Dispute over pneumococcal vaccine initiative
Authors: Ann Danaiya Usher
Journal: The Lancet (2009)

The Global Alliance for Vaccines and Immunisation is at loggerheads with experts critical of the financing mechanism that it administers for pneumococcal vaccines. Ann Danaiya Usher reports. The US$1·5 billion Advance Market Commitment (AMC) for pneumococcal vaccines was officially launched in June, 2009, at the G8 Summit in L'Aquila, Italy. With funding provided by Italy, the UK, Canada, Russia, Norway, and the Bill & Melinda Gates Foundation (table), the idea of the AMC is that it creates a market for vaccines that target developing country diseases by putting up a large subsidy and fixing the price at which vaccines are to be sold. But finding the right price has been a key stumbling block for the donors since the scheme was proposed by Italy in 2005.TableDonors to the Advance Market CommitmentDonation (million US$)Italy635The United Kingdom485Canada200Russia80Norway50Gates Foundation50Total AMC subsidy1500 Open table in a new tab Today the AMC is close to being realised with four companies expressing interest in supplying vaccine through the initiative. But unanswered questions remain about what this innovative funding mechanism will really cost and what it will achieve. The initiative that was presented in L'Aquila sets the price per dose to be paid to participating firms at $7 per dose. 18 months earlier, donors were considering a much higher price. An expert group headed by Ruth Levine, a senior fellow at the Center for Global Development—a think-tank based in Washington, DC, USA—had studied the options, and held consultations with vaccine producers to get a sense of their pain threshold. Days prior to what was meant to be the last meeting of the AMC donors (May, 2008) to hammer out the final details of the scheme, Levine's group presented a report to the donors in which they recommended a price of $10 per dose. Norway, alone among the donors, argued that this was too high and feared that the terms were being set “on industry's premises”. Internal documents show that Norway insisted that the price should not be higher than $7, and managed to convince the other donors to agree. The Global Alliance for Vaccines and Immunisation (GAVI) says that the initiative will save 7 million lives by 2030. A logical question is what was gained by pushing the price down by 30%? How many more lives are expected to be saved with this AMC compared with the higher price of $10? The difficulty of finding clear answers to these questions indicates one of the fundamental problems of the years-long AMC process: the lack of transparency in the deliberations, which has hampered informed public debate about this huge aid-financed project. Promoters of the AMC say that in terms of lives saved, nothing was gained. “If a higher AMC price had been chosen, the same number of lives would have been saved”, says Tania Cernuschi, AMC manager at GAVI. Ruth Levine concurs. “The number of doses is independent of the AMC price—although I realise it does sound a little counter-intuitive”, she says. The reason given is complicated. Through the scheme, companies commit to supply a certain number of doses over 10 years. In the initial phase, the price is $7 per dose, after which the firms continue to supply the vaccine at a tail price that cannot exceed $3·50. GAVI covers most of the tail price for the remaining 10 years with developing country governments contributing a small share. GAVI hopes that companies will offer a price below $3·50 and that donors will provide GAVI with additional funds to purchase the vaccines, so that they can immunise more children. It is a lowered tail price that can increase the number of doses purchased, GAVI argues. Cernuschi notes that the $1·5 billion subsidy is fixed. The $7 price is “merely the rate at which the funds are disbursed. A higher AMC price would only mean that the company receives its share of AMC funds at a faster rate, the total amount that it receives does not change.” Levine says: “The per dose price does determine one important thing, the speed at which the company gets its share of the $1·5 billion. The higher the price, the faster it gets the money. So because of that, a $10 price is more valuable to a firm.” Levine says she worries that the lower price will make the AMC less attractive to vaccine manufacturers. “The AMC will not work if it costs a firm more than $7 to manufacture the vaccine. But they might participate even if they just break even, if they see it is good for their corporate image… or they might not.” She insists that her group was operating with imperfect information about manufacturing costs. “There is nothing magic about the $10. It is a matter of how much profit you think industry needs to participate. If you put the emphasis on bringing in more firms, you increase the price. If you are willing to run the risk that one of a small number of firms won't participate because of the lack of profit margin you can lower the price. If we erred on one side, we leaned toward wanting multiple industry participants. We were seeking greater competition.” Adel Mahmoud, a microbiologist at Princeton University, Princeton, NJ, USA, disagrees emphatically with the claim that the price set by the AMC has no effect on numbers of lives saved. In an interview with the journal Development Today in early November, he says: “It is not a calculation that anyone can understand. If there is a difference in price, it will by definition make the number of doses purchased different…If you have a fixed amount of money and you are buying a product for $7 or $10, the amount of product will be different. You either divide by seven or you divide by ten.” Mahmoud, a former GAVI board member and former president of Merck Vaccine, says he was told by Nina Schwalbe, director of policy at GAVI, that the same number of children will be covered at both prices because GAVI will put in its own resources to cover the same number of children. “If GAVI is covering the difference, then why don't they just say that?” says Mahmoud. “Why do they make claims that no-one can understand?” This is not the first time that experts have taken issue with GAVI's transparency over the AMC. Following a GAVI consultation on the AMC with civil society organisations back in April, 2008, Tido von Schoen-Angerer, director of Médecins Sans Frontières' Campaign for Access to Essential Medicines, requested the baseline data on which the AMC was being modelled. He argued that this was needed to enable informed public discussion of the AMC concept. “It is very important that the models that were used by the expert committee will be in the public domain as quickly as possible, certainly before the set up of the AMC has been completed”, von Schoen-Angerer said at the time. GAVI promised to provide the information to MSF, but it was in fact never released. Von Schoen-Angerer points out that the overall cost for GAVI of the AMC will be much higher than $1·5 billion because GAVI (through donor funds) will subsidise the tail price. He estimates that the total cost of the AMC will be $3–5 billion. Another long-time critic of the AMC concept is Donald Light, Lorry Lokey visiting professor of Comparative Health Policy at Stanford University, Stanford, CA, USA. He has written extensively about the AMC, warning that because it is based on a commercial approach to vaccine producers, it results in a price per vaccine that tops up company profits and remains too expensive for poor country governments. Light's most recent report was published earlier this year by Health Action International (HAI)—a non-governmental organisation working to increase access to essential medicines. In it, he writes that GAVI has consistently moved to silence critics of the AMC. Donald Light was part of the first working group of experts set up in 2004 by the Bill & Melinda Gates Foundation to consider the AMC concept. In the HAI report, Light writes that those members of the group—including himself and representatives of the Pan American Health Organization, UNICEF, and WHO—who would not endorse the AMC had their names removed from the group's final report. “The AMC concept was presented to the G8 finance ministers in 2005 as unanimously endorsed [by the expert group], because no negative votes or minority opinions were allowed”, Light writes. To The Lancet, Light says: “GAVI and the promoters of the AMC have repeatedly made false or misleading statements. This [claim that the number of lives saved is not affected by a change in price] is just the latest in a series of misleading statements…For GAVI or Levine to claim that a higher price does not mean fewer children immunised misleads the donors and the public.” Donors and GAVI are currently considering a second AMC. Tuberculosis and malaria are two of the diseases that have been mentioned. But Von Schoen-Angerer at MSF warns against jumping into another AMC. “We consider this premature given the many problems experienced with the pneumo AMC so far and the fact that it still remains to be proven whether this AMC will be successful”, he says. Ann Danaiya Usher covers the AMC for Development Today Ann Danaiya Usher covers the AMC for Development Today