Despite verbal nods to global cooperation, equity, and solidarity, the COVID-19 pandemic laid bare a brutal realpolitik: all countries will put their citizens first and vaccinate their own populations, before offering charitable leftovers beyond their own borders. Sub-Saharan Africa, more than any other region, learned this lesson the hard way, as COVID-19 vaccines were too few and too late to adequately scale vaccination coverage. African leaders now increasingly recognize that their only path to real health security (“Never Again”) is through self-sufficiency—and that means developing their own vaccine manufacturing capabilities.
The momentum for local vaccine manufacturing is strong. The African Union and Partnership for African Vaccine Manufacturing have set a target for Africa to manufacture at least 60 percent of the region’s routine immunization by 2040—and several initiatives are already underway to advance this agenda.
There is general agreement that building manufacturing capability will require a financing “kick start”, alongside efforts to strengthen complementary functions such as technology transfer and regulation, among others. Still, recent attention—and financing, including from development finance institutions that are wading into this space—has arguably been more focused on supply-side factors, like building manufacturing plants and workforce capacity.
To this end, the Gavi Secretariat is currently designing an Advance Market Commitment (AMC), intended to subsidize African-made vaccines and provide the needed “pull” for a nascent, competitive industry. But the effort is still in the early stages, and there’s a lot to figure out—fast!—as the Board expects to consider a full proposal at its December meeting.
While we agree urgent action is needed as the window to act on lessons from COVID-19 is arguably shrinking, we also want to make sure any new financial instrument is well-targeted, soundly designed, and ultimately set up for success. This blog raises three big critical yet unanswered questions that are foundational to the entire effort—and that we hope will be top of mind as the Secretariat continues to work out key design features.
Three Foundational but Unanswered Questions Underlying the AMC:
1. What manufacturing capability is the AMC intended to develop?
The Gavi Secretariat is considering varying levels of manufacturing capabilities, as outlined in a recent paper shared with the Board for its June meeting. Still, these considerations appear to be framed much more tactically than strategically. There’s no denying that the specific design features—however complex—will need to be worked out, but the more milquetoast goals put forward seem to fall short of articulating a clear, shared strategic position.
Taking a step back, the effort to develop a novel financing mechanism should be responsive to the capability that African stakeholders envision. Indeed, the objectives suggest two explicitly stated goals in the paper: 1) “substantial, sustainable vaccine manufacturing base in Africa” and 2) “diversified manufacturing capacity to improve supply capacity and resilience; improving access and lowering prices in future pandemics.” But this appears to conflate means (“a vaccine manufacturing base in Africa”) with ends. The end goal here is not necessarily African-based manufacturing per se, but arguably higher-level objectives around advancing industrial policy and/or health security and resilience.
While the paper references the goal of “health security sovereignty”—alongside related ideas like “supply resilience against vaccine nationalism”, “real self-sufficiency”, and “sustainable self-reliance in critical vaccine manufacturing”—it is not entirely apparent if this is an explicitly shared vision. Are African leaders committed to upholding pan-African solidarity? Are African governments truly country-agnostic; would they find it acceptable if all the novel (subsidized) vaccine manufacturing were to be based in South Africa or Kenya? And would countries with these increased capabilities commit to equitably sharing vaccines in a future emergency?
A shared vision and high degree of strategic alignment upstream is a prerequisite for making the kinds of tactical decisions the Gavi Secretariat is currently considering, on a seemingly very tight timeline. Considerations outlined in the Board paper include questions such as:
Should the AMC support fill and finish (F&F) only? Should contract manufacturing “count” toward subsidy?
Should the AMC focus on the most “essential” vaccines, pandemic potential pathogens, platform diversity, or all of these?
Does the AMC need to be more specific in diversifying across African countries? (Some work suggests small population countries like Rwanda or Senegal might be ideal.)
An explicit set of shared principles that stakeholders are working towards would provide a clearer strategic direction to steer planning and design decisions for a new mechanism—especially considering the complexity and political nature of this overall agenda. This would also address an important lesson from the COVID response.
2. What are the underlying assumptions about the economic dynamics of African manufacturing?
The stated goal for a “substantial, sustainable manufacturing base in Africa” could also have very different implications for incentive design, depending on underlying economic dynamics. We see four possible scenarios about the best-case end goal, each with different implications for incentive design.
