Whipping the Covid-19 vaccine market into shape
The COVAX vaccine procurement facility has run a remarkable race, but needs stable funding for long-term success.
- 27 September 2021
- 5 min read
- by The Interpreter
The question of equitable Covid-19 vaccine distribution is likely to be an important topic of discussion at the upcoming G20 Heads of State and Government Summit in Rome during late October. As the cost of a Covid-19 vaccine ranges from US$2–$40, it averages around US$35 to fully vaccinate a person. Yet in many low-income countries, the total annual healthcare budget per person is limited to just US$41. These costs are one important reason why poorer countries have had to rely on international donations of doses.
By the end of 2021, rich countries are predicted to have a cumulative surplus of 1.06 billion doses. These surplus doses should be contributed to COVAX.
Launched in April 2020, the Covid-19 Vaccines Global Access (COVAX) facility is a joint initiative of the World Health Organisation (WHO), the Coalition for Epidemic Preparedness Innovations (CEPI) and the Vaccine Alliance (GAVI). It was set up as a kind of “buyers pool” to incentivise manufacturers and researchers to prioritise the development and production of Covid-19 vaccines. To date, COVAX has shipped almost 110 million donated doses to 86 low- or medium-income countries (LMICs) in Africa, the Middle East, Southeast Asia and the Pacific. But it is far behind its goal to deliver 2 billion doses by the end of 2021 and 1 billion doses to low- and medium-income countries.
Given the delays in vaccinating people in poorer countries, COVAX has been criticised for providing doses to richer nations. As reported by The Sydney Morning Herald, Australia received 500,000 Pfizer doses from COVAX through an order placed in June 2021 – double what Africa received in the same month. And it has provided vaccines to other wealthy countries with high vaccination rates such as the UK, Singapore, Canada, New Zealand, Saudi Arabia and Qatar.
Have you read?
The decision to supply doses to rich countries may seem baffling, but it forms part of an overall market shaping strategy, which has been successfully used in the past by partner organisations like GAVI to ensure manufacturers produce enough vaccines at affordable prices.
What is vaccine market shaping?
“Market shaping is the process of carefully studying and intervening (or not) in a market to nudge it towards a desired outcome,” according to Ian Thornton, manager of the UNICEF Covid Tools and Health Emergency Unit, which is “a sufficient supply of high quality, appropriate and affordable vaccines”.
Market shaping strategies aim for sustainability so prices are affordable, but not so low that it is no longer worthwhile for manufacturers to make their products. These tools include financial instruments and market interventions, such as vaccine bonds issued by the International Finance Facility for Immunisation, risk sharing agreements, procurement guarantees, volume guarantees, and in the case of Covid-19 vaccines, advance purchase agreements under the COVAX Advance Market Commitment.
Other tools that have affected the Covid-19 vaccine market include the WHO Global Covid-19 Vaccination Strategy, which signalled to manufacturers that they should plan for future demand, and the UNICEF vaccine market dashboard, which reveals what price vaccines are selling for, so even countries making bilateral deals pay the most competitive price to manufacturers. GAVI has documented its use of market shaping tools in other vaccine markets, and between 2016 and 2020 this resulted in price and supply stabilisation for yellow fever, pentavalent and pneumococcal vaccines. But the timeline for the successful development of a stable and “healthy market” was a relatively long one, up to 15 years.
The COVAX procurement alliance included a self-financing stream for richer countries like Australia, Canada, New Zealand, Norway, the UK and South Korea, and a stream for 92 lower-income countries reliant on donor doses. “For high income countries (HICs) also pursuing bilateral deals, part of the value proposition of COVAX was as ‘a hedge’, in effect,” says Thornton. “If their bilateral deals fell through, or a given product wasn’t effective against a variant, for example, joining COVAX gave HICs access to some doses.”
Bringing high- and low-income countries together aimed to incentivise vaccine production among manufacturers, creating enough demand for Covid-19 vaccines to make investment in their development worthwhile, and also to give the donor-financed countries more purchasing power, which would drive down prices for all members.
Yet the uncertainty, demand and speed of the 2020 Covid-19 vaccine market was unprecedented. It took time for COVAX to attract members and secure funding, by which point many manufacturers worldwide had their order books full. Thornton explains that many high-income countries did not wait for regulatory approval before making bilateral deals and had more success with them than anticipated. From May 2020, the US signed multiple contracts with manufacturers without regard to price or conditions in a public-private partnership literally called Operation Warp Speed. They also invoked the Defence Production Act 18 times to prevent exports of raw materials for vaccines or the vaccines themselves from the United States.
By the end of 2021, rich countries are predicted to have a cumulative surplus of 1.06 billion doses. These surplus doses should be contributed to COVAX. As Thornton says, given their success with bilateral deals now, “many HICs are forfeiting their allocations through COVAX or re-donating them to support access for LMICs”. For all its problems, COVAX is significantly reducing the historical delay of 15–20 years for vaccines to reach low-income countries after they have been rolled out in rich countries. And COVAX has delivered 190 million vaccine doses to places that would otherwise have struggled to afford them. COVAX should be made permanent, as an international vaccine procurement organisation with stable funding to secure deals and shore up supply more quickly during a crisis. Its experience in market shaping and coordination capacity will be crucial for the long-term global response to the Covid-19 pandemic, and any to come in the future.