1. Tania Cernuschi AMC Secretariat GAVI Alliance The Advance Market Commitment Innovative Finance for Development The Advance Market Commitment Innovative Finance for Development

2. 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 What is an AMC? 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. 2 Source: GAVI

3. Price Quantity (& time) 91011 AMC Funds AMC price Low tail price The basic concept The AMC is designed to get life-saving vaccines to developing countries faster and at a sustainable price 15~20 yrs Guaranteed first stage price (AMC price) In return, firms obliged to sell at lower long run price (tail price) 3

4. 1.Accelerate and influence vaccine development 2.Ensure availability 3.Enhance uptake Challenges to introduction of vaccines in developing countries: Challenges to introduction of vaccines in developing countries:  Vaccine formulations and presentation for developing countries  Vaccines may not be available in sufficient quantity at the time of demand  Sustainable, affordable pricing AMC Objectives: Which challenges are we targeting? 4

5. 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 How does an AMC help? The AMC only provides funds if vaccines are developed and are requested by developing countries 5

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

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

8. Center for Global Development http://www.cgdev.org/section/initiatives/_archive/vaccinedevelopment  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 Back 8

9. Disease considered: HIV, HPV, Malaria, Rotavirus, Tuberculosis, Pneumococcus Disease Expert Group Decision: Pneumococcus 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 2006Membership 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 9

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: o Science and technology for effective pneumococcal vaccine are well understood o 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 10

11. AttributeMinimally Acceptable Profile Vaccines sereotypes Must cover at least 60% of invasive disease isolates in target region Must include 1,5,14 ImmunogenicityIn accordance with WHO criteria: non inferiority to a licensed pneumo vaccine Target populationPrevent disease among children < 5, in particular < 2 Safety, reactogenicitySimilar to currently licensed vaccine Dosage and schedule Compatible with national infant immunization programmes and no more than 3 doses in first year of life InterferenceNo significant interaction or interference with currently administered vaccines Routes of administrationIntramuscolar or subcutaneous Product presentationMono-dose or low multi-dose Product FormulationLiquid formulation Storage and cold chainStable at 2-8 °C with shelf life of at least 24 months Packaging and labellingIn accordance with WHO recommendations Product registration and pre-qualification WHO pre-qualified Post marketing surveillanceIn accordance with national regulatory authorities and WHO prequalification requirements Back Target Product Profile 11

12. 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 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 AMC Donor Committee: Analyses report and makes a decision AMC Donor Committee: Analyses report and makes a decision 1 April 2008: Final Report Consultations with stakeholders and empirical analysis/scenarios Consultations with stakeholders and empirical analysis/scenarios Optimising the AMC design 12

13. Economic Expert Group (EEG): Overview of findings Economic Expert Group (EEG): Overview of findings 1. 13 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. 2. 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 Doses (Millions) Updated, December 2007. Source: Pneumo ADIP Strategic demand forecast for GAVI countries – Accelerated Introduction Plan – Vaccine Demand Routine Immunizations 14

15. 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. How to modify the AMC A. Supply commitments How to modify the AMC A. Supply commitments 15

16.  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 DesignFrontloading 1 Tail Price The Donor Committee agreed to mitigate industry’s risk with frontloading of price. B. Mitigate risk by frontloading price 16

17. 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 C. Sequential tendering 17

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

19.  Correct formulation and presentation of vaccines will be developed  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 What does it mean for GAVI-eligible countries? What does it mean for GAVI-eligible countries? 19

20. 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’ World Health Assembly Resolution 60.30 20

21. Thank you for your attention 21

22. Contribution from different sources AMC Price Country Co-Pay Vaccine Price 1 st Eligible Vaccine Available Donor Funds Depleted Time Tail Price AMC Funding Commitment Period Post-AMC Supply Commitment Period Supplier Commitment Fulfilled AMC Donors GAVI Country/Partner payment 22

