss 

calculation covered a 15-month period from January 2011 to March 2012. 

Lacking basic inventory control tools and procedures, these facilities ran 

the risk of not knowing whether the drugs had been dispensed to patients 

or distributed to other storage sites, or if they were inventory losses. 

Seven of these 11 supply chain evaluations we reviewed also indicated 

that some treatment facilities where drugs are dispensed had missing or 

inaccurate records.32 As a result, these facilities had difficulty forecasting 

their drug needs, ensuring that the drugs ordered would be sufficient to 

meet demand, or knowing what drugs were lost to theft or inadvertent 

waste. Three of these evaluations specifically mentioned a lack of 

accurate consumption data. For example, an evaluation of supply chains 

in Mozambique indicated that facility-level pharmacies had no monitoring

or reconciliation of ARV drugs once they left the storage shelf; thus, there 

were no controls to ensure that the ARV drugs arrived at the dispensing 

table or were administered to the patient. The Mozambique evaluation 

team could not reconcile ARV drug consumption data with prescriptions 

at facility-level pharmacies. The Mozambique evaluation also indicated 

that procedures for characterizing the unit of drugs dispensed were not 

always standardized across facilities: some facilities tracked ARV drugs 

as pills, while others tracked them as bottles. Inconsistent units make it 

more difficult to collect consumption data and may cause errors in 

determining the quantity of new drugs to be ordered. An evaluation report 

on Kenya’s public health supply chain indicated that more than half the 

treatment sites visited by evaluators did not maintain or update stock 

cards for ARV drugs. This made it difficult for the facilities to know what 

new drugs to order and increased the risk of undetected loss or theft.

 

31The sample of facilities reviewed in this evaluation is not generalizable to all facilities in 

Zambia. 

32These seven evaluations include all seven countries represented in the evaluations we 

reviewed.
 

Page 16 GAO-13-483 PEPFAR Supply Chains

Eight of the 16 country supply chain evaluations we reviewed cited 

human resource constraints as contributing to weaknesses in inventory 

controls and record keeping at health facilities, storage sites, or both.33

For example, heavy workload, inadequate training, and insufficient 

oversight may have led to poor performance by staff responsible for 

inventory control and record keeping, and in at least one country, their 

fear of shortages may have led to hoarding of drugs.34 Furthermore, poor 

compensation and working conditions may have led to absenteeism, 

turnover, and pilferage.

Ten of the 35 fiscal year 2012 PEPFAR country and regional operational 

plans also identify human resource constraints that may contribute to 

inventory control and record keeping weaknesses, including, for example, 

a lack of qualified staff and difficulty retaining and motivating such staff 

because of heavy workloads and low salaries. In Côte d’Ivoire, for 

example, the PEPFAR country team reported that even trained 

pharmacists lacked basic skills in and understanding of supply chain 

management and logistics issues. As a result, they were often reluctant to 

fill out all the paper-based data collection sheets, registers, and other 

forms that were fundamental tools for tracking drug consumption in that 

country. 

Weaknesses in data systems can exacerbate human resource constraints 

and contribute to unreliable information at some treatment facilities. For 

example, according to a USAID official in Kenya, some rural facilities do 

not have electronic data collection systems or even a stable electricity 

supply and must therefore rely on paper-based systems. Such systems 

can be labor intensive to maintain and prone to error. In addition, a 

representative of an implementing partner in South Africa with whom we 

spoke noted that there can be significant data quality issues in paper 

records, particularly for facilities that are using paper records while trying 

to provide treatment to large volumes of patients and as changes in 

treatment guidelines expand the number of patients eligible for treatment. 

In at least one instance, according to an evaluation we reviewed, a 

 

33These eight evaluations include six of the seven countries represented in the 

evaluations we reviewed.

34An evaluation in Uganda found that health workers were fearful of not having sufficient 

drugs on hand when government health officials came to visit. Thus, they withheld drugs 

from patients to ensure a ready supply of drugs, for show, should the officials inspect their 

facilities.

