FOR DECISION Resource mobilisation strategy

Transcription

1 FOR DECISION Resource mobilisation strategy One of the core tasks of the GAVI Alliance, with the active support of the Board, is to raise finance to fulfill GAVI s mandate by providing sustainable support to GAVIeligible countries for vaccine procurement and health systems strengthening. In recent years the success of GAVI s programs has led to an increase of demand for new and underutilised vaccines, which in the near future will require a similar increase in donor support. GAVI s decision in June 2008 to agree to the change to the AMC terms requiring us to match the AMC donor financing for pneumococcal vaccines, has resulted in a substantial additional increase in GAVI s long term funding needs. We face an emerging funding gap in the context of a global financial crisis. Resource mobilisation is now of the highest priority for the GAVI Alliance. GAVI raised $3.8 billion and disbursed $2.7 billion in For the next period , meeting forecasted country demand for GAVI s programmes will cost $8.1 billion. These investments could avert 3 million deaths, including 2.4 million child deaths and 18 million cases of disease. Of the projected 2.4 million child deaths the GAVI Alliance can avert between now and 2015, 98% would result from the impact of four vaccines: pentavalent (DTP-HepB-Hib), pneumoccocal, rotavirus, and yellow fever. The same four vaccines account for 92% of GAVI s projected vaccine expenditures up to Based on this analysis, a prioritisation of vaccines in the GAVI portfolio would not yield significant savings without a substantial negative impact on reaching the MDGs. Eliminating other vaccines from the portfolio would only yield marginal cost savings. Potential efficiency savings on programme, work plan and administrative expenditures of 10% per year ($780 million in total) are proposed and have been factored in to the expenditure forecasts. The secretariat will prepare a detailed proposal on efficiency savings for the November Board. The GAVI Alliance will start facing a funding gap in 2011 when it needs to raise an additional $305 million. The funding then quickly rises to higher levels from On average over , GAVI s fundraising targets are to raise approximately $400 million per year on top of continued contributions at historical levels. This paper explores scenarios for bridging GAVI s emerging funding gap. It demonstrates that the additional income required to reach Alliance goals can only be raised if GAVI is able to attract new government donors and secure significant increases from existing donors. The Resource Mobilisation Strategy aims to maximise income and operational efficiency. Key elements include: - A fundraising model of institutionalised voluntary replenishments - Systematic identification of priority donors - Active board engagement in donor outreach The Board is asked to: approve the proposed Resource Mobilisation Strategy. 1

2 FOR DECISION Table of Contents 1. Background 3 2. Today s opportunity 4 3. Country demand for GAVI programmes 4 4. Potential for cost saving 6 5. Donor pledges to date 7 6. Financial position and fundraising targets 8 7. Bridging the gap: contribution models Funding model Focused outreach Board engagement 16 Annexes 1 Vaccine costs and performance metrics ( ) 17 2 GAVI income 19 3 Detailed breakdown of income and expenditure forecasts 21 4 Contribution models summary 22 5 GAVI contribution model 23 6 GDP contribution model 24 7 IDA contribution model 25 8 Global Fund contribution model 26 9 Duration of donor commitments Donor prioritization Main characteristics of replenishments of selected comparators 33 Page 2

