Innovative financing mechanisms allow GAVI to provide long-term funding commitments to developing countries
Development aid flows have often been volatile and based on projects that reflect donor rather than developing country objectives. This was especially true at the end of the nineties, prior to GAVI's foundation, when international funding for immunisation was in decline.
As a key voice in the GAVI partnership, developing countries have emphasised their preference for large-scale, long-term funding. With the main issues in extending immmunisation coverage requiring long-term projects, such as health worker training, health ministries need to know that donor commitment will last the course of their own national plans rather than stop halfway through a project.
The financing goal of GAVI's 2011-2015 strategy is specifically focused on securing "long-term commitments from donors for national immunisation programmes". This reduces the impact of year-to-year donor volatility and allows GAVI, in turn, to make its own long-term commitments to developing countries.
To generate this kind of large-scale "predictable" funding, the GAVI business model relies on three highly innovative financing mechanisms:
- GAVI Matching Fund
- The International Finance Facility for Immunisation (IFFIm)
- Advance Market Commitment (AMC)
GAVI Matching Fund
GAVI’s newest public-private partnership is the GAVI Matching Fund, which is designed to raise US $260 million for immunisation by the end of 2015. Under the
program, the U.K.
Department for International Development (DFID) and the Bill & Melinda Gates
Foundation have pledged about $130 million combined (£50 million and
$50 million, respectively) to match contributions from corporations,
foundations, their customers, employees and business partners.
Participating partners not only are contributing significant funding but they are bringing
significant visibility to the issue, providing powerful champions for the cause
of immunisation as well as core business skills to help address technological
and logistical challenges to immunisation.
International Finance Facility for Immunisation
The International Finance Facility for Immunisation (IFFIm) was set up in 2006 to rapidly accelerate the availability and predictablity of funds for GAVI’s immunisation programmes.
IFFIm uses US$ 6.3 billion in long-term pledges from donor governments to sell ‘vaccine bonds’ in the capital markets, making large volumes of funds immediately available for GAVI programmes. This affords GAVI great flexibility, enhancing the efficiency of its operations and providing predictability for vaccine programmes. It is the first aid-financing mechanism in history to attract legally-binding commitments of up to 20 years from donors and offers the predictability that developing countries need to make long-term budget and planning decisions about immunisation programmes.
The mechanism has transformed GAVI’s financial landscape, nearly doubling existing support for countries from 2006-2015. With the World Bank as its treasury manager, IFFIm is backed by US$ 6.3 billion in donor pledges from the governments of Australia, United Kingdom, France, Italy, Norway, Spain, The Netherlands, Sweden and South Africa.
Vaccine bonds have proven remarkably popular with institutional and individual investors who want a market-based return and a socially-responsible investment opportunity.
According to GAVI’s 2nd Evaluation, IFFIm has contributed to the certainty of funding that underpins GAVI's ability to underpin long-term vaccine programmes.
IFFIm funding is used to support the introduction of new and underused vaccines, including the five in one pentavalent vaccine, as well as immunisation services support, injection safety and health system strengthening.
Funds raised through IFFIm bonds were also used to support targeted immunisation campaigns against deadly diseases, including yellow fever, polio, measles, maternal and neonatal tetanus.
Advance Market Commitment
Working with the World Bank, UNICEF and donor partners, GAVI is implementing a second innovative financial instrument, the Advance Market Commitment (AMC) pilot programme for pneumococcal vaccine – the main antigen against pneumonia, the world’s leading killer of under-fives.
An AMC represents a groundbreaking approach to public health funding that is designed to stimulate the development and manufacture of affordable vaccines tailored to the needs of developing countries. In June 2009, five government donors (Italy, UK, Canada, the Russian Federation, Norway) and the Bill & Melinda Gates Foundation committed US$ 1.5 billion to launch the AMC pilot for pneumococcal vaccines.
With this ‘predictable’ finance, pharmaceutical companies have an incentive to invest in the capacity to manufacture pneumococcal vaccines that include the additional serotypes required to combat the most common and fatal strains of pneumococcus in low-income countries.
In exchange, these same firms have signed legally binding agreements to supply the pneumococcal vaccine at a maximum long-term price of US$ 3.50 a dose.
This allows developing country governments to budget and plan for their immunisation programmes, safe in the knowledge that vaccines will be available in sufficient quantity and at a predictable price. The success of this pilot project could have far-reaching consequences for addressing market failures to provide the right solutions to eliminate diseases that affect low-income countries.