Vaccinating the World's Poorest

In the 15 years since its founding, Gavi, The Vaccine Alliance, has emerged as an important bridge between the companies that make and manufacture vaccines and millions of people in developing nations who have very little capacity to pay for them.

By Michael Dumiak

Last January Seth Berkley found himself once again mixing with the elite at the World Economic Forum in the Swiss resort of Davos. The energetic, most would say tireless, New Yorker is the chief executive of Gavi, the Vaccine Alliance and the former head and founder of the International AIDS Vaccine Initiative (IAVI). In Davos, Berkley was anxiously lining up the last missing pieces for Gavi’s “replenishment” donor conference, due to be held a few days later in Berlin. The organization was trying to raise US$7.5 billion to support its activities for the next five years, with a goal of helping countries immunize 300 million children. This effort, they estimate, could save six million lives. Over the course of their now 15-year history, the Alliance reports immunizing 500 million children.

Worldwide, 73 countries with an annual per-capita income equal to or below $1,580 are eligible for Gavi support. The organization pairs its hefty donor resources with pent-up and guaranteed demand, making a marketplace for vaccines in the world’s poorest places and creating an incentive for pharmaceutical executives to sit down and negotiate lower prices for this market. Gavi is successful at raising large sums of public and private money and acting as a buyer for ‘Gavi-eligible’ developing nations, accelerating introduction of new vaccines in the poorest countries. Gavi also requires participating countries to share in financing vaccine purchases, taking on part of the cost of new or underused vaccines. The Alliance further aims to strengthen the capacity of health and delivery systems within Gavi-eligible countries and to forge partnerships that can assist in the logistics of developing systems to deliver vaccines effectively, even in very difficult-to-reach places.

Despite its successes, Gavi still has its critics, and there are plenty of obstacles to vaccinating poor children that any organization would have difficulty overcoming. There are still many middle-income nations where—because of a lack of resources, conflicts, or the failure of governments to place a higher priority on health care—vaccines are still beyond the reach of large numbers of people. But the interplay between Gavi and its partners is worth close study as similar strategies may be used to get an eventual HIV vaccine, or those against other pathogens such as Ebola or dengue, to the vast number of people who will need them.

Beyond Davos

At 11am on Monday, January 26, the day of Gavi’s replenishment conference in Berlin, the organization was still $250 million short of its $7.5 billion goal. Currency shifts were taking a toll. The euro had hit an 11-year low against the dollar. Donors were swinging in and out: Berkley was surprised by Japan, whose government decided not to pledge at all for the 2016-2020 period. But he still held some cards. “At the end we had some amazing people stepping up,” Berkley says. Bill Gates took the stage that morning in Berlin and said he’d add an extra $50 million to the $1.5 billion he was already giving to Gavi.

Both Gates and Davos are instrumental to Gavi: Gates, as the Bill & Melinda Gates Foundation was Gavi’s first backer; Davos, because the premise of Gavi is to bend market forces and create new dynamics in vaccine economics. The World Economic Forum prides itself on its patina of movers and shakers trying out new ideas and this is where the idea for Gavi emerged. In March 1998 The World Bank convened public health, financial, and pharmaceutical industry leaders out of concern that children in poor nations were not gaining access to increasing numbers of new vaccines that were available to children in wealthy countries. The World Bank call led to Gates-hosted dinners in Seattle and another conclave in Bellagio, Italy, where the idea for Gavi first took shape. The Gates Foundation decided to back Gavi with an initial pledge of $750 million at Davos in January 2000.

 By the time Berkley left Berlin, Gavi successfully raised its target $7.5 billion from donors. As a result, the Alliance will carry a certain amount of clout when it comes to negotiating vaccine prices and implementing its strategic plan over the next five years. Gavi-eligible countries may be poor, but they represent a very large number of people in parts of the world that do not currently use many pharmaceutical products. “Today, nobody thinks about launching a new vaccine without at least asking the question of what they will do about the Gavi markets,” Berkley says. “If you can get these vaccines introduced there, eventually you are building new marketplaces. You are also going to have the biggest effect on disease because there is less likelihood of really good treatment strategies in these countries.”

