Tania Cernuschi AMC Secretariat GAVI Alliance

1. The Advance Market Commitment Innovative Finance for Development Tania CernuschiAMC SecretariatGAVI Alliance

2. 2 What is an AMC? Source: GAVI An AMC is a pull funding mechanism, additional to current package of solutions, e.g. push funding, support for purchase of current products, system strengthening. A financial commitment by donors to subsidise vaccine purchase at a set price, if & when: • they are developed • meet minimum specified criteria • demanded by GAVI-eligible countries

3. 3 The basic concept Guaranteedfirst stage price (AMC price) Price AMC price In return, firms obliged to sell at lower long run price (tail price) AMC Funds Low tail price Quantity(& time) 15~20 yrs 9 10 11 The AMC is designed to get life-saving vaccines to developing countries faster and at a sustainable price

4. Which challenges are we targeting? • Accelerate and influence vaccine development • Ensure availability • Enhance uptake Challenges to introduction of vaccines in developing countries: AMC Objectives: • Vaccine formulations and presentation for developing countries • Vaccines may not be available in sufficient quantity at the time of demand • Sustainable, affordable pricing

5. How does an AMC help? • The AMC incentivises: • COUNTRIES – Guarantee of future financing before funds needed to purchase doses; predictability of long term tail price • INDUSTRY – Assurances of future price as incentive for more timely investment by industry; new “market” can bring in additional firms The AMC only provides funds if vaccines are developed and are requested by developing countries

6. AMC timeline Publication of Economic Expert Group Final Report 1 April 2008 Launch of the Pilot AMC: 1.5 billion US$ Feb. 2007 G7: Launch of consultation process on pilot AMC 2005 Implementationdetailsdefined May 2008 2008 2005 Disease Expert Committee: Recommendation on Pilot Feb. 2006 Donors, GAVI and World Bank preparing AMC Pilot implementation Legal Agreements Signature of Final T&C, Donors, Stakeholders' & Offer Agreements July 2008 • Role of differentorganizations defined • IAC members selected by panel of public health leaders • TPPapproved by DG of WHO – Dec. 2007 • Consultations with different stakeholders • M&E Study • LegalAgreements Publication of ‘Making Market for Vaccines’ 2005

7. AMC timeline (cont’d.) T&C, Offer, Stakeholders’ AgreementSigned 2008 ThirdVaccine Approved (2016) SecondVaccine Approved (2012) First Vaccine Approved (2009) 2030 2008 GAVI eligible countries can apply for AMC approved vaccines through regular application procedures Supply Agreement Price guarantee Manufacturing capacity Companies sign on Vaccines delivered Guarantee terms set Contract binding on sponsors Product specifications set through TPP

8. Center for Global Development • Ruth Levine Vice President for Programs and Operations and Senior Fellow • Michael Kremer Gates Professor of Developing Societies, Harvard University Department of Economics • Alice Albright CFO, GAVI Fund http://www.cgdev.org/section/initiatives/_archive/vaccinedevelopment Back

9. Disease Expert Group Membership Composed of a range of experts in public health, developing country health systems, legal affairs and immunization Chair: Dr. Ntaba, former Minister of Health, Malawi Mission: Recommend most suitable disease for pilot AMC Timeline:Paris, February 2006 Disease considered: HIV, HPV, Malaria, Rotavirus, Tuberculosis, Pneumococcus Decision: Pneumococcus

10. Why pneumococcal diseases? • There is a high disease burden: Potential to prevent 5.8 million deaths by 2030 • Quick measure of effectiveness of AMC concept: • Science and technology for effective pneumococcal vaccine are well understood • There is robust pipeline that includes several efficacious vaccines for target countries • Importance of accelerating the development, capacity scale-up and reducing manufacturing costs • Cost-effective intervention: Pneumo vaccines are likely to fit into existing delivery systems; concerns about growing antibiotic resistance Back

11. Target Product Profile Back

12. Optimising the AMC design ECONOMIC EXPERT GROUP Lead world experts in development economics, health economics, contract law, vaccine delivery systems, vaccine business development, public health Mission: Recommend financial terms of AMC Timeline: Summer 2007- April 2008 Consultations with stakeholders andempirical analysis/scenarios 1 April 2008: Final Report AMC Donor Committee: Analyses report and makes a decision

13. 13 Economic Expert Group (EEG): Overview of findings 1. • SPECIAL NATURE OF PNEUMO • Key issue is to incentivize manufacturing capacity • Demand risk • A lucrative market exists in high- and middle-income countries • There is relatively little competition likely at least in early years

14. Modify the basic AMC structure to increase efficiency and efficacy of AMC. In particular, need to ensure building of sufficient capacity to meet GAVI demand 2. Strategic demand forecast for GAVI countries – Accelerated Introduction Plan – Vaccine Demand Routine Immunizations Doses (Millions) Updated, December 2007. Source: Pneumo ADIP

15. 15 How to modify the AMC A. Supply commitments Companies should commit to supply portion of forecast developing country demand. In return, companies would be apportioned access to share of AMC’s $1.5bn resources. For example, if a company guarantees to supply 30% of forecast demand, then 30% of available AMC funds would be allocated to subsidise purchase of its vaccine. After these funds are used up, the company would be obligated to supply a proportional amount vaccines at AMC tail price.

16. 16 B. Mitigate risk by frontloading price • If demand substantially less than anticipated, frontloading reduces firms’ financial exposure. • Firms value earlier revenues. • Frontloading would not increase overall amount of AMC subsidy that any one company receives. It only means that each company receives its portion of an AMC faster – but would also transition faster to supplying at low tail price. Framework Design Frontloading 1 The Donor Committee agreed to mitigate industry’s risk with frontloading of price. Tail Price Tail Price

17. 17 C. Sequential tendering The AMC funds will most likely be divided and allocated within sequential offers. The first offer would be available from start of the AMC and accessible for all companies that produce vaccines in the early years. The remaining funds would be made available under future offers, during later years of the AMC period. WHY? • Uncertainty about demand will be resolved through first round of tender/delivery • Permits market to be split among additional entrants (potentially including emerging) • Increases responsiveness to country choice

18. 18 D. Ensure there is low and hard cap on tail price Price AMC price 14 The AMC ensures the long term price is sustainable in the long term AMC Funds Low tail price Quantity(& time)

19. What does it mean for GAVI-eligible countries? • They will become available faster and in the right quantities to cover demand • The price for developing countries will be known years before procurement starts • Availability of support funding is known years in advance • GAVI countries are empowered to chose the vaccine they want • Correct formulation and presentation of vaccines will be developed

20. World Health Assembly Resolution 60.30 We believe the AMC can be an effective ‘incentive mechanism to addressing the linkage between the cost of research and development and the price of vaccines’

21. Thank you for your attention