Gavi to release funds from pneumonia vaccine subsidy to manufacturer of more affordable vaccine

NEW YORK/GENEVA, JUNE 3, 2020—Gavi, the Vaccine Alliance, announced today it will award $75 million of the remaining $262 million of the Advance Market Commitment (AMC)—a $1.5 billion fund that was launched in 2009 to pay for the introduction of the pneumonia vaccine in developing countries—to the Serum Institute of India, which in December 2019 received quality approval for the pneumonia vaccine. This will help get more affordable versions of this vaccine on the market.

Until now, the only two producers of the pneumonia vaccine have been Pfizer and GlaxoSmithKline (GSK), which already had pneumonia vaccines at the brink of market entry when the AMC was launched. They have received the bulk of the $1.5 billion subsidy pot, on top of the base price for the vaccine that they charge Gavi. Pfizer and GSK charge Gavi roughly $9 for each child to be vaccinated in the poorest countries, and as much as $80 per child for middle-income countries that don’t qualify for Gavi support.

The Serum Institute of India will sell the vaccine at $6 per child to Gavi and to the poorest countries and has previously stated that it will sell it for no more than about $11 per child in middle-income countries—significantly less than Pfizer and GSK’s products. These lower prices could prove ground-breaking in protecting more children against the world’s biggest childhood killer as many countries have not yet been able to afford to start using the pneumonia vaccine at all, even though the vaccine has existed for well over a decade.

The international medical humanitarian organization Doctors Without Borders/Médecins Sans Frontières (MSF) has been advocating for the remaining funds of the AMC to be reserved for the first alternative pneumonia vaccine product to be brought to market, which was one of the original goals outlined for the AMC mechanism, namely to “accelerate the development of vaccines that meet developing country needs.” For the vast majority of the AMC’s life span, this objective remained unrealized, partly because of how the AMC was designed at its inception.

One big shortfall of the AMC was that Gavi was in a weak position to get Pfizer and GSK to lower their prices, and without an alternative and more affordable product on the market, Pfizer and GSK charged high prices to Gavi for the pneumonia vaccine for the duration of the AMC, eating up a significant portion of Gavi’s overall vaccines budget. In fact, roughly 40 percent of the total budget goes to pay for this one vaccine in Gavi’s overall portfolio of 13 vaccines that they finance. Pfizer and GSK have made a combined $56 billion in global sales for the pneumonia vaccine since it was brought to market. The pneumonia vaccine is currently Pfizer’s best-selling product.

As Gavi now draws up plans for a new fund to pay for future COVID-19 vaccines—the COVAX Facility—it is important that the lessons of this previous AMC are taken into account.

Kate Elder, senior vaccines policy advisor for MSF’s Access Campaign, said today:

“It’s encouraging to see that Gavi has finally agreed to award part of the remainder of the AMC funds for the pneumonia vaccine to the Serum Institute of India, the first producer to bring to market an alternative to the Pfizer and GSK products. MSF has long said that no further subsidy should be given to Pfizer and GSK on top of the high price they were already being paid by Gavi, but instead that it should be reserved for a truly new product. Gavi, however, had already locked itself into a flawed AMC fund design and ended up awarding more than $1.2 billion to Pfizer and GSK in extra subsidy—icing on the cake of the $56 billion that these pharmaceutical corporations have already made off of the pneumonia vaccine across the globe.

“The world has been anxiously waiting for over 10 years for a more affordable pneumonia vaccine so that more children can be protected against this childhood killer. This new product could prove to be a game changer in many developing countries that have not been able to afford to protect their children against pneumonia.

“We’re pleased to see that on the brink of the AMC fund’s conclusion, a developing country vaccine manufacturer has won some of the coveted subsidy. However, this positive step should not be taken as an indication of the overall effectiveness of Gavi’s AMC fund in speeding up the entry of alternative pneumonia vaccine producers to the market. Back in 2007, when the AMC was being originally designed, MSF advocated for a different approach of structuring the funds to promote pneumonia vaccine development by alternative suppliers, with the goal of real competition that would lower the price. Instead, an independent evaluation of the AMC has found that Gavi likely paid more than necessary for Pfizer and GSK’s pneumonia vaccines due to a lack of information on the real costs to manufacture their products and a desire to ensure the corporations would participate in the mechanism.

“As Gavi is now in the midst of designing a similar fund to pay for future potential COVID-19 vaccines, the important lessons of Gavi’s last mechanism for buying pneumonia vaccines for developing countries are more timely than ever. The devil is in the details: Gavi should be careful not to simply design another big pay-out for pharmaceutical corporations. If you want to stimulate real competition that will ensure enough supply and affordable prices, you can’t repeat the mistakes of the past.”