Michael Haydock, a vaccine analyst at the London firm Datamonitor, points out that Gavi invests in training health workers and educating communities about the benefits of vaccination. “This takes a lot of the onus away from big pharma. If they wanted to access these countries by themselves they would have to invest significant resources for minimal financial return,” he says. “Partnering with Gavi also provides the opportunity to gain higher market share within developing markets, because Gavi-procured vaccines are then more likely to be used as routine vaccines of choice.”

The resulting steady and predictable revenue stream is a boon for manufacturers. Gavi is not the only institution pooling demand to negotiate lower prices: the Pan American Health Organization, a public health agency which serves as regional office for the Americas of the World Health Organization (WHO), has used its revolving fund for 35 years in order to pool resources and procure vaccines at bulk prices for its member states. The United Nations Children’s Fund (UNICEF) also has its 25-year-old Vaccine Independence Initiative, a relatively small kind of revolving credit line for Pacific island vaccine buyers, which brings them the added benefit of bundling demand for orders and using UNICEF procurement expertise and resources.

But it is Gavi that is now, by volume if not by margin, vaccine giant GlaxoSmithKline’s (GSK) largest single customer. Both Pfizer and GSK made concessions in advance of the Gavi donor conference in Berlin. In the current vaccine market, Gavi does not really act as a price-setter, bargaining back and forth, walking away if the deals don’t work. What it does is use its leverage to set a floor price and ensure supply of vaccines to remote and poor places.

Gavi’s Aurelia Nguyen refers to this as ‘market shaping.’ In fact, Nguyen’s job title is Director, Policy and Market Shaping. The idea is to introduce some countervailing forces into the vaccine marketplace to ‘shape’ it in a way that gets this valuable product to the largest amount of people possible, most of whom can’t afford it. The way it works is this: Alliance representatives meet with officials from UNICEF, Gavi’s procurement contracting agent, and set out a pricing strategy. Nguyen says this includes analysis and review of demand for the vaccine, setting target prices, and discussions on terms and length of contracting. UNICEF officials then write a tender requesting suppliers bid for volumes of vaccine (see UNICEF tenders by volume, and prices for vaccines). Berkley describes the Alliance’s role here as trying to create a ‘monopsony,’ a kind of market where there is only one buyer. Suppliers respond to the tender. The manufacturers are then awarded contracts for the volumes at hand.

Nguyen, who used to work for GSK, says Gavi is pursuing three conflicting aims. The first is to find a balance of supply and demand. Second is ensuring appropriate prices for vaccines in the world’s poorest nations. Third is to get appropriate and innovative vaccines to the Gavi countries. “There’s a fundamental tension we deal with,” she says. “If you want to aim for the lowest cost, you may just want to buy from the cheapest manufacturer.” But that could jeopardize a secure supply. A vaccine program with interruptions is no program at all. So, Ngyuen says, she may need to settle for a higher price to find the lowest—but most sustainable—price at which Gavi can buy.

Gavi is described as a market innovator and a model that can spur the development of new vaccines, expand production of existing ones, and influence the market. As the Ebola epidemic raged last summer, for instance, Gavi was able to tell suppliers it would guarantee purchase to the tune of $300 million for a vaccine that doesn’t yet exist.

The model Gavi uses to do this is rooted in market economics. But when it comes to vaccines, and for pharmaceuticals as a whole, the rules of how markets function get a little twisted. Basic market economics starts with supply and demand: higher supply, lower cost, and higher demand, higher cost. For vaccines it’s different and more complex for a number of reasons.

“Supply and demand work only in the most approximate fashion in vaccine markets,” says health economist Joel Hay of the University of California, Los Angeles, Center for Vaccine Research. “Vaccines are not a good like a mobile phone: it is really a product that is dependent on different psychological and social factors,” says Sibilia Quilici, deputy director of health policy at Sanofi Pasteur MSD. One of these factors is what Quilici calls ‘intertemporality:’ the consumer gets something now, pays for it now, but the benefit is in the future and is hopefully something that never happens at all, i.e. getting sick. It is also more complicated on the demand side. “Vaccines are a health product. If you think about antibiotics, if you think about clean water, vaccines are among the products saving the most number of lives in the world. It is essential that access to vaccines is given to every person and every child in the world,” Quilici says. “Knowing that, developing countries cannot afford a product at the same price that Europe or Australia or the United States can. The price has to vary, depending on the country, and has to be adapted to the capacity and the ability of the country to pay for it.”

