1. 1 Innovations in Global Vaccine Financing Amie Batson Health, Nutrition, Population The World Bank

2. 2 Global Financing Mechanisms  Three major global financing mechanisms  Buy-downs  Advance Market Commitments (AMCs)  IFFIm  Questions for each mechanism  What is the current situation? What isn’t working?  How would a financing mechanism be able to address the problem or improve the situation?  How would it need to be structured to maximize the benefits but minimize the transaction costs?

3. 3 IDA and IBRD buy-downs What is the problem? Need to increase financial support to governments on priority activities with significant cross-border externalities Insufficient focus on performance/results for GPGs Bank credits and loans not very flexible (e.g. tailor loan/credit terms same regardless of externalities) Donor resources are used to lower the cost of the credits and loan targeted at priority health interventions. Use of donor funds is dependent on performance.

4. 4 Experience with buy-downs: Pakistan and Nigeria polio projects Global Polio Eradication effort required $$’s in few countries with continued polio transmissions. World Bank approached as funder of last resort  but grant more appropriate given global public good implications. IDA buy-down allowed IDA credit to be turned into a grant if performance targets achieved. The Gates Foundation, Rotary International, the United Nations Foundation and the US Center for Disease Control provided over $75 million to reduce the cost of polio IDA credits ($175 million) to grants based on defined performance targets. Projects developed in Pakistan and Nigeria Targets: Coverage/province in SIAs >80% and OPV received 5 weeks in advance of NID

5. 5 Buy-down Mechanism Implications for Stakeholders Countries –Access to critical financing to help support health priorities (e.g. polio eradication) –Opportunity to highlight performance both internally and to international community (e.g. donors) –If performance criteria met, funds translated into a grant or lower cost loan Donors –Funds only used if performance goals are achieved. –Minimal management costs since funds provided within framework of Bank loan World Bank –Better financial support for projects with global public good/cross border characteristics (e.g. communicable disease control) –Project and proven performance will help attract continued funding for health priority.

6. 6 Global Financing Mechanisms  Three major global financing mechanisms  Buy-downs  Advance Market Commitments (AMCs)  IFFIm  Questions for each mechanism  What is the current situation? What isn’t working?  How would a financing mechanism be able to address the problem or improve the situation?  How would it need to be structured to maximize the benefits but minimize the transaction costs?

7. 7 196019802000 HPV HIV/AIDS General scientific/technical uncertainty YF Polio Tetanus Measles HepB Hib Pneumococcal TB Rotavirus Malaria Year/anticipated year of registration Size of circle indicates number of deaths (400,000 deaths, 2002 data) Left side of circle aligned with expected introduction date Vaccines Pipeline 197019902010 Meningococcal A Potential vaccines JE Typhoid Cholera Influenza Next generation Available and underutilized Traditional EPI New vaccines have the potential to prevent millions of deaths. But there is inadequate investment to assure development and access.

8. 8 Vaccines Pipeline The challenge 3 million premature deaths from vaccine preventable diseases 7 million premature deaths from diseases for which vaccines are not yet widely available 196019802000 HPV HIV/AIDS General scientific/technical certainty YF Polio Tetanus Measles HepB Hib Pneumococcal TB Rotavirus Malaria Year/anticipated year of registration Size of circle indicates number of deaths (400,000 deaths, 2002 data) Left side of circle aligned with expected introduction date 197019902010 Meningococcal A JE Typhoid Cholera Influenza

9. 9 Vicious cycle Higher price Uncertain demand Limited supply Uncertainty about demand in developing countries leads industry to limit investments in capacity Limited vaccine supply keeps prices relatively high Higher prices keep developing countries uncertain about demand and donors uncertain about financing needs

10. 10 Slow introduction: Introduction of Hep B and Hib vaccines into developing countries is occurring 10-15 years after initial availability The Vaccine Fund established GAVI forecasts* HepB -- all developing countries HepB -- all developing countries, excl. India, China, Indonesia Hib -- all developing countries 198319851987198919911993199519971999200120032005 Hep B licensed in U.S. Million doses Hib licensed in U.S.

11. 11 Package of solutions Buying and using existing products (GAVI, IFFIm) –Improves market for existing products –Strengthens delivery systems to reach children –Increases predictability of funding Prepare for future products (GAVI, PPPs, WHO…) –Provide data for timely national decision on demand –Improve accuracy of forecasting Invest public resources in early R&D –Product-development PPPs –“Enterprise” for scientific collaboration Missing: Assurance that the market for future products will exist There is a package of solutions to accelerate access to priority new vaccines…

12. 12 Funding the pipeline Discovery & Research Early Development Capacity Investment Supply Vaccine for wealthy countries Health R&D for wealthy countries $106 billion Vaccines for poor countries Private investment to complete the pipeline Health R&D for poor countries $8 billion Late Development Licensure Attracting private investments to fund the vaccine pipeline for vaccines for poor countries is essential. Public fundsPrivate funds

13. 13 AMCs: A market-based incentive Create a market: for new vaccines needed in poor countries (not a purchase guarantee) Donors commit upfront: Donors fund an AMC of a specified market size and price for a target vaccine with set specifications (effectiveness, public health impact) Candidate vaccines become available: an Independent Assessment Committee determines if a vaccine meets the target specifications Country demand: Where recipient countries are interested in introducing a successful candidate vaccine, donors subsidize its purchase and recipient countries provide co-payment. Post-AMC predictable supply and pricing: When AMC funding is depleted, manufacturer continue to provide the vaccine at an established price for a specified period. How do AMCs work….

