Transcript Advance Market Commitment Concept & Development Tania Cernuschi Senior Manager, AMC Copenhagen, 26 August 2009 AMC Pneumo Pre-tender Meeting.

Advance Market Commitment
Concept & Development
Tania Cernuschi
Senior Manager, AMC
Copenhagen, 26 August 2009
AMC Pneumo Pre-tender Meeting
Objectives
 The problem
 The AMC concept
 The Pneumococcal AMC pilot
 How does the pilot work?
Photo: GAVI-09-Indrias Getachew
 Implications for countries
 Some issues flagged by industry
 Target results & next steps
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R&D for Diseases Affecting Primarily Poor Countries
 Little commercial
investment to
complement public
resources
 High and indivisible
capital investment
costs
 Perceived small and
risky market
opportunity to recoup
R&D costs:
Source: G Finder Report 2008, the George Institute for
International Health
 Limited ability to pay of countries
 Public Good nature of health R&D
 Weak Intellectual Property rights
 Anticipated time-inconsistent behaviour of donor
agencies
 Slow demand materialization
Consequences
 Investment for R&D to prevent/cure
diseases primarily affecting poor countries
is limited: $2.5 billion in 2007
 Many needed vaccines are not developed
 Existing vaccines do not meet developing
countries’ needs for formulation,
presentation, storage, and packaging
 Existing vaccines are not available in
enough quantities to meet large demand
from developing countries
 Lag of 10-15 years between the
introduction of new vaccines in
industrialised and in developing countries
AMC Concept
 The AMC is an up-front legally binding financial commitment by
donors to support purchase of target vaccines for poor countries
if and when they are developed.
 The expected value of the financial commitment should be large
enough to cover risks-adjusted costs of private investment for
development of vaccines and scale-up of manufacturing capacity.
 The AMC can spur increased commercial investment for
vaccines of interest to the world’s poorest countries,
consequently accelerating the introduction of needed vaccines.
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AMC structure
A financial
commitment by
donors
to subsidize vaccine
purchase
at a set price (AMC
PRICE) for a certain
amount of doses,
to allow recouping of
R&D costs,
if and when the
vaccine is developed
according to a
specified target
product profile (TPP)
and if the vaccine is
demanded by
beneficiary
countries.
In exchange,
manufacturers must
continue supply at
manufacturing cost
in the long term.
The manufacturing
cost is paid by
beneficiary countries
(and development
agencies).
An AMC can be
structured in
many ways
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The Pneumococcal AMC pilot
Overarching goal: reduce morbidity and mortality from
pneumococcal diseases. Target: save more than 7 million lives
by 2030
 Main objectives:
• Bring forward the availability of effective pneumococcal
vaccines - scale up of production capacity.
• Accelerate development of second generation vaccines that
meet developing country needs.
• Accelerate vaccine uptake - predictable vaccine pricing for
countries and manufacturers.
• Test AMC concept
 Pneumo AMC financial commitment: support pneumococcal
vaccine market with US$ 1.5 billion
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Why pneumococcus?
The decision to target the first AMC to pneumococcal
vaccines was made by a Disease Expert Committee chaired
by Dr. Hetherwick Ntaba, former Minister of Health, Malawi

High disease burden

Pneumo vaccines are likely to fit into existing delivery systems;
concerns about growing antibiotic resistance

Economics, not science, is obstacle to introduction in poor
countries

Good value for money: the pilot AMC will leverage the
investments that industry has already made in R&D driven by
affluent and middle-income markets

Importance of accelerating the development of new vaccines,
capacity scale-up and reducing manufacturing costs

