New deal secured for rotavirus vaccines reduces price by two-thirds, signaling potential market impact of US$ 650 million
Geneva, 10 April 2012 – Supply agreements for vaccines against rotavirus have established a new price 67% lower than before. If GAVI had been prepared to buy the vaccine at the previous price, it would have needed to pay US$ 650 million more. This example shows the impact of GAVI’s new supply and procurement strategy as the Alliance strives to shape vaccine markets to benefit children in developing countries.
The rotavirus vaccine combats the main cause of diarrhoea - the second largest killer of children under the age of five. The new agreements announced today will enable the Alliance to respond to ever-increasing demand from developing countries and provide the vaccines to eight developing countries this year for some three million children. By 2016, GAVI plans to roll out the vaccines in more than 40 of the world’s poorest countries, immunising more than 70 million children.
Our market-shaping goal is to maintain supply security and strive to achieve the lowest price for currently available products.
Dr. Seth Berkley, CEO, GAVI Alliance
Two-third price reduction
The bulk of the supply volume contracted —132 million doses—will be procured at a cost of $5 dollars per (two-dose) course, a two-third price reduction compared to the previous lowest price offered to GAVI of US$ 15 a course.
This price drop is the result of an acceleration of GAVI’s market shaping activities and discussions with manufacturers carried out together with the Bill & Melinda Gates Foundation and the Supply Division of UNICEF, key Alliance partners.
"Influencing vaccine markets to the benefit of children in the poorest countries is core to GAVI’s mandate,” said GAVI CEO Dr Seth Berkley. “We strive to make our donors’ funds go further so we can help developing countries protect more children against deadly diseases and accelerate efforts towards reaching the Millennium Development Goals.”
The supply agreements to 2016 announced today were concluded with the two rotavirus vaccine manufacturers, GlaxoSmithKline (GSK) and Merck & Co. Inc. Meanwhile GAVI’s partners, including PATH supported by the Bill & Melinda Gates Foundation, are advancing the development of several promising new rotavirus vaccines by collaborating with emerging country manufacturers in the hope of new market entrances from 2015.
Today’s announcement illustrates how GAVI, through its supply partner UNICEF, applied some of the key elements of its new vaccine supply and procurement strategy. These elements include:
- Committing to an “advance” purchase: by prepaying a portion of the vaccine supply, GAVI allows manufacturers to recoup their fixed costs earlier and offer a more competitive price.
- Offering mid-term market certainty: by extending the deal period - to five years in the case of the rotavirus vaccines deal - GAVI provides manufacturers with increased visibility, another incentive to commit to lower prices in return for more predictability of demand.
- Offering a long-term view of the market: by sending signals of a viable market to future manufacturers, GAVI aims at enlarging the vaccine supplier base and encouraging developing country manufacturers to join the market.
Moving forward, GAVI will continue its proactive efforts to shape the vaccine market, and will seek to apply innovative measures specifically tailored to each vaccine.
“Our market-shaping goal is to maintain supply security and strive to achieve the lowest price for currently available products,” added Dr Berkley. “Today’s announcement shows that we have already taken an encouraging step forward towards this goal. GAVI Alliance members will continuously pursue these efforts to broaden competition and ensure the provision of quality vaccines at sustainable prices.”