Human Resource 

Constraints Contribute to 

Some Partner-Country 

Supply Chain Weaknesses
 

Page 17 GAO-13-483 PEPFAR Supply Chains

computerized information system was not well integrated into the recordkeeping process, and this resulted in errors. Addressing these errors can 

add to staff workload. 

PEPFAR’s ongoing training initiatives and technical assistance efforts 

have begun to address some of these human resource challenges. For 

example, the supply chain assessment tools are being used to help 

identify and address supply chain weaknesses, including inventory control 

and record-keeping weaknesses, in the countries where they are being 

piloted. An SCMS official implementing the Supply Chain Capability 

Maturity Model in South Africa stated that part of the process is getting 

staff and managers to understand that the information generated by the 

tasks they perform is important for managing their supply chain; the 

official said that this is because the information feeds into or flows from 

what their colleagues do, and there are consequences (e.g., shortages) if 

information management tasks are not performed properly. Expanding 

the application of these supply chain assessment tools to additional 

countries will take several years, according to OGAC officials. The 

evaluations and country operational plans we reviewed identify various 

other training and recruitment efforts to address human resource 

constraints in supply chain management. Several of the evaluations and 

operational plans also cite efforts to make data collection and sharing 

more efficient by enhancing automation or moving to Internet-based 

information management systems. According to a USAID official, the 

training and technical assistance under way are long-term efforts, whose 

results will not begin to be apparent for at least 5 years.
 

Page 18 GAO-13-483 PEPFAR Supply Chains

Although 11 of the 16 evaluations we reviewed highlight the risks of drug 

shortages, waste, and loss due to inadequate inventory controls,35 OGAC 

has not taken all of the steps in a risk management framework that are 

important for mitigating such risks.36 In particular, it has not required 

country teams to develop a plan for mitigating all of these risks or to track 

progress in mitigating them. 

OGAC country operational plan guidance calls on PEPFAR country 

teams to describe plans to assist their respective countries in developing 

effective and sustainable treatment programs. OGAC has generally 

instructed teams to promote the development of national HIV supply 

plans and strengthen partner countries’ ability to forecast, procure, 

manage, and distribute HIV-related commodities. However, OGAC does 

not specifically require country teams that support partner-country supply 

chains to develop and implement plans to strengthen partner countries’ 

inventory controls and record keeping to reduce the risks of shortages, 

waste, and loss in ARV drug supply chains. We reviewed country 

operational plans for the seven countries covered by the evaluations we 

analyzed and found that most of these documents discussed plans for 

improving inventory controls and record keeping to help countries reduce 

the risk of shortages. However, only two mentioned the risks of waste or 

loss in their discussions of these plans. Without plans that address all of 

the elements of risk to supply chains, OGAC cannot ensure that country 

teams are appropriately targeting assistance to avoid shortages, waste, 

and loss in partner-country supply chains.

OGAC’s Next Generation Indicators Reference Guide requires country 

teams to collect information on progress partner countries are making in 

developing reliable supply chains. Specifically, the country teams are 

 

35These 11 evaluations include all seven countries represented in the evaluations we 

reviewed. 

36GAO, Defense Infrastructure: The Navy’s Use of Risk Management at Naval Stations 

Mayport and Norfolk, GAO-12-710R (Washington, D.C.: July 13, 2012). This report 

identified five basic guiding principles of risk management: (1) management and 

personnel identify risks; (2) they analyze risks; (3) after analyzing the risks, they create a 

plan that identifies different possible courses of action to mitigate the identified risk; (4) 

when a plan for risk mitigation is approved, management and personnel implement the 

risk mitigation action plan; and (5) they track risks and mitigation action plan 

implementation to determine if the plan was successful in mitigating the risk. These 

guiding principles were developed by studying the practices of several leading 

organizations engaged in risk management. 