14. 14 The AMC hinges on national demand, therefore national political will and commitment are essential, as are accurate demand forecasts…. Price AMC $x billion Post-AMC market Guaranteed AMC price Years 0 2 4 6 8 10 12 14 16 1234567891011121314

15. 15 Framework Agreement Announced Details on AMC: Size, price, target product goal Donors sign binding financial commitments Companies sign on Framework Agreement Suppliers provide vaccine to eligible countries at agreed lower price AMC Commitment exhausted Legal framework First Vaccine Approved Guarantee Agreement 1 Price guarantee Manufacturing capacity Vaccines delivered Second vaccine purchased Guarantee Agreement 2 Second Vaccine Approved

16. 16 AMC complements other strategies Increased investment in R&D (push) –Direct investment in vaccine candidates –Investment in establishing development capacity (clinical trial field sites etc) –Investment in public-private partnerships Strengthened delivery systems to ensure vaccines reach target populations Strengthened demand forecasting to reduce industry risk Strengthened national planning of health priorities and budgets Credible assurance of future commitment to purchase priority new vaccines -- AMC

17. 17 Status: Pneumococcal AMC Pilot The Expert Committee recommended pneumococcal vaccines as the most suitable candidate for a pilot –Ability to rapidly demonstrate that the AMC concept works –Potential impact on the health of the target populations. Modeling of the firms indicate that $1.5 billion would allow first three firms to make neutral or positive risk adjusted return Institutional arrangement: –GAVI house AMC Secretariat support programmatic functions through existing systems (country applications, procurement, delivery…) –World Bank provide financial services –WHO work provide expert recommendations to IAC on target product profile and if vaccine meets standards based on pre-qualification process Funding: Donor Working Group, expected funding launch with $1.5 billion secured February 9, 2007

18. 18 Global Financing Mechanisms  Three major global financing mechanisms  Buy-downs  Advance Market Commitments (AMCs)  IFFIm  Questions for each mechanism  What is the current situation? What isn’t working?  How would a financing mechanism be able to address the problem or improve the situation?  How would it need to be structured to maximize the benefits but minimize the transaction costs?

19. 19 Every year 27 million infants are not vaccinated against the most common childhood diseases and 2 to 3 million children die annually from easily preventable diseases. It is anticipated that over 10 years IFFIm will enable the immunisation of 500 million people It is estimated that this intervention will save 5 million child deaths and more than 5 million future adult deaths Specific funding to support Health system strengthening Measles and TT campaigns OPV stockpile New vaccine introduction What is IFFIm’s Purpose? IFFIm’s goal is to provide $4bn for immunisation from 2006-2015

20. 20 How does the IFF work?  Donors make legally binding long term commitments (e.g. 20 years)  Donor commitments are treated off-budget (i.e. only recognized on budget when must finance pledge in future)  Bonds are issued against these donor pledges  Proceeds from bond sales used for development  Donor commitments used to pay-off bonds 10-15 years in future

21. 21 IFFIm’s Sources and Uses  harwyn\Presentation s\IFFIm Presentation Pack sept 6.doc IFFIm’s Target Disbursements (USD mm) Maximum Donor Cashflows (USD mm) $0 $100 $200 $300 $400 $500 $600 2006200720082009201020112012201320142015 Combined to $1,050mm for 2006/7

22. 22 Conclusions Financing mechanisms are resulting in new funding Mechanisms can address weakness in funding -- predictability, predictability, timing, timing, cost of funds, cost of funds, link to performance link to performance Mechanisms not appropriate solution for all problems IDA buy-downs: Over $175 miliion in IDA credits to Nigeria and Pakistan with $75 million from donors.IDA buy-downs: Over $175 miliion in IDA credits to Nigeria and Pakistan with $75 million from donors. AMCs: $1.5 billion for purchase of future pneumo vaccines, Malaria vaccine AMC???AMCs: $1.5 billion for purchase of future pneumo vaccines, Malaria vaccine AMC??? IFFIm: $3-4 billion to invest today in delivery systems and existing vaccinesIFFIm: $3-4 billion to invest today in delivery systems and existing vaccines IDA buy-downs: Increase flexibility of funding terms for credits addressing externalities and tie financial terms to performanceIDA buy-downs: Increase flexibility of funding terms for credits addressing externalities and tie financial terms to performance AMCs: Guarantees of funding reduces exceptional market risk and encourages private investmentAMCs: Guarantees of funding reduces exceptional market risk and encourages private investment IFFIm: Frontloaded funds -- build critical infrastructure, induce private investment, reduces prices more rapidlyIFFIm: Frontloaded funds -- build critical infrastructure, induce private investment, reduces prices more rapidly IDA buy-downs: Must align with rationale for increased concessionalityIDA buy-downs: Must align with rationale for increased concessionality AMCs: Vaccine demand must be high probabilityAMCs: Vaccine demand must be high probability IFFIm: Increased cost of frontloaded funding only acceptable if exceeded by increased benefitsIFFIm: Increased cost of frontloaded funding only acceptable if exceeded by increased benefits

23. 23 Innovative Financing for Immunization GAVI IFFIm $$ Trad’l Donor $$ Countries AMC for x vaccine

24. 24 BACKUP

25. 25 Advance Market Commitments (AMC) Problem Small, risky and unpredictable markets leads to under- investment in products of importance to the developing world Industry’s investments in development/capacity determine what products are available, when and to whom Assumptions Assurances of a future market would address financing risk and help reduce demand risk and thus provide an incentive for more timely investment by industry Governments can provide credible, low cost commitments to guarantee future financing for priority vaccines Mechanism can be market based and only “pay for results”