African vaccine manufacturing would be equally efficient to global standard, except for fixed, one-time costs of developing capacity
Time-limited subsidy to offset fixed costs would be effective, and African vaccine manufacturing could be competitive in medium-term in global market without ongoing subsidy
African vaccine manufacturing would be less efficient in short-term than global standard, but would reach efficiency equivalence in medium-term/after reaching scale
Time-limited subsidy to offset fixed costs and enable scale would be effective, and African vaccine manufacturing could be competitive in medium-term in global market without ongoing subsidy
African vaccine manufacturing is unlikely to reach equivalent efficiency with global suppliers in medium-term, but lower transaction/shipping/import costs will create effective price equivalence for Africa-based buyers in the medium-term
Time-limited subsidy to offset fixed costs and enable scale would be effective and African vaccine manufacturing could be competitive in long-term among Africa-based vaccine buyers
African vaccine manufacturing is unlikely to reach equivalent efficiency with global suppliers in medium-term and the lower manufacturing efficiency is large enough that lower transaction/shipping/import costs will be insufficient to create effective price equivalence to Africa-based buyers in the medium-term
African vaccine manufacturing will need ongoing subsidy/procurement preferences to be sustained, and buyers will have to accept/agree to a higher price long-term. (How much of a price premium is acceptable/ agreed/expected? Which buyers are willing to pay?)
On top of these complex dynamics, there is the undeniably tricky question of how to think about excess or surge vaccine manufacturing capacity. While there is a need for geographically diversified surge capacity everywhere, higher-income countries, at least in theory, have a lot more money to throw at this problem.
While recognizing these complexities, tactical design decisions about the incentive model should be downstream from these foundational assumptions, especially in terms of what “sustainability” means for an African vaccine industry, and the required theory of change for how to get there. Still, it is not fully clear which scenario(s) is/are driving incentive design. And, while Gavi and its partners seek to maximize benefits, they will also need to explicitly acknowledge trade-offs and consider ways to mitigate any potential negative spillovers on the global vaccine market.
3. How much money will be available to back the AMC and what is the path to sustainability?
This is admittedly a chicken-and-egg problem. Donors are unlikely to put up money without a clear sense of the ultimate goals and potential for results. Yet it is tricky to calibrate goals and ambition levels without knowing the order of magnitude budget.
Different available resource envelopes for the AMC would suggest different policy paths and design prospects—and Gavi needs to figure out what level it’s pitching at. Initial indications suggest Gavi is pitching somewhere in the range of $700 million to $1 billion for the AMC. As background, Gavi is already operating in an environment with lots of other “asks” on its overall budget and an upcoming replenishment that will occur within a tough macro-fiscal climate. It might, however, have access to some of the $2.7 billion in leftover COVAX funds; the latest update suggests that a portion of these funds will be committed to COVID-19 vaccines, but about $1 billion could be available for reallocation elsewhere.
Even if the AMC is large enough to overcome the up-front barriers to start-up and market entry, ensuring sustainability and viability of a nascent industry will necessarily require achieving economies of scale. Financial engineering is not a substitute for actual demand—and it is still not clear where the requisite long-run demand will come from.
While Gavi finances a large share of current vaccine demand in Africa, it’s market share is projected to shrink by 2040, as countries—including large ones like Nigeria, Ethiopia, Kenya, and Tanzania—transition away for Gavi support. It’s also not obvious to us that Gavi should provide long-term demand-side financing if the goal is to build self-reliance. Will African governments be willing—and able to afford?—to purchase from these manufacturers? And are individual countries willing to pay a premium for “African” vaccines that are not produced within their own border? If so, for how long?
We acknowledge some of these dynamics are outside of Gavi’s direct sphere of influence, but the Secretariat and its partners should be thinking about the longer-term horizon here, specifically, how the AMC will interact with these demand considerations, amidst uncertainties about future financing, and alongside ways to incentivize demand from country governments. It will also be critical to consider how the AMC intersects with other ongoing initiatives (several of which are backed by the same donors that would also likely support the AMC)—and where and how it can—and cannot—contribute to building the enabling environment that is essential to advance the overall agenda of diversifying vaccine manufacturing.
We’re encouraged to see Gavi and its partners focus on the needed “pull” for a nascent, competitive industry. But, ultimately, decisions about critical design features should be underpinned by alignment among stakeholders on answers to some high-level, foundational, strategic questions. Getting everyone on the same page first, however complex these issues may be, is essential to sound design and eventual success. Missing the mark to do so would be a lost opportunity to respond to the wake-up call delivered by the COVID-19 pandemic.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
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