But how prices are determined for vaccines can be a bit of mystery, according to Amanda Honeycutt, a healthcare analyst at North Carolina-based think tank RTI International. “We don’t have really good answers to how vaccine prices are determined. It’s not really determined in the marketplace in the same way as other goods.”

Quilici argues vaccines are unique. “It is more complex to set a price for a vaccine for many reasons. Vaccines are complex products. You can’t find a generic to compete with it. It is really difficult to produce: they are live products, most of them, even if they are attenuated. A vaccine takes between six and 22 months to produce; 70 percent of that time in production is related to quality and safety. It’s long, and complex, and within the production chain there are many uncertainties,” she elaborates.

All of these factors make the process of negotiating vaccine prices for the poor—for Gavi, or any other organization that would emulate it—rather complicated. This is especially true now that the types of vaccines in development have changed so radically.

Increasing complexity, increasing cost

For decades there were a set of shots administered to babies to protect against what were the leading diseases of the day. These included vaccines against tetanus, measles, rubella, and others. Laboratory-produced vaccines have a 135-year history and even older roots, with most of these basic vaccines being introduced in the postwar years of the 20th century. The medical College of Physicians of Philadelphia, which operates the History of Vaccines website and its handy timeline dates the contemporary “vaccine era” to the late 1950s when the combined diphtheria, tetanus, and pertussis vaccine took hold after introduction in 1948. These vaccines were highly effective and comparatively cheap.

As the pharma industry entered a blockbuster-era in the 1980s and 1990s, vaccines languished and were considered unprofitable. It was not so long ago that academics wondered if pharma would give up vaccine production altogether. It’s a little different now: the global vaccine business, Quilici says, is a $23 billion industry. Compared with global pharma’s $300 billion a year, though, it’s niche.

A big change, GSK’s Thomas Breuer says, came nearly 15 years ago with the introduction of Prevnar 7. Breuer is a former physician and epidemiologist who has worked with the Robert Koch Institute, Germany’s frontline public health body, and is now GSK’s chief medical officer for its vaccine operation and a member of the company’s management board.

Prevnar 7 protects against Streptococcus pneumoniae, which causes the bacterial form of meningitis and several other diseases from pneumonia to bronchitis. The ‘7’ in its name refers to the seven serotypes of pneumococcal bacteria against which this multivalent vaccine is effective. While a multivalent vaccine against pneumococcus had been on the market since 1977, it wasn’t terribly effective and did not protect infants under two from invasive pneumococcal disease. With Prevnar, researchers took advantage of a new wave of boosters and adjuvants to increase the vaccine’s potency. Prevnar is a conjugate vaccine—the vaccine antigens are attached to an engineered carrier protein, in this case a diphtheria protein, which is intended to increase the immunogenicity of the vaccine. The first conjugate vaccine was introduced against H. influenzae type b in 1987. Prevnar took advantage of further developments of conjugate technology to boost antibody response to the vaccine, increasing its effective duration and overall potency.

Breuer says that Prevnar 7 changed more than the way vaccines were developed and manufactured. Pfizer, which acquired the vaccine when it bought the developer, Wyeth, introduced a new way to price vaccines with Prevnar 7. This new vaccine was priced comparably to other products in the pharma portfolio, even to high-margin items like the cholesterol-lowering drugs known as statins. “They did real health economic modeling and cost-effective analysis to bring home the value of their vaccine,” Breuer says. “This was largely adopted by companies, including GSK.” This made Prevnar 7 able to hit the market at about $58 a shot.