OGAC Does Not Require

Country Teams to Develop

Plans for Mitigating Risks 

or to Track Partner 

Countries’ Progress
 

Page 19 GAO-13-483 PEPFAR Supply Chains

required to collect information on access to high-quality, low-cost 

medications generally, and more specifically on the percentage of 

treatment facilities that experienced ARV drug shortages in the previous 

12 months. This guide also recommends that country teams track the 

percentage of ARV drug distribution sites that report on drug consumption 

and losses, but this is not a required indicator. According to OGAC, 

monitoring this information is important but not indispensable to basic 

program tracking. Six of the seven country operational plans we reviewed 

provided information on assessing or attempting to address shortages, 

and five of the seven discussed using ARV consumption data to do so.

However, only two discussed using consumption data to help reduce the 

risk of waste or loss, and none provided information on the percentage of 

distribution sites that report on drug consumption and losses. Monitoring 

partner countries’ progress in measuring consumption, waste, and loss is 

vital to basic program tracking, because without data on progress in 

reducing waste and loss, OGAC cannot fully assess whether partner 

countries can operate supply chains independently and efficiently. This is 

increasingly important as partner countries are expected to assume 

greater responsibility for managing their supply chains. 

PEPFAR is at a critical juncture as it transitions from directly managing 

supply chains to primarily providing guidance and advice. PEPFAR has 

taken steps toward greater integration with partner-country health 

systems, overall health system strengthening, and greater partner-country 

responsibility for addressing HIV/AIDS. If PEPFAR can increase 

efficiency by reducing shortages, waste, and loss, it would be better able 

to expand treatment to more of the 23 million people in low- and middleincome countries living with HIV/AIDS and in need of treatment or who 

are in at-risk groups eligible for treatment. Because PEPFAR generally 

relinquishes control of the supply chain once the drugs reach a country’s 

central warehouse, it is essential that partner-country governments 

develop the capacity to manage their drug supply chains without 

excessive risks of shortages, waste, or loss of inventory.

PEPFAR has strengthened supply chains in a number of ways and is 

continuing to take steps to make them more reliable and efficient. In 

addition, it is important that PEPFAR’s efforts to address partner 

countries’ human resource constraints are sustained over the long term to 

show results. However, at some distribution and treatment sites, 

weaknesses in inventory controls and record keeping limit the ability of 

some partner-country health systems to track consumption, putting them 

at risk for shortages, waste, and loss. OGAC does not require PEPFAR 

Conclusions 
 

Page 20 GAO-13-483 PEPFAR Supply Chains

country teams to develop plans to address these weaknesses or to 

monitor progress in reducing these risks. Without such plans or 

monitoring, OGAC cannot fully assess partner-country progress toward 

the goal of self-sufficient supply chain management.

To help ensure that drug supply chains in PEPFAR partner countries 

function efficiently and mitigate the risks of shortages and wasted and lost 

drugs, we recommend that the Secretary of State direct the U.S. Global 

AIDS Coordinator to take the following two actions:

• require that country teams develop and implement plans for assisting 

countries to address inadequate inventory controls and record 

keeping; and

• require that country teams track the progress partner countries are 

making in measuring ARV drug consumption, waste, and loss.

We provided a draft of this report to State, USAID, and CDC. Responding 

jointly with USAID and CDC, State provided written comments (see app. 

II for a copy of these comments). State and USAID also provided 

technical comments, which we incorporated, as appropriate.

