How Innovative Finance Help Deliver Vaccines Faster

12Nov11

Fight Pneumonia. Save a Child.

Today is world pneumonia day. Why designate such a day? Maybe it is because not many of us know that pneumococcal disease is the #1 vaccine-preventable cause of death in children under 5.

The GAVI Alliance (formerly Global Alliance for Vaccines and Immunizations, introduced in a previous post) is currently rolling out pneumococcal vaccines across 3 continents and will potentially prevent more than 650,000 deaths by 2015 in 58+ countries.

The complex pneumococcal vaccines first started rolling out in GAVI-eligible countries in 2010 and the development and manufacturing process for these vaccines (rolled out in the millions) were stimulated by an ADVANCE MARKET COMMITMENT (AMC).

The AMC’s goal is to bring forward the availability of effective vaccines through scaling up of production capacity to meet developing country vaccine demand and secure long-term predictable demand, supply (by manufacturers) and pricing.

In June 2009, the governments of Italy, UK, Canada, Russia, Norway and the Bill & Melinda Gates Foundation committed to a $1.5 billion USD AMC fund for pneumococcal vaccine. The AMC funded acted as a “pull” incentive for pharmaceutical companies participating in the AMC to develop and produce the appropriate vaccines needed in developing countries: the right vaccine at the right price, in the right quantity and at the right time. A second goal is to accelerate vaccine uptake by developing countries once the right vaccine is available. The AMC acts as a innovation diffusion catalyst as well!

The supplier pharmaceutical firms under legally-binding contracts must agree to supply their vaccines at $3.50 USD for 10 years for GAVI purchasing to the developing country governments. For 20% of the doses, companies receive a “top-up” payment from the AMC pool of funds of another $3.50 USD out of the $1.5 billion donor commitments.

So why is the AMC innovative? 

It really is a new way of using donor funds for international development. The group of donors could have chosen to donate $1.5 billion AFTER the vaccines were available on the market and use their funds to help subsidize the price for developing country governments. However, who is to say that the vaccines would be rolled out faster? Or the price would be higher/lower than $3.50 or $7.00 for the 20% (how you look at it)?

From the supplier firm’s perspective, why invest in R&D and production capabilities when you do not know what demand (both quantity in volume and in price) is? How do you justify building this one vaccine manufacturing facility over another therapeutic in your portfolio?

Through the GAVI alliance, an agreement was brokered between participants in the alliance. If the ultimate mission is to save children’s lives, then there is an urgency factor to do it as soon as possible. The inherent power of vaccines is prevention of getting the disease in the first place. Instead of the $1.5 billion funds being used in purchasing post full-commercialization, the commitment is brought forward into a legally-binding agreement to set price and volume and therefore set the ability to quantify demand.

From the donor’s perspective, the investment in aid was to be used for fighting pneumococcal disease.  The AMC brought forward the commitment in the innovation value chain (from end-purchasing to the development/manufacturing stage) so that the aid can be used as a “pull-incentive” for supplier companies to roll-out their product faster. From the firm’s perspective, yes there is now competition to produce as many doses as fast as possible because if you are the first firm to manufacture the vaccine, you would have the first right of access to the “top-up” funds from the AMC pool.

In March 2010 (9 months after the AMC became operational), GSK and Pfizer made long-term commitments to supply new vaccines against pneumococcal disease and the first roll-outs occurred in December 2010 in Latin America. GAVI has produced a comprehensive timeline to show the sequence of development of the AMC. Although press releases make it seem that the vaccine was completed quickly between AMC operationalization and roll-out, please remember all the background work! The supplier firms dedicating decades to research & development and the donor/innovative finance community first setting out the white paper on “making markets for vaccines”  back in 2005 led by Centre for Global Development.

It is now November 2011 and let’s continue the good fight against vaccine-preventable diseases.

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