Innovative Financing Mechanisms to Advance Global Health Past, Present and Future Investments

POLICY BRIEF 21 | JUNE 2009 Innovative Financing Mechanisms To Advance Global Health Past, Present and Future Investments In the past decade, remarkable co-chaired by UK Prime Minister progress has been made in improving Gordon Brown and World Bank the health of vulnerable populations in President Robert Zoellick, estimates low- and middle-income countries. The that up to US$ 10 billion in additional GAVI Alliance (GAVI) and the Global annual funding is needed to achieve the Fund to Fight AIDS, TB and Malaria Millennium Development Goals (MDGs) (the Global Fund), which address by 2015 (Taskforce, 2009). And although access and delivery issues for existing the product pipeline to address neglected treatments in low- and middle-income diseases has grown, in part due to PDPs, countries, have saved more than US$ 1 billion per year is needed to 7 million lives and protected 200 million supplement current funding to advance more from preventable diseases such as R&D activities (DFID, 2006). diarrhea and malaria. Investments in health research and development (R&D) increased “More than ever, we need to be imaginative about finding from US$ 42 billion in 1986 to the resources to invest in the health and welfare of the US$ 143 billion in 2005. In the field of AIDS vaccine R&D, funding grew world’s people.” from US$ 327 million in 2000 to —Ban Ki-Moon, United Nations Secretary-General US$ 961 million in 2007 (HIV Vaccines and Microbicides Resource Tracking Working Group, 2008). Additionally, As a PDP working to ensure the product development partnerships development of a safe and effective (PDPs)—currently representing 23% preventive AIDS vaccine, the International of all R&D spending for neglected AIDS Vaccine Initiative (IAVI) analyzes diseases—have been critical in and advocates for improving mechanisms accelerating activities by collaborating that provide adequate financing for with both public and private sectors on R&D in global health technologies. This R&D (Moran et al., 2009). policy brief reviews recent innovations in Despite such advances, significant health financing and new options under financing gaps deter efforts to improve consideration by groups such as the High- health in resource-limited countries. The Level Taskforce and the WHO Expert Taskforce on Innovative International Working Group on R&D Financing to International AIDS Financing for Health Systems, address current funding gaps. avi Vaccine Initiative Innovative Mechanisms to Support Global Health and R&D MECHANISM PURPOSE FUNDING SOURCE EXAMPLES Recent International Facilitate access to available treatments Donor governments, GAVI Alliance; Global Fund health health funds for neglected diseases in low- and foundations, private to Fight AIDS, Tuberculosis financing middle-income countries donations, IFFIm and Malaria innovations Product- Develop products for diseases that Donor governments, Aeras; IAVI; PATH; Malaria development disproportionately affect low- and middle- foundations, private Vaccine Initiative partnerships income countries through partnerships donations with academia and industry International Generate revenue for immunization Bondholders with IFFIm finance programs and improved health systems in government and facility resource-limited countries philanthropic backing Advance Incentivize industry investment in Donor governments, Pneumococcal AMC market vaccines for neglected diseases foundations commitment UNITAID Increase access to treatments for HIV Consumers (through Chile, Côte d’Ivoire, France, and AIDS, TB and malaria in low- and an airline tax), donor Republic of Korea, middle-income countries governments Madagascar, Mauritius, Niger Proposed R&D funds Support PDP partnerships with industry Donor governments, IRFF, FRIND financing for neglected for product development foundations mechanism diseases options Taxes/levies To alter market behavior or generate Taxpayers, consumers CTT, De Tax, VSC revenue for development of goods and services, private sector Recent Health Financing Innovations International Health Funds combine funding streams to strengthen in 70 low- and middle-income GAVI and the Global Fund facilitate health systems in low- and middle- countries. By borrowing on capital access to existing treatments by raising income countries. Later this year, the markets and disbursing funds to GAVI, funds or pooling money for health Global Fund will try to capture IFFIm generates immediate revenue programs in low- and middle-income private-sector funding to supplement to accelerate access to vaccinations in countries. Revenues come primarily its government support and to fill a low-income countries, and donors make from governments and philanthropies US$ 4 billion budget gap (Anderson, payments over a