Quick measure of effectiveness of AMC concept
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Which pneumococcal vaccine are we targeting?
Attribute
Minimal Acceptable Profile
Vaccines serotypes
• Must cover at least 60% of invasive disease isolates in target region
• Must include serotypes 1,5,14
Target population
Prevent disease among children < 5, in particular < 2
Dosage and schedule
Compatible with national infant immunisation programmes and no more than 3
doses in first year of life
Routes of administration
Intramuscular or subcutaneous
Product presentation
Mono-dose or low multi-dose
Product formulation
Liquid formulation
Storage and cold chain
Stable at 2-8 °C with minimum shelf life of 24 months
Product registration and
pre-qualification
WHO pre-qualified
Source: Vaccine: pneumococcal vaccine – Technical Product Profile (TPP)
http://www.vaccineamc.org/updatedec_08.html
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How does the Pneumococcal AMC work?
 Italy, UK, Canada, Norway, Russia, Bill & Melinda Gates
Foundation have committed to support pneumococcal vaccine
market: $ 1.5 billion (AMC subsidy).
 Interested companies who develop an appropriate vaccine
commit to supply certain quantities of the vaccine for 10 years.
 As GAVI eligible demand the vaccine, companies receive $ 7 per
dose (AMC price) for about 20% of the initial doses of vaccine funded by the AMC subsidy; allows quick recouping of investment
costs.
 In exchange, companies are required to ensure the supply of the
vaccine for the remaining doses at a price equal or below $3.50
per dose (tail price cap). Price close to manufacturing cost to be
funded by beneficiary countries and GAVI.
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The process
Step 1
Donors
Financial Support
Donors
provide AMC
subsidy
World Bank
Financial
Management for
Donor Funds
WB manages AMC
subsidy disbursing it to
UNICEF as needed
Step 4
UNICEF
Procurement
Agency
Manufacturers
Develop and
produce vaccines
Step 3
UNICEF Call for
Supply Offers
Countries
Decide to adopt
vaccine and cofinance
UNICEF
procures
vaccines from
manufacturers
Manufacturer supply offer
Step 2
Application for prequalification
WHO
Technical support
Defines TPPs
Pre-qualification
GAVI
Financial,
Administrative,
Programmatic
support
Entry into a
Supply
Agreement
WHO
prequalifies
pneumococcal
vaccine
GAVI Strategic
Demand forecast
updated biannually
Application for
vaccines
IAC assesses if
the vaccine
meets the Target
Product Profile
GAVI and
countries
contribute to cost
of vaccine
Vaccines
are
delivered
to
countries
UNICEF calls for offers
Million of doses
250,000,000
222
200
200,000,000
150,000,000
127
100,000,000
50,000,000
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-
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Source: AMC website
http://www.vaccineamc.org/files/StrategicDemandForecast.pdf
Supply Commitments
 Suppliers make 10-year commitment to supply a share of the total
demand forecast of 200 million doses annually.
 The AMC provides a directly proportional share of the US$1.5 billion.
AMC Funds
Available
FIRM A
gets $
375M
US$ 1.5 billion
$ 1125M
Example:
 Firm A makes an offer to supply 50M doses
(25% of 200M)
 Firm A is entitled to US$ 375M
(25% of the total US$ 1.5B AMC)
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Funding Sources
AMC Price per Dose
$7
FIRM A
US$ 375 M
AMC subsidy
Tail price cap
$3.50
GAVI
funding
Country Co-pay ( $0.10 - $0.30 per dose
initially) *
$0
2
1stEligible
Vaccine available
4
6
8
supplier’s share
of AMC funds
depleted
10
Years
Supply Commitment
Fulfilled
AMC Period
Tail Period
10 yrs
* Co-financing levels will be in line with the applicable GAVI co-financing policy.
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Example
Firm A:
• commits to supply 50M doses annually for 10
yrs –entitled to up to $375M of the total $1.5B
AMC
• sets its tail price at $2, then $ 375 M disbursed
at a rate of $ 5.00 per dose (top up)
$7
AMC Price
• sells 75M doses at $7 (from $375 M/$5.00 )
Top up:
+ $ 5.00
AMC Envelope
• Sells 425M doses at $2 (from 500M - 75M
doses)
• AMC period = 1.5 years (from 75M/ 50 M
doses per yr)
• tail period = 8.5 years
Tail
Price
$2.00
GAVI & Countries
AMC Period
Tail Period
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What does this mean for GAVI countries?
Same
Country
Applications
IRC Review
GAVI Board/EC
approval
• Countries express their preference on pneumo vaccines
• GAVI co-financing and default policies will apply to the AMC without modifications
• Vaccines are procured through UNICEF
But different
• Vaccines will be available in the right quantities to cover demand
• Availability of support funding is known years in advance
• The price of these vaccines for developing countries is known years before procurement starts
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Demand Risk
Purchase of vaccines from each supplier is dependent on demand
Source of risk:
 Risk is inherent in binding supply commitment
 Fear of demand over-estimation
 Funding contingent upon long-term ODA commitments and
country co-financing
Mitigation:
 AMC subsidy provides financing for capital cost
 Fast AMC subsidy payout for early cash flow
 Partial demand guarantee to ensure subsidy payments (45% of
one year demand – firm order timing)
 Opt-out provision if demand absent
 Production planning based on the rolling 12-months demand
forecast by UNICEF
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Economic Adjustments for Inflation
Inflation adjustment mechanism (Condition 8 T&Cs):
At request of manufacturers,
•
IAC will increase tail price annually up to the cap at rate of
inflation
•
IAC will consider an increase in the tail price cap at rate of
inflation:
•
Each third anniversary of 12 June 2009 or
•
Every time 7% cumulative inflation since 12 June 2009 or
latest inflation review
Requests for increases above inflation rate must be accompanied
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by relevant Cost Information
Independent Assessment Committee (IAC)
Independent Committee of Experts in: Clinical performance &
vaccine delivery systems; Public Health, Contract Law, Health
Economics, Public/Private Finance, Vaccine Business Economics
Selected by IAC Selection Panel (chaired by GAVI – non voting):
1.
2.
IFPMA
DCVMN
3.
4.
World Bank
WHO
IAC’s roles:
1. Approve and modify TPP
2. AMC eligibility determination
3. Monitoring
4. Review and modification of AMC prices
Target results
More
than 7 million deaths averted
by 2030
Companies are
Production capacity
reassured on the terms
of pneumo purchase
before making costly
investment
Increased commercial
investment for
pneumococcal vaccines
developed to meet
demand from GAVI
countries: 2 billion
doses made available
Second generation
vaccines are developed
Accelerated, sustainable
access: $12.75 total for
a 3-shot course of
immunization compared
to $200 in U.S.
Multiple supplier
participation is
encouraged and
competition enhanced
Vaccine security is
enhanced
Vaccine quality
improves over time
while vaccine price
declines
Socially highly efficient:
$33-36 per DALY,
compared to WB $100
benchmark
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Next steps
First call for offers
Q3 (September 09)

legal agreements
signed on 12 June
2009
Vaccines could be
delivered to
countries Q1-Q2
2010
SDF v 0.1 published
on AMC website
(August 09)
2010
2009
First potential
vaccine
Available
Q3-Q4 2009
Design
First Supply
Agreement
potentially signed
Q4 2009
Implementation
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Thank you
Source: GAVI