State agreed with the intent of our first recommendation to improve 

partner countries’ inventory controls and record keeping for drug supply 

chain management. State agreed that inventory controls are not 

optimized in all PEPFAR countries and indicated that it will further assess 

these controls and focus technical assistance on improving them where 

they are found lacking. State also noted that PEPFAR has engaged with 

partner countries in supply chain capacity development through careful 

assessment of each country’s supply chain context and the degree to 

which PEPFAR is positioned in the country to support a long-term 

technical assistance effort. Noting that PEPFAR operates in many 

different environments and supports a range of HIV/AIDS activities with 

diverse sets of stakeholders, State commented that PEPFAR country 

teams should continue to place supply chain improvement as a high 

program priority in countries where PEPFAR has a large financial 

investment in supporting HIV treatment; in countries where PEPFAR’s 

investment is more limited, State commented that country teams should 

work with other donors and the partner government to ensure that any 

supply chain weaknesses or risks, including those related to inventory 

and record keeping, are addressed. State also commented that there are 

other, often greater supply chain weaknesses that result in an inadequate 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 21 GAO-13-483 PEPFAR Supply Chains

supply of ARV drugs, such as delayed Global Fund disbursements or 

poor procurement planning by partner-country governments. We found 

that these delays and planning issues are significant challenges and note 

that PEPFAR is already taking steps to address them through, for 

example, developing an information-sharing network with other donors to 

identify and address potential gaps in supply and establishing an 

emergency procurement mechanism to fill these gaps. However, 

PEPFAR guidance does not explicitly address the need for plans to 

improve inventory controls and record keeping to mitigate the risks of 

waste and loss as ARV drugs move through the supply chain in partner 

countries to the patients who need them. We believe that such plans are 

necessary to ensure that efforts to mitigate these risks are systematically 

implemented and progress in mitigating them is documented.

In the draft we sent for comment, we recommended that country teams 

track the percentage of ARV distribution sites reporting on inventory 

consumption, waste, and loss. State agreed with the intent of this 

recommendation, but noted some constraints that would make it difficult 

to implement: in countries where PEPFAR works with a large number of 

treatment sites, it would be costly to collect data from all of them; and in 

countries where PEPFAR provides limited support, requiring site-level 

data collection could be perceived as overly onerous by partner-country 

governments and at odds with PEPFAR’s efforts to promote country 

ownership of supply chain management. Nevertheless, tracking the 

percentage of ARV drug distribution sites reporting on inventory 

consumption, waste, and loss is an indicator that PEPFAR currently 

recommends that country teams implement, although it does not require 

them to do so. State proposed ways to deal with the constraints it 

identified, such as sampling site data and working with partner countries 

like South Africa to provide targeted technical assistance where needed. 

Specifically, State noted that PEPFAR has begun a more systematic 

investment in health supply chain metrics to identify risks and 

weaknesses in partner-country supply chains and assess progress in 

reducing risks and enhancing performance. State further noted that, as 

PEPFAR reviews and updates its guidance, it will incorporate measures 

to evaluate the capability of partner-country supply chains to identify risks 

and assess progress, and that new indicators will include inventory 

management. In response to State’s comments, we revised our 

recommendation to reflect that another, more flexible indicator besides 

the one OGAC had already developed may also be appropriate. We 

believe that requiring country teams to track the progress partner 

countries are making in measuring ARV drug consumption, waste, and 

loss in whatever way is most appropriate in those countries would be 
 

Page 22 GAO-13-483 PEPFAR Supply Chains

beneficial in two ways: (1) it would provide a measure of accountability for 

partner countries as they transition to assuming greater responsibility for 

managing their supply chains, and (2) it would provide OGAC with 

flexibility in the differing contexts of PEPFAR involvement in each country.

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Secretary of State and 

the U.S. Global AIDS Coordinator and interested congressional 

committees. The report also will be available at no charge on the GAO 

website at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact 

me at (202) 512-3149 or gootnickd@gao.gov, or contact Marcia Crosse at 

(202) 512-7114 or crossem@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix III. 

