Increased demand for Gavi-funded vaccines encourages more suppliers into the market and the competition, as well as new technologies, is helping to bring down prices
Achieving low and sustainable vaccine prices for Gavi-eligible countries is one way of making donor money go further and increases the ability of countries to fund vaccines in the long-term.
Lower vaccine prices allow more children to be immunised with a given amount of resources. An active approach to market shaping is essential to achieve this objective.
Various factors influence the price of a vaccine
While prices of traditional childhood vaccines can be very low, the prices of new and underused vaccines supported by Gavi currently tend to be higher. Several factors influence the vaccine price, including:
- Market environment: the number of suppliers producing a quality vaccine suitable for use in developing countries, production capacity and the willingness or ability to supply influence the prices offered to Gavi.
- Gavi’s relative market power: relative market power is how Gavi’s engagement can influence the market. This can be measured, for example, in terms of volumes, revenues and profits relative to other purchasers/markets or products.
- Vaccine production: the technology used to make some vaccines (including pneumococcal conjugate vaccines) can be very complex and therefore expensive. Products containing multiple antigens or serotypes require sophisticated manufacturing processes, which add to costs.
Ensuring a lasting impact on the vaccine market to the benefit of the low- and lower middle-income countries underlies the Gavi business model. In the first ten years of operation, the Vaccine Alliance influenced vaccine prices using several strategies:
Aggregating demand and procurement
Pooling demand and purchasing activities have been effective mechanisms to reduce prices through increasing demand certainty. The creation of a strategic demand forecasting platform and the use of long-term commitments have increased the certainty of demand, enabling manufacturers to plan production more effectively, which in turn reduces the risk of supply shortages and allows Gavi to obtain lower prices.
Gavi’s impact is evidenced by the changing production and supply base, in particular with pentavalent vaccines, and accelerated price decreases. As Haemophilus influenzae type b- and hepatitis B-containing vaccines have shown, the entrance of new suppliers (including from emerging markets) can increase competition and drive down prices.
Gavi and its partners are also actively engaged in a range of push and pull funding mechanisms to ensure that new suppliers will enter the market in the medium to long-term.
Ensuring increased transparency
Gavi strategy: the market-shaping goal
Gavi adopted market-shaping as one of the pillars of its new strategy for 2011-2015.
The strategy aims to achieve a more efficient match of supply with demand through more intense and targeted competition, the entrance of new suppliers, increased bargaining power for purchasers, and strong advocacy support.
Gavi strongly believes in timely, transparent and accurate information on vaccine demand, supply dynamics and pricing. Since 2011, UNICEF Supply Division, which manages most of the vaccine procurement on behalf of Gavi countries, has been publishing historical vaccine price data.
Encouraging tiered pricing
The significant volume and value of demand from Gavi countries have created sufficient incentives for the pharmaceutical industry to establish a low-pricing tier, allowing Gavi-eligible countries to access the same product at a fraction of the price charged in high-income countries.
Access to sustainable prices for graduating countries
In order to sustain immunisation programmes in countries that graduate from Gavi support, it is important to provide continued access to low vaccine prices.
Gavi has negotiated stable prices for graduating countries for pentavalent, rotavirus and pneumococcal and a request for access to pricing for graduating countries is now part of tenders conducted by UNICEF on Gavi’s behalf. Gavi is also working to encourage additional market entrants with lower priced products to meet the needs of graduated and other lower-middle income countries. Prices for many Gavi supported vaccines (e.g. measles, MR, MenA) are already low and accessible, as such no additional negotiation is necessary to ensure lower pricing for graduating countries.