International Finance Facility for Immunisation (IFFIm) and Universal Access

1. International Finance Facility for Immunisation (IFFIm) and Universal Access Robin Gorna, UK Department for International Development (for Carole Presern)

2. Innovative Finance • Monterrey and High Level Panel on Financing for Development 2001: an increase of US$50 billion p.a • G8 • UNGA 2005 and Special Session 2006 • 1 March 2006 French Ministerial Conference on Innovative Finance, UNITAID • Other possibilities – debt swaps. But, need long term, guaranteed finance

3. What was the problem? • MDGs off-track • Significantly more resources needed for for development (US $4 billion) • 30 million children without basic vaccines annually, 3 million deaths • Outcomes needed now - frontloaded

4. How? • Frontloading principle • Long term pledges from donors used as security to issue bonds on capital markets • Bonds provide immediate resources for investment in development outcomes (same principles apply for Universal Access) • Repaid over longer term by donors on annuity basis

5. What is the IFFIm? • An IFF for immunization (IFFIm) has been proposed as a pilot for the IFF mechanism • On 9 September 2005 IFFIm was launched in London with five donors - UK, France, Italy, Spain, and Sweden: now Norway and Brazil have announced contribution as well • Estimated disbursable of $3.2 billion before 2015 • Ongoing effort to secure resources from additional donors to reach $4 billion resource goal • Target date for first bond issuance is 4 October 2006 • Works through GAVI Alliance; partnerships with WHO, UNICEF, Gates, World Bank and many others for technical expertise

6. Components of the IFFIm • Donors enter into 20 year legally binding commitments • These commitments are leveraged in the bond market • Proceeds distributed to countries and for supply procurement • Resources nominally split 50/50 systems and vaccines • GAVI purchases under-used vaccines and strengthens health systems in 72 countries

7. Offers of DTP + HepB Vaccine to UNICEF For both WHO prequalified & non-prequalified vaccines 12 $1.20 Weighted average price Weighted average price 10 $1.00 $0.80 8 Number of Manufacturers Price per Dose $0.60 6 $0.40 4 $0.20 2 $0 2001 2002 2003 2004 2005 2006 Predictable, long-term flows can accelerate market forces GAVI’s significant resources have stimulated the entry of additional manufacturers for combination vaccines, resulting in a price drop ultimately delivering more vaccines to children

8. IFFIm Leverage in Market Price per dose Source: CGD Working Paper “The costs and benefits of front-loading and predictability of immunization”

9. Implications of the IFFIm • New donors • Countries not previously contributing to GAVI attracted by innovative nature of IFFIm supplying additional resources • Influencing the market • Long-term predictable commitments allow longer-term planning for supply strategy • More flexibility for contracts with manufacturers with a potential to negotiate a lower price or accelerate supply through strategic use of long-term contracting • Better planning and sustainability for countries • Commitments can be made to countries over longer-term allowing for better integration within national planning cycles and longer lead time to plan for country financing and eventual sustainability

10. Cost vs. Benefit Additional IFFIm impact IFFIm Funds Continued growth of current funding Continued gains in lives saved due to growth of current funding The IFFIm raises additional monies through a borrowing mechanism (securitization)….. …but saves many additional lives more quickly.

11. Is It Worth the Cost? • Principal IFFIm benefits are: • Accelerating coverage of immunisation with traditional and new and under used vaccines, and • ‘pulling’ the vaccine industry through predictable market, leading to increased industry capacity and lower vaccine prices • Key benefits: 5.3 million additional children’s lives saved over 10 years (Africa 3.1 million, Asia 2.1 million and others 0.1 million) • A further 5 million adult lives saved through HepB • Estimated “financial cost” of IFFIm at 3.5% against IRR of accelerated benefits of 18%

12. Main criticisms of IFF • Is it an alterative to 0.7? • New EU target? • Borrowing for development? • Repayments too high? • What happens to aid flows after 2015? • Is it additional? • Absorptive capacity?

13. The case for frontloading • Center for Global Development estimates rate of return of frontloading at over 30% • Other estimates between 20-90% • Against a borrowing cost of 5% • First bonds to be issued 4 Oct 2006 • If frontloading US$4 billion can save US$4 billion then potential for other sectors or at higher scale very exciting

14. Fit with IDPF/UNITAID • Complementary – preventable diseases and three pandemics – largest contributors to morbidity and mortality • UK is actively engaged with UNITAID • Actively increasing regular ODA, and has committed UK Stg 1.5 billion from regular ODA to AIDS over three years

15. Relevance for Universal Access • Large amounts of innovative, traditional ODA, domestic finance will be needed to meet the MDGs • IFF is complementary: Critical mass of donors prepared to invest long term (as for UNITAID etc) • Resource needs will grow, particularly in R and D, so all possible sources need to be tapped • Does not complicate aid architecture: Working through established partnerships; country based allocation system