There are now several multivalent vaccines on the market: more and better pneumococcal conjugate vaccines (PCV) that protect against 13 strains of the bacterium (Prevnar 13), for instance. Other specialized new vaccines also made their mark in the last decade, such as those against human papilloma virus (with two vaccines on the market: Gardasil from Merck and Cervarix from GSK) or rotavirus, (with two vaccines on the market: Rotarix, from GSK and RotaTeq, from Merck). Many of these newer vaccines are now part of the basic immunization package recommended by national health agencies in many countries.

Quilici says vaccines are an exciting field. “You have preventive vaccines, you have more and more therapeutic vaccines, and they’re working more and more on how they are administered,” she says. “Today we have a needle, but maybe in two years we have a patch, or an orally administered dose that is safer, less painful, with fewer side effects. We have vaccines against infectious diseases but hopefully we’ll have a vaccine against HIV and against cancers.”

But as vaccines that have more complex development and production processes, and therefore higher price tags, join the slew of other routinely administered shots, the total vaccination costs are increasing exponentially. The US health care system has its own troubles with vaccine pricing, as outlined by Elisabeth Rosenthal in The New York Times. Rising vaccine prices, as Rosenthal explains, are putting increasing pressure on doctors, patients, and public health budgets. Now, consider the poorest countries in the world. “Vaccines are a great buy,” says Robert Steinglass, Immunization Team Leader for the United States Agency of International Development’s Maternal and Child Health Integrated Program. “But the perception of their relative expense obviously depends on the context of the local economy into which they are introduced.”

In the last decade the price for the basic set of immunizations, according to figures from Médecins Sans Frontières (MSF), ballooned in Gavi-eligible countries by 2,700 percent to $38 in 2011 for a package against 11 diseases, up from $1.37 in 2001 for a package against six diseases—tuberculosis, polio, measles, diphtheria, tetanus, and pertussis. But the most recently developed in the original package of six vaccines was the combined diphtheria, tetanus, and pertussis shot approved in 1948. The newest vaccines for pneumococcal infections and rotavirus account for 70 percent of the overall cost, MSF says.

“There is no such thing as an expensive vaccine unless you specify the parameters against which expensive or cheap would be defined. Vaccines must give value for money judged against criteria of cost effectiveness,” says David Salisbury, former director of immunization for the UK Health Department and an analyst for the think tank Chatham House. “If they are cost effective, then the price is almost irrelevant—the health and wider economic benefits outweigh the costs.”

Philip Jacobs, an economist in the University of Alberta’s department of medicine and author of “Economic Evaluations in Vaccine Policy Decisions,” argues that vaccines are less cost effective today and says the initial price for vaccines introduced to cover new pathogens and illnesses will continue to increase, often drastically. “Vaccine manufacturers and public health people used to call vaccines the best bargain available in health care. I don’t think you would hear that argument today. The market has been growing, but the vaccines are less cost effective.”

But Quilici says any pharma product on the market has to prove that it is at least in some way cost effective. “It is a new era for vaccines. They are not working in the same way as the ones developed in the 20th century,” she says. “They are more expensive because of that. There is always a balance with the cost of the disease itself. Prices may be expected to increase but they will stay in balance with the cost of the disease that you want to prevent. For our system, it is always like that: how much are we willing to pay to avoid having to pay for damage in terms of disease.”

Researchers working to develop even newer vaccines, like those against HIV and multi-drug-resistant TB, could potentially face even higher development and production hurdles. Oxford postdoc Gareth Betts at the Nuffield Department of Surgical Sciences, who has published research on the potential for using multiple viral vectors in new tuberculosis vaccines, says pursuing such a multi-vector strategy could produce more robust and powerful shots, reducing the need for multiple injections, but would also drastically increase manufacturing costs and therefore also price (see Making it to Manufacturing, IAVI Report, Vol. 18, No. 2, 2014).

Gavi strikes a balance

What Gavi seeks to do is to bridge the gap between the supply and demand for newer, more complex vaccines. On the supply side, there’s a highly researched, engineered, complex, and effective product that can save a human life; a limited supply source; high research, development, and production costs; and private-sector pressures. On the demand side, there are 45 million babies born every year in poor countries who could benefit from new life-saving vaccines, but who have no ability to afford the product. The Alliance does this in part by negotiating lower prices for vaccines in poor countries, but also by encouraging even very poor governments to co-finance vaccine purchases.