3 FOR DECISION Resource mobilisation strategy FUNDING GAPS AND HEALTH IMPACT Year Total Annual Average Expenditure forecast with 10% savings (US$ million) (1,127) (1,072) (1,094) (1,136) (1,279) (1,229) (1,211) (8,147) (1,164) Funding gap if zero growth income (US$ million) 0 0 (305) (652) (660) (655) (646) (2,918) (417) Deaths averted if fundraising is successful (x1,000) , Cases averted if fundraising is successful (x1,000) 766 1,029 2,738 2,001 2,762 3,967 4,809 18,072 2, Background The GAVI mission Since 2000, the GAVI Alliance has identified priority vaccines against 10 diseases which together result in the death and disability of millions of people each year and fuel poverty: hepatitis B, Hib, yellow fever, pneumococcal disease, rotavirus diarrhoea, meningococcus, HPV, Japanese Encephalitis, typhoid and rubella. Vaccines against these diseases have great potential to significantly accelerate progress towards meeting the Millennium Development Goals (MDGs). GAVI s mission is to make these new and underutilised vaccines available to the poorest countries in the world without the traditional delay after their introduction in industrialised countries. If left to market forces it could take up to 20 years before the poor have access to these life saving vaccines. The model works GAVI s unique approach to scaling up immunisation programmes and shaping the market for vaccines has shown proof of concept. Vaccines have been procured globally at reduced prices with additional suppliers entering the market as a result of increased demand; countries are increasingly co-financing vaccines; flexible health systems strengthening support is provided to ensure that vaccines and other public health services can be delivered to more people. By the end of 2008, an estimated 213 million children had been reached with GAVI-supported vaccines and GAVI Alliance support had resulted in the aversion of 3.4 million future deaths caused by hepatitis B, Hib and pertussis. Hepatitis B vaccine GAVI s biggest success story in terms of future deaths averted reached 192 million children by end The number of children reached with Hib vaccine rose to 42 million by the end of 2008, a 50% increase in just 12 months. In several countries, including Uganda, Hib meningitis has now been virtually eliminated in young children only five years after GAVI-supported introduction of the vaccine. 3

4 2. Today s opportunity FOR DECISION We must now build on GAVI s outstanding platform and roll out the next generation of new vaccines. GAVI s immediate focus is on those vaccines which will greatly reduce the two top killers of children under 5 pneumococcal and rotavirus infections. The potential impact of these vaccines is unquestionable. In 2008, based on a strategic assessment of new vaccines for possible GAVI support, the Board prioritised those that would have most impact on disease burden in developing countries: HPV, Japanese encephalitis, rubella and typhoid vaccines. With these additions to the existing portfolio, GAVI now has the potential to costeffectively avert 18 million cases of disease and 3 million deaths, 2.4 million of them in children under five years of age between now and Providing these vaccines to countries will be a critical step towards reaching the health MDGs. 3. Country demand for GAVI programmes Demand forecast accuracy GAVI s expenditure forecasts are firmly rooted in projections of country demand, which are produced in collaboration with partners such as WHO, UNICEF, the Accelerated Vaccine Introduction (AVI) consortium, including the former the former Accelerated Development and Introduction Plans (ADIPs), product development partnerships (PDPs) and disease experts. An assessment of the accuracy of historical forecasts shows that country uptake of vaccines closely resembles earlier demand forecasts. Between 2002 and 2006, GAVI s demand forecasts were roughly 90%+ accurate across all vaccines (i.e. within around 10% or less of actual doses procured): GAVI s annual forecast error and actual aggregate procurement volumes (million of doses) DTP Heb B Hib Year Error Volume Error Volume Error Volume % % % % % % % % % % % % % % % 33.6 Average -1% % % 95.5 / Total Source: Sean McElligott (University of Pennsylvania) 1 1 We are grateful to Sean McElligott (Doctoral Candidate, Health Care Systems Department, University of Pennsylvania), for provision of this preliminary analysis. These figures are part of a forth coming publication on vaccine demand forecast accuracy and the determinants of country adoption and rate of uptake of new vaccines. 4

