Tiered pricing: vaccine prices in different markets. Source: UNICEF Supply Division, CDC Vaccine Price List.
For the pharmaceutical industry to offer fixed lower prices for vaccines produced for developing countries, manufacturers need to see a market with sufficient size and income to cover their costs.
GAVI's business model has turned this vision into reality by aggregating demand from eligible countries and raising sufficient funds to finance this large-scale demand.
GAVI's predictable funding and pooling of demand has created an incentive for the pharmaceutical industry to set up a tiered pricing policy, whereby low-income countries are charged less than higher income countries for the same product.
There is now clear evidence of tiered pricing for the following GAVI-supported vaccines:
Between 2006 and 2009, GAVI paid 12% of the US public market price for the one-in-five combination Pentavalent vaccine.1 Thanks to the Advance Market Commitment (AMC) donor group, GAVI expects to pay, at most, 5% of the current US public market price for pneumococcal vaccine.
1CDC vaccine price lists. Atlanta, GA: CDC. May 2010.