Gavi started with high expectations. The organization originally expected that in just a few years it could speed vaccine price decline through its use of volume purchases to levels that eligible countries could afford to purchase them on their own, says Helen Saxenian at the Results for Development Institute in An analysis of how the GAVI Alliance and low- and middle-income nations can share costs of new vaccines, written with Gavi colleagues forHealth Affairs. But price drops didn’t happen as quickly as expected. “Some of the newer-generation vaccines in particular, such as pneumococcal conjugate vaccine, might not reach the price points of the older vaccines, such as yellow fever vaccine, precisely because of their complex technology—which is something that the GAVI Alliance did not fully appreciate at its start. Some of the newer vaccines are also more expensive because of limited competition among a small number of manufacturers,” the team writes. Co-financing, at least theoretically, the team writes, is an accepted part of Gavi eligibility because it helps build country ownership of the vaccine effort and raise awareness of the value of vaccines and of investing in health care at large. Over the years, Gavi has refined its calculus for what eligible countries can pay in order to distinguish among the poorest of the poor, for example the Democratic Republic of the Congo or Liberia, and more prosperous nations like Cuba, Azerbaijan, and Armenia.

Gavi’s logistical efforts and moves to help shore up domestic health care systems also help keep the markets open that it strives so diligently to create. Bill Gates, in Berlin for Gavi’s conference, seemed most gleeful when talking about a new vaccine delivery mechanism—a kind of high tech thermos that could keep vaccines cold. He even imagined the thermos being used to deliver vaccines to remote parts of the world on the backs of camels.

But the reason Gavi is so prominent is because of its negotiations with manufacturers. “Obviously, Gavi would not exist if the price of vaccines were not a problem for poor countries,” says Stanley Plotkin, an executive advisor to Sanofi Pasteur and a physician who played a role in discovering the vaccine against rubella. By pooling funding and quantifying and organizing the demand for a vaccine, Gavi creates a market for vaccines in poor countries. The market is negotiated among manufacturers, payers, and government agencies in order settle on a lower price for vaccines in poor countries than what is charged in wealthy countries, but a higher price than can be afforded by the poorest countries themselves. This is an example of what the global pharma industry calls tiered pricing. Gavi didn’t invent tiered pricing, but it has used it incredibly effectively.

“Before Gavi the offer for vaccines was at such a low price that manufacturers, and there are not that many manufacturers, decided to leave the market,” says Quilici. “Vaccines were at such a low price that the industry could not really afford to produce them anymore. That’s when Gavi came, considered pricing, and the way to work between manufacturers and publicly discuss pricing. The system is now in such a way that there is a balance.”

But tiered pricing has its critics. MSF argues that the original prices for vaccines are inflated and therefore the reduced prices for poor countries are still too high. Kate Elder, MSF’s access campaign’s vaccines policy advisor, is troubled by the lack of cost transparency. GSK and Pfizer both announced price cuts to their pneumococcal vaccines earlier this year, Elder acknowledges. “But these are all very nebulous definitions and descriptors. Everybody is having this discussion completely in the dark.” She argues that tiered pricing strategies, even adjusted for rates in the developing world, are cover for industry charging as much as it can get away with.

But as Breuer outlines, vaccine pricing is a function of a few set factors: the cost of research, clinical development, infrastructure investment, and manufacturing. Companies must also have some ability to bear large-scale failure when a drug or vaccine in development doesn’t work. Producing Synflorix, GSK’s pneumococcal vaccine, takes 18 months’ production time, Breuer says. Several hundred quality tests have to be performed before a batch can be released on the market. The hurdles faced by vaccine developers today are much greater than those in the mid-20th century. The process of passing these new vaccines through clinical trials with much higher safety standards also add to the overall difficulty of developing a new product. There are also basic business concerns. “We are a publicly traded company, so we have to pay back shareholders who have given us money. They want to see a certain return.”

