Tania Cernuschi
Senior Manager, AMC
Copenhagen, 26 August 2009
AMC Pneumo Pre-tender Meeting

 The problem
 The AMC concept
 The Pneumococcal AMC pilot
 How does the pilot work?
 Implications for countries
 Some issues flagged by industry
 Target results & next steps
Photo : GAVI-09-Indrias Getachew
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 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

 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

 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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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)
An AMC can be structured in many ways 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).
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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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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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Attribute
Vaccines serotypes
Target population
Dosage and schedule
Minimal Acceptable Profile
• Must cover at least 60% of invasive disease isolates in target region
• Must include serotypes 1,5,14
Prevent disease among children < 5, in particular < 2
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
Product formulation
Storage and cold chain
Product registration and pre-qualification
Mono-dose or low multi-dose
Liquid formulation
Stable at 2-8 ° C with minimum shelf life of 24 months
WHO pre-qualified
Source: Vaccine: pneumococcal vaccine – Technical Product Profile (TPP) http://www.vaccineamc.org/updatedec_08.html
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 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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Donors provide AMC subsidy
Donors
Financial Support
World Bank
Financial
Management for
Donor Funds
UNICEF
Procurement
Agency
WB manages AMC subsidy disbursing it to
UNICEF as needed
Step 1
UNICEF Call for
Supply Offers
Manufacturers
Develop and produce vaccines
WHO
Technical support
Defines TPPs
Pre-qualification
Step 2
GAVI
Financial,
Administrative,
Programmatic support
Countries
Decide to adopt vaccine and cofinance
GAVI Strategic
Demand forecast updated biannually
Application for vaccines
Step 3
Step 4
Manufacturer supply offer
Application for prequalification
WHO prequalifies pneumococcal vaccine
IAC assesses if the vaccine meets the Target
Product Profile
Entry into a
Supply
Agreement
UNICEF procures vaccines from manufacturers
GAVI and countries contribute to cost of vaccine
Vaccines are delivered to countries

Million of doses
250 000 000
200
200 000 000
222
150 000 000
100 000 000
127
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

 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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$7
FIRM A
US$ 375 M
AMC subsidy
Tail price cap
$3.50
GAVI funding
Country Co-pay ( $0.10 - $0.30 per dose initially) *
$0
1 st Eligible
Vaccine available
2 supplier’s share
4 of AMC funds depleted
AMC Period
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Tail Period
8
10 yrs
* Co-financing levels will be in line with the applicable GAVI co-financing policy.
10 Years
Supply Commitment
Fulfilled
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Top up:
+ $ 5.00
$7
Tail
Price
$2.00
AMC Envelope
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)
• sells 75M doses at $7 (from $375 M/$5.00 )
• 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
GAVI & Countries
AMC Period Tail Period
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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
• 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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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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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 by relevant Cost Information
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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

Companies are Production capacity reassured on the terms Increased commercial developed to meet of pneumo purchase investment for demand from GAVI before making costly pneumococcal vaccines countries: 2 billion investment 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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 legal agreements signed on 12 June
2009
First call for offers
Q3 (September 09)
SDF v 0.1 published on AMC website
(August 09)
2009 2010
First potential vaccine
Available
Q3-Q4 2009
First Supply
Agreement potentially signed
Q4 2009
Vaccines could be delivered to countries Q1-Q2
2010
Design Implementation
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Source:
GAVI