David Gootnick

Director, International Affairs and Trade

Marcia Crosse

Director, Health Care
 

Page 23 GAO-13-483 PEPFAR Supply Chains

List of Requesters

The Honorable Lamar Alexander

Ranking Member

Committee on Health, Education, Labor, and Pensions

United States Senate

The Honorable Tom Coburn, MD

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Richard Burr

Ranking Member

Subcommittee on Primary Health and Aging

Committee on Health, Education, Labor, and Pensions

United States Senate

The Honorable Michael B. Enzi

Ranking Member

Subcommittee on Children and Families

Committee on Health, Education, Labor, and Pensions

United States Senate

The Honorable Johnny Isakson

Ranking Member

Subcommittee on Employment and Workplace Safety

Committee on Health, Education, Labor, and Pensions

United States Senate
Appendix I: Objectives, Scope, and 

Methodology

Page 24 GAO-13-483 PEPFAR Supply Chains

This is one of three reports responding to a congressional request to 

review HIV/AIDS treatment programs supported through the President’s 

Emergency Program for AIDS Relief (PEPFAR). This report examines (1) 

actions PEPFAR has taken regarding antiretroviral (ARV) drug supply 

chains and (2) partner-country ARV drug supply chain operations.

To obtain background information and establish a framework for 

understanding drug supply chains serving PEPFAR, we identified key 

participants in PEPFAR supply chain management programs by 

reviewing laws and regulations relating to these programs. We also 

identified six supply chain elements and three processes common to 

effective drug supply chains by analyzing guidance documents on supply 

chain performance assessment processes, tools, and metrics, and an 

expert review focused on supply chain best practices. Specifically, we 

analyzed seven guidance documents obtained from PEPFAR 

implementing partners that procure drugs and one produced by the World 

Health Organization in conjunction with the U.S. government and other 

multilateral organizations. The expert review we also analyzed was a 

best-practices supply chain study for the U.S. Agency for International 

Development (USAID). We determined that a supply chain element or 

process was key if the same, or similar, element or process appeared in 

at least four of the nine sources we reviewed.

To examine actions PEPFAR has taken regarding ARV drug supply 

chains, as well as to describe partner-country ARV drug supply chain 

operations, we reviewed reports and guidance issued by PEPFAR and its 

implementing partners, including all 35 PEPFAR country and regional 

operational plans and all 22 PEPFAR country partnership frameworks for 

fiscal year 2012. We also reviewed studies, reports, and assessment 

tools on the drug supply chains used by PEPFAR-supported treatment 

programs that were prepared by USAID; the Centers for Disease Control 

and Prevention (CDC); key implementing partners such as the Supply 

Chain Management System (SCMS); multilateral agencies such as the 

Global Fund to Fight AIDS, Tuberculosis, and Malaria and the World 

Health Organization; and PEPFAR partner countries. 

Furthermore, to examine partner-country supply chain operations, we 

analyzed selected evaluations relevant to PEPFAR-supported supply 

chains and synthesized their findings, conclusions, and 

recommendations. To select these evaluations, we reviewed documents 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 25 GAO-13-483 PEPFAR Supply Chains

obtained through site visits, USAID Office of the Inspector General audits, 

and a database of evaluations compiled for a related GAO engagement.1

We identified 68 evaluations published from 2008 through 2012 

containing some assessment of drug supply chain systems or a selection 

of components in those systems in countries supported by PEPFAR. We 

then eliminated all evaluations published before 2011, yielding 16 

evaluations. Our final set of 16 evaluations included findings, 

recommendations, and/or actions taken related to supply chains in these 

seven countries: China, Côte D’Ivoire, Kenya, Mozambique, South Africa, 

Uganda, and Zambia. 

We analyzed each of the 16 evaluations to identify any findings, 

recommendations, or actions taken related to the six supply chain 

elements and three processes we had previously identified. We used this 

analysis to identify any weaknesses within each supply chain function and 

related actions taken to address them. We also reviewed fiscal year 2012 

PEPFAR country operational plans for all 32 countries and three regions 

that prepared these plans in that year. 