So, Breuer says, GSK considers tiered pricing as the only way forward. The concept is that each market is different, so prices are set differently (which also makes it more difficult to see a real “going rate” for a vaccine). Higher prices paid in wealthier markets subsidize the company’s development costs and afford it the ability to charge lower prices in places where people can’t afford the full cost. “The price difference can be more than 10 times, but it’s the same vaccine. We don’t have different vaccines for different parts of the world,” Breuer says. “It’s part of our business model to make vaccines available to whoever needs it. But this only works with this tiered-pricing approach.”

MSF’s Elder recognizes how effective Gavi is at negotiating lower prices for vaccines. “You can’t contest that Gavi has brought prices down significantly. This is exciting. It has set the global floor for those prices.” But for her that isn’t enough. “I think it’s therefore Gavi’s responsibility now to make sure those prices continue to come down,” Elder says. “And, now that they’ve introduced those vaccines, also to make sure prices are sustainable and affordable for the countries when they lose Gavi support.”

This happens when countries exceed $1,580 in annual per-capita income. Twenty-four countries are due to graduate from Gavi support this year alone. Three years ago UNICEF tried to launch a ‘middle-income’ procurement project for countries like these. Its initial tender for HPV, PCV, and rotavirus vaccine went out in December 2012. Whether it will be successful long-term remains to be seen: according to UNICEF, only $12.5 million was awarded for procurement of PCV, rotavirus, and HPV vaccines in the tender so far.

This ‘middle-income’ issue will cause further complications in the near future, analysts say. Right now, there’s no such player like Gavi to support immunizations in these graduated countries. “This is a concern for health care across the board. A lot of middle-income countries have large, poor populations. Because they are classified as middle income, they see reduced international assistance. This means there needs to be government will to pick up the difference,” says Mark Hollis, a health economist and life sciences analyst at IHS, a global industry consultancy and think tank. “We see this to some degree, but not across the board. Countries need to increase the amount they are spending on health care. You see them investing in nice shiny military technology but not in vaccines,” Hollis says. But for countries that fall under their aegis, it is clear Gavi is effective in its dealings with vaccine manufacturers.

Others models to lower prices

There are also other factors at play that could bring about lower vaccine prices in the future. Financing tools such as advanced market commitments, which are long-term, single-purpose contracts aimed at bulk purchases or to encourage research and development for new vaccines, could be established and refined. Gavi organized one such commitment for the now-licensed pneumococcal vaccine, bringing in funding from Italy, Norway, Russia, the UK, Canada, and the Gates Foundation.

There are also new Chinese and Indian vaccine manufacturers that are producing vaccines. Berkley is keen to point out that Gavi started in 2000 by negotiating with five suppliers, all in the developed world. Industry consolidation squeezed that further. Now, however, 16 suppliers feed Gavi stocks, and the majority of those are in developing countries.

“What I think is greatly needed is a comprehensive study of the barriers to new vaccine development and introduction,” says former US National Vaccine Program head Walter Orenstein, who is now associate director at the Emory Vaccine Center. He cites a call this summer in the New England Journal of Medicine by Plotkin, Princeton University molecular biology and infectious disease expert Adel Mahmoud, and Jeremy Farrar, director of the UK’s Wellcome Trust, for a $2 billion global vaccine development fund to fill the gaps left by market inefficiency and public-sector inability or unwillingness to go further in targeting vaccines for infectious diseases.

New partnerships could change the economics of vaccines even further. Over the last 10 years, the international non-profit organization PATH worked to hasten the delivery of a vaccine for Japanese encephalitis (JE). The organization also identified a Chinese vaccine supplier and worked with the WHO to advance the vaccine through clinical trials. PATH then bargained with the supplier to secure an affordable public-sector price.

On April 1, the southeastern Asian country Laos began an immunization program for JE with support from Gavi, UNICEF, the Bill & Melinda Gates Foundation, and PATH. The Chengdu Institute of Biological Products will supply the vaccine, marking the first time Gavi provided funding to a country to use a Chinese-manufactured vaccine.

Chengdu’s price for its Japanese encephalitis vaccine for Gavi is 42 cents. That makes it cheaper than an American postage stamp.

Michael Dumiak reports on global science, technology, and public health and is based in Berlin.