23. Feeds into AMC-Eligible Vaccine IAC IAC Charter Defines IAC’s functions. IAC Charter Defines IAC’s functions. IAC Bylaws Define IAC’s operational procedures. IAC Bylaws Define IAC’s operational procedures. Terms & Conditions Self-standing attachment to AMC agreements, describes the AMC mechanism: e.g. size of envelope; price for vaccines; TPP; procedures and monitoring for AMC implementation (e.g. functions of IAC); supply arrangements. Terms & Conditions Self-standing attachment to AMC agreements, describes the AMC mechanism: e.g. size of envelope; price for vaccines; TPP; procedures and monitoring for AMC implementation (e.g. functions of IAC); supply arrangements. Offer Agreement Between GAVI and WB: Commitment to subsidize the future purchase of targeted vaccines according to the AMC Terms &Conditions. Offer Agreement Between GAVI and WB: Commitment to subsidize the future purchase of targeted vaccines according to the AMC Terms &Conditions. Donor Grant Agreements Between each AMC donor and WB, sets out grantor obligation, payment schedule and details. Donor Grant Agreements Between each AMC donor and WB, sets out grantor obligation, payment schedule and details. Stakeholder Agreement Between GAVI, WB and grantors: Sets out AMC mechanics for matters relevant to all grantors: e.g. use and application of AMC funds; undertakings of GAVI and WB; payment arrangements; decision- making, monitoring and supervision. Stakeholder Agreement Between GAVI, WB and grantors: Sets out AMC mechanics for matters relevant to all grantors: e.g. use and application of AMC funds; undertakings of GAVI and WB; payment arrangements; decision- making, monitoring and supervision. Supply Agreement Anticipated to be signed by procurement entity (e.g., GAVI and UNICEF), and vaccine manufacturer. Conditions for supply and procurement of vaccines during the AMC and the post- AMC period. Supply Agreement Anticipated to be signed by procurement entity (e.g., GAVI and UNICEF), and vaccine manufacturer. Conditions for supply and procurement of vaccines during the AMC and the post- AMC period. SUPPLIERS Licensed by stringent regulatory authority/WHO PQ Vaccine GAVI- WHO Memorandum of Understanding Anticipated to be signed by WHO and GAVI for review of AMC vaccines through the WHO pre-qualification process. GAVI- WHO Memorandum of Understanding Anticipated to be signed by WHO and GAVI for review of AMC vaccines through the WHO pre-qualification process. back Legal Structure 23

24. UNICEF Procurement agent UNICEF Procurement agent WHO Technical support: Defines TPPs and pre-qualifies AMC vaccines WHO Technical support: Defines TPPs and pre-qualifies AMC vaccines IAC AMC decision making body: oversees establishment of TPPs; recommends vaccines for AMC funding; establishes changes to AMC terms and conditions IAC AMC decision making body: oversees establishment of TPPs; recommends vaccines for AMC funding; establishes changes to AMC terms and conditions DONOR COMMITTEE (DC) credible funding and technical input on appropriate policies and procedures, monitor implementation. DONOR COMMITTEE (DC) credible funding and technical input on appropriate policies and procedures, monitor implementation. WB Provides financial and fiduciary support. Manages donor commitments WB Provides financial and fiduciary support. Manages donor commitments AMC SECRETARIAT Supports IAC; manages pilot AMC; reports to stakeholder committee AMC SECRETARIAT Supports IAC; manages pilot AMC; reports to stakeholder committee back Vaccine, pharma and biotech firms Developing and producing pneumococcal vaccines Vaccine, pharma and biotech firms Developing and producing pneumococcal vaccines GAVI Eligible Countries evidence-based decision to introduce the vaccine, co-payment for vaccine GAVI Eligible Countries evidence-based decision to introduce the vaccine, co-payment for vaccine GAVI Provide operational & programmat ic functions AMC Stakeholders 24

25. GAVI’s Co-financing Groupings * Eligible GAVI countries which had a GNI under $1000 in 2003, and have gone above in 2005 2005 GNI over $1000/Capita* 2005 GNI under $1000/capita & Classified by the UN as “least developed country” (LDCs) 2005 GNI under $1000/capita & Not classified by the UN as least developed country GAVI eligible country meeting post conflict / countries in crisis criteria (independent of GNI/capita) Poorest Intermediate Least poor Post conflict / fragile CategoryDefinition Mutually exclusive groupings 25

26. GAVI’s Co-financing Levels ** The «group of the least poor» will be requested to increase payment 15% annually Poorest Group Intermediate Group Least Poor (starting level) ** Fragile Group First Vaccine$0.20$0.30 $0.10 Second Vaccine$0.15 Third vaccine$0.15  These policies will be evaluated in 2009 and revised in 2010 26