5 FOR DECISION For the newer vaccines such as pneumococcal and rotavirus vaccines which are on the brink of wide-scale introduction in GAVI countries, GAVI cannot yet assess the accuracy of its forecasts. Nonetheless, GAVI has done much to draw upon the best available information and expertise to create long range strategic demand forecasts. In particular, over the past four years, GAVI made strategic investments in the ADIPs and the newly formed AVI consortium, enabling these entities to improve the precision of their strategic long range forecasts as well as to undertake demand generation activities and. Looking at the forecasts by the ADIP for pneumococcal vaccines between mid-2006 to the end of 2007, more countries are expected to adopt the new vaccine sooner than was initially assumed. In general, collaboration with partners (e.g. WHO, UNICEF, PDPs), long-term and secure funding like the AMC, and novel platforms to accelerate and monitor introduction of new vaccines (the AVI consortium) will continue to improve GAVI s ability to forecast demand accurately. Country demand Current demand forecasts indicate that annual expenditures will be $ 1.1 billion in 2009 and reach $1.3 billion in Total cumulative expenditures through 2015 are expected to reach $8.1 billion, including potential 10% cost savings on all expenditures. This figure could vary according to a number of variables, including vaccine price and uptake, but reflects a reasonable estimate of the financial challenges now faced. The chart below breaks expenditures down by programme area. Given the immediate importance of pentavalent, pneumococcal and rotavirus vaccines in the lead up to 2015, investments in new vaccines (HPV, typhoid, rubella and Japanese Encephalitis vaccines) have been pushed back and scaled down based on a more conservative demand forecast 2. The largest driver of immediate expenditure is the scale up of pentavalent vaccines, but the emphasis will gradually shift to pneumococcal and rotavirus vaccines. This paper does not address the core financial needs of GAVI Alliance partners, but donors should take into account that GAVI depends critically on the efforts of many Alliance partners to support vaccine delivery in countries. 2 This conservative demand forecast assumes a slowed down uptake of the VIS vaccines between 2011 and 2015, compared with earlier, more ambitious forecasts 5

6 Forecasted demand and expenditures through 2015 FOR DECISION 1,800 1,600 1,400 1,200 1, # Pneumococcal vaccine Rotavirus vaccine Pentavalent vaccine Future Vaccines* Yellow fever vaccine campaign Meningitis vaccine campaign Other vaccines** Health system strengthening & immunisation support Vaccine introduction support Administration 4. Potential for cost saving * Future Vaccines = HPV, JE vaccines, Rubella and Typhoid; ** Other Vaccines = Hib, HepB, Yellow Fever and Measles Programme prioritisation Given the financial challenges facing GAVI, the Board discussed the possibility of programme prioritisation at the Board Retreat in March The Board highlighted that it would need a comprehensive analysis of the costs and the disease impact of GAVI s current portfolio of vaccines across all GAVI-eligible countries to contextualise future discussions. The results from a preliminary analysis on these issues are presented in ANNEX 1, which provides an overview of key metrics around cost and health impact of vaccines. The GAVI Alliance can avert 3 million deaths between now and 2015, 2.4 million in children under the age of five years. Of the projected 2.4 million averted child deaths, 98% would result from the impact of four vaccines: pentavalent (DTP-HepB- Hib), pneumoccocal, rotavirus, and yellow fever. The same four vaccines account for 92% of GAVI s projected vaccine expenditures up to Based on this preliminary analysis, a prioritisation of vaccines in the GAVI portfolio would not yield significant savings without a substantial negative impact on reaching the MDGs. Eliminating other vaccines from the portfolio would only yield marginal cost savings. Workplan, Administrative and programme cost savings In light of the financial crisis it is even more important that development funding is well spent. The Secretariat is committed to ensuring maximum efficiency in all operations. Based on preliminary estimates, the Secretariat believes that a certain degree of savings 6