longer period of time. but also from innovative financing 2009). It expects to issue a new Front-loading resources for mechanisms. Since 2001, the Global financial product, Exchange Traded immunization may minimize future Fund has received US$ 20 billion in Funds, which pool securities and assets assistance dedicated to disease donor commitments, US$ 39 million (similar to mutual funds) and trade on prevention and treatment. In 2007, of which is from UNITAID (see next international stock exchanges. It hopes GAVI disbursed more than page) and US$ 132 million from to encourage hedge fund managers to US$ 630 million of IFFIm funds to (PRODUCT) RED, a two-year-old share their fees with the Global Fund as combat measles, yellow fever, tetanus business partnership that licenses the a means of attracting investors oriented and polio; improve health systems and (PRODUCT) RED brand to companies toward social responsibility. immunization services; and support and donates partial proceeds to the new and underused vaccines (IFFIm, Global Fund. GAVI has received nearly International Finance Facility 2009). However, questions around US$ 4 billion since 2001, US$ 1.2 billion for Immunisation (IFFIm) long-term sustainability remain. IFFIm of which is from the International IFFIm issues government-backed has high administrative costs compared Finance Facility for Immunisation, bonds in international capital markets to multilateral banks that borrow on described below. to fund GAVI-sponsored programs and a larger scale, and it has had difficulty GAVI and the Global Fund plan to to support health system improvements securing legally binding commitments Innovative Financing Mechanisms to Advance Global Health from donors, in part due to concerns strains of Streptococcus pneumoniae. using price negotiations and pooled about creating debt for future It has secured US$ 1.5 billion in donor procurement to increase access to generations. commitments and is expected to save treatments for AIDS, TB and malaria in 5.8 million lives by 2030 (GAVI, World developing countries. More than 70% Advance Market Bank, 2009). It remains unclear to what of UNITAID’s funding comes from a Commitments (AMCs) extent an AMC could accelerate early levy on airline tickets imposed by seven Under an AMC, donors commit to stage research. Since pneumococcal of its 35 member countries, with the paying for a vaccine at a fixed price for vaccines were in late-stage development remainder coming through direct a given period to defray development when the AMC was created, it donor funds. costs and to subsidize procurement essentially served as a procurement UNITAID has the potential to raise by low-income countries. These mechanism rather than an incentive. significant revenue, having generated commitments can create a viable future Additional AMCs for vaccines in early US$ 389 million in 2008. However, market and incentivize private industry development stages may require greater future revenues may be affected by to invest in developing new vaccines for industry risk-taking and significantly the current economic crisis. Moreover, neglected diseases. An AMC also enables higher donor commitments. imposing a mandatory levy can be donors to pay only when a product is time-consuming and politically difficult, brought successfully to market. UNITAID as seen in part by the small number of In 2007, the first AMC was created Established in 2006, UNITAID is member countries that have joined this for vaccines against the most common an international drug purchase facility effort to date. Proposed Financing Mechanism Options R&D Funds for Neglected Diseases would enable air travelers to make a tax to distort market behavior, as well Two mechanisms have been US$ 2 donation to fund UNITAID as the impact of additional taxes in the proposed to bolster neglected disease activities (Douste-Blazy, 2009). The current economic environment. R&D by PDPs. The Industry R&D VSC could generate an additional Facilitation Fund (IRFF) aims to US$ 1 billion annually by 2011, and may De-Tax/Anti-tax Proposal increase industry involvement in further expand to other travel services The De-Tax proposal would allow R&D by financing PDPs’ payments (rental cars, hotels and train tickets). individual businesses to offer consumers to industrial partners (Moran et. al, a discount (e.g. 1% or 2%) on goods 2005). Retroactive reimbursement to Currency Transaction Tax (CTT) and services, which would be used to PDPs would focus on encouraging Proposals to implement a CTT have support projects in low and middle- greater private-sector engagement. surfaced in recent months, aiming to income countries. These contributions The Fund for R&D in Neglected tax foreign exchange transactions, with from businesses would be complemented Diseases

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