We compared the actions PEPFAR took to strengthen supply chains with 

performance metrics and supply chain best practices identified in USAID 

reports. Specifically, we identified performance metrics, best practices, 

lessons learned, and supply chain models in relevant guidance, 

evaluations, and assessment tools. Furthermore, we compared the 

actions to five basic guiding principles of risk management: (1) 

management and personnel identify risks; (2) they analyze risks; (3) after 

analyzing the risks, they create a plan that identifies different possible 

courses of action to mitigate the identified risk; (4) when a plan for risk 

mitigation is approved, management and personnel implement the risk 

mitigation action plan; and (5) they track risks and mitigation action plan 

implementation to determine if the plan was successful in mitigating the 

risk.2 We also compared the actions with Standards for Internal Control in 

the Federal Government, which identify risk management as critical to the 

ability of managers to run organizations and achieve their objectives.3 We 

 

1

GAO, President’s Emergency Plan for AIDS Relief: Agencies Can Enhance Evaluation 

Quality, Planning, and Dissemination, GAO-12-673 (Washington, D.C.: May 31, 2012). 

2

GAO, Defense Infrastructure: The Navy’s Use of Risk Management at Naval Stations 

Mayport and Norfolk, GAO-12-710R (Washington, D.C.: July 13, 2012).

3

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). 
Appendix I: Objectives, Scope, and 

Methodology

Page 26 GAO-13-483 PEPFAR Supply Chains

searched the country operational plans for the seven countries covered 

by the evaluations we reviewed as well as PEPFAR guidance for 

developing operational plans to determine whether these documents 

included plans to mitigate the risks identified by our analysis of the 

evaluations. 

In addition, we conducted fieldwork in three PEPFAR partner-countries—

Kenya, South Africa, and Uganda—in June 2012 to obtain information on 

drug supply chain operations. We selected these countries based on their 

relatively large PEPFAR budget and spending allocations, relatively high 

disease burden estimates, variation in PEPFAR’s role in supply chain 

management, and other factors, including feasibility of travel. We selected 

these countries from a list of countries with the largest PEPFAR budgets, 

including those with greater than $100 million in their annual budgets and 

greater than $25 million spent on ARV drug procurement between fiscal 

years 2009 and 2010. We further narrowed our sample by limiting the 

selection to countries with the highest HIV prevalence rate using April 

2012 estimates from the Joint United Nations Programme on HIV/AIDS. 

By applying these criteria, we obtained a list of four countries. We then 

selected South Africa and Kenya because they had SCMS regional 

distribution centers, and we selected Uganda because it was the only 

remaining country that could provide examples of non-SCMS 

procurement models. We interviewed representatives of SCMS, the 

contractor that manages the bulk of PEPFAR’s ARV drug procurement; 

representatives of PEPFAR implementing agencies, including officials 

from OGAC, USAID, and CDC in the countries we visited and in 

Washington, D.C. We also interviewed partner-country government 

officials in each of the three countries. The results of our fieldwork cannot 

be generalized to all PEPFAR partner countries but provided insights into 

various aspects of specific supply chain operations. 

We conducted this performance audit from May 2012 to April 2013 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 
Appendix II: Comments from the Department 

of State

Page 27 GAO-13-483 PEPFAR Supply Chains

Appendix II: Comments from the Department 

of State 
Appendix II: Comments from the Department 

of State

Page 28 GAO-13-483 PEPFAR Supply Chains
Appendix II: Comments from the Department 

of State

Page 29 GAO-13-483 PEPFAR Supply Chains
Appendix II: Comments from the Department 

of State

Page 30 GAO-13-483 PEPFAR Supply Chains
Appendix II: Comments from the Department 

of State

Page 31 GAO-13-483 PEPFAR Supply Chains
Appendix III: GAO Contacts and Staff 

Acknowledgments

Page 32 GAO-13-483 PEPFAR Supply Chains

David Gootnick, (202) 512-3149 or gootnickd@gao.gov, or Marcia 

Crosse, (202) 512-7114 or crossem@gao.gov 

In addition to the contacts named above, Jim Michels, Assistant Director; 

Kay Halpern; Katherine Forsyth; Erika Navarro; Chad Davenport; David 

Dayton; and Steven Putansu made key contributions to this report. In 

addition, Todd M. Anderson, Brian Hackney, Etana Finkler, Grace Lui, 

and Jane Whipple provided technical assistance and other support. 

Appendix III: GAO Contacts and Staff 

Acknowledgments 

GAO Contacts 

Staff 

Acknowledgments 
Related GAO Products

Page 33 GAO-13-483 PEPFAR Supply Chains

President’s Emergency Plan for AIDS Relief: Shift Toward PartnerCountry Treatment Programs Will Require Better Information on Results. 

GAO-13-460. Washington, D.C.: April 12, 2013.

President’s Emergency Plan for AIDS Relief: Per-Patient Costs Have 

Declined Substantially, but Better Cost Data Would Help Efforts to 

Expand Treatment. GAO-13-345. Washington, D.C.: March 15, 2013.

Ensuring Drug Quality in Global Health Programs. GAO-12-897R. 

Washington, D.C.: August 1, 2012.

Defense Infrastructure: The Navy’s Use of Risk Management at Naval 

Stations Mayport and Norfolk. GAO-12-710R. Washington, D.C.: July 13, 

2012.

President’s Emergency Plan for AIDS Relief: Agencies Can Enhance 

Evaluation Quality, Planning, and Dissemination. GAO-12-673. 

Washington, D.C.: May 31, 2012.

President’s Emergency Plan for AIDS Relief: Program Planning and 

Reporting. GAO-11-785. Washington, D.C.: July 29, 2011.

Global Health: Trends in U.S. Spending for Global HIV/AIDS and Other 

Health Assistance in Fiscal Years 2001-2008. GAO-11-64. Washington, 

D.C.: October 8, 2010.

President’s Emergency Plan for AIDS Relief: Efforts to Align Programs 

with Partner Countries’ HIV/AIDS Strategies and Promote Partner 

Country Ownership. GAO-10-836. Washington, D.C.: September 20, 

2010.

President’s Emergency Plan for AIDS Relief: Partner Selection and 

Oversight Follow Accepted Practices but Would Benefit from Enhanced 

Planning and Accountability. GAO-09-666. Washington, D.C.: July 15, 

2009.

Global HIV/AIDS: A More Country-Based Approach Could Improve 

Allocation of PEPFAR Funding. GAO-08-480. Washington, D.C.: April 2, 

2008.

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Page 34 GAO-13-483 PEPFAR Supply Chains

Global Health: Global Fund to Fight AIDS, TB and Malaria Has Improved 

Its Documentation of Funding Decisions but Needs Standardized 

Oversight Expectations and Assessments. GAO-07-627. Washington, 

D.C.: May 7, 2007.

Global Health: Spending Requirement Presents Challenges for Allocating 

Prevention Funding under the President’s Emergency Plan for AIDS 

Relief. GAO-06-395. Washington, D.C.: April 4, 2006.

Global Health: The Global Fund to Fight AIDS, TB and Malaria Is 

Responding to Challenges but Needs Better Information and 

Documentation for Performance-Based Funding. GAO-05-639. 

Washington, D.C.: June 10, 2005.

Global HIV/AIDS Epidemic: Selection of Antiretroviral Medications 

Provided under U.S. Emergency Plan Is Limited. GAO-05-133. 

Washington, D.C.: January 11, 2005.

Global Health: U.S. AIDS Coordinator Addressing Some Key Challenges 

to Expanding Treatment, but Others Remain. GAO-04-784. Washington, 

D.C.: June 12, 2004.

Global Health: Global Fund to Fight AIDS, TB and Malaria Has Advanced 

in Key Areas, but Difficult Challenges Remain. GAO-03-601. Washington, 

D.C.: May 7, 2003.

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