7 FOR DECISION could be achieved by trimming work plan and administrative expenditures. Although specific areas of cutting would still need to be identified and negotiated with partners, it is estimated that these savings could reach 10%. Although these savings would not significantly address the resource gap, the Secretariat is committed to implement administrative cuts where possible and work with partners to identify opportunities for other savings. In addition, the Secretariat aims to implement 10% cost savings on programme expenditures from Examples of how this could be achieved include cutting down vaccine wastage rates 3, revising eligibility policies especially for newer more expensive vaccines, tightening disbursement policies in line with country absorption capacity, etc. The feasibility and appropriateness of such measures needs further investigation with partners. A detailed proposal will be prepared for the November board. 5. Donor pledges to date (ANNEX 2) History In 2000, the Bill & Melinda Gates Foundation (BMGF) donated $750 million to the Vaccine Fund, to support the nascent GAVI Alliance. Within a year, the governments of the UK, the US, Denmark, the Netherlands, Norway and Sweden had made their first contributions. By 2006, the GAVI Alliance 17 government donors providing support either through direct contributions or through commitments to the IFFIm or the AMC. Private philanthropy In order to diversify funding and raise GAVI s visibility, a private philanthropy initiative was launched in Private philanthropy from individuals, family foundations and corporations has accounted for $ 2.13 million cash received plus an additional $ 2.75 million in pledged commitments. In addition, work with Spain s La Caixa Foundation to renew its contribution, launch its Business Alliance for Childhood Vaccination, and initiate and promote a La Caixa employee giving program has raised funds in excess of $10 million. In 2009, the GAVI Alliance Immunize Every Child board has endorsed a robust outreach initiative involving natural allies, such as parents and pediatricians, as well as high net worth individuals. The initiative, now in its second year, is growing and over time aims to annually raise at least the equivalent of a contribution from a small- to medium size sovereign donor. Targets are to increase donations from $8 million in 2009 to $12 million in The value of private philanthropy goes beyond the level of mere returns. Multiple funding sources ensure a more stable and predictable funding base in the long term. Importantly, private donations and engagement in development often enhances government support. Spain sets a unique example in this regard. With a Government contribution as well as a private campaign and donations received through the la Caixa bank and foundation, it brings to GAVI a true mix of public and private money, demonstrating strong support for the cause of immunisation across different layers in society. 3 Different vaccines have different wastage assumptions depending the presentation (ie. 10 dose vial, 20 dose vial, 2 does vial). When GAVI buys vaccines for countries, we include a wastage factor. If we reduce the wastage factor for each vaccine by 50% it results in roughly 4 percent savings. We are currently reviewing actual versus projected wastage as well as recently published literature on wastage to see if there is any scope to change the assumptions when we purchase vaccines as this could be a potential area for savings. 7

8 FOR DECISION Cash received By the end of 2008, contributions from government donors (including payments to the IFFIm), the European Commission, the Bill and Melinda Gates Foundation and other private donors, amounted to a total of $2.8 billion (figure 1). $226 million of this amount was not disbursed to GAVI but to the IFFIm, which uses these funds to pay back investors in IFFIm bonds. In the same period, $1.3 billion was levered for GAVI programmes by issuing IFFIm bonds on the capital markets, clearly demonstrating the powerful frontloading effect of the IFFIm. As such, GAVI s total income by the end of 2008 amounted to $3.8 billion (figure 2). Pledges Donors have collectively made firm pledges worth $9.9 billion for the period , including through the IFFIm ($5.3 billion 4 ) and AMC ($1.5 billion) 5. Sources of funding Government contributions, including their share of IFFIm proceeds 6, made up around 72% of GAVI s income to date of $3.8 billion. Donations from the BMGF accounted for most of the remainder of GAVI s income from private sources (figure 3). Of donors collective firm pledges for ($9.9 billion), 68% is channelled through the IFFIm and AMC (figure 4). Four donors account for 78% of total pledges to GAVI. 6. Financial position and fundraising targets The graph below compares annual expenditure projections to 1) guaranteed income and 2) guaranteed income plus direct bilateral donor income at historical levels (green bars). Guaranteed income adds up to $ 507 million per year on average. Beyond 2009 this income is mainly from IFFIm bond proceeds, AMC funding, BMGF contributions and a 4 $5.3 billion is the USD equivalent of the pledges using the prevailing exchange rates at the time of signing of the grant agreements 5 AMC funds are earmarked for the support of pneumococcal vaccines. 6 Bond proceeds have been attributed to the 7 IFFIm donors on the basis of their share of total IFFIm pledges 8

9 FOR DECISION draw down on cash reserves 7 (See ANNEX 3 for a detailed breakdown of income and expenditures). Cumulative expenditure through 2015 is forecasted to be $8.1 billion 8 Average annual expenditure is projected to be $1.2 billion The estimated annual funding need - the difference between projected expenditure and guaranteed income plus available cash - is on average $657 million ($ 4.6 billion over the period ). If historical bilateral contribution levels remain consistent, the incremental new funding need is $ 417 million per year ($ 2.9 billion over the period ). Without this incremental funding: o GAVI s cash position falls below $500 million in 2011 and will fall below zero early in 2012 o GAVI s net asset position becomes negative in The funding gap first appears in 2011 when GAVI needs to raise an additional $305 million and then quickly rises to higher levels from On average over , GAVI s fundraising targets are to raise approximately $400 million per year on top of continued contributions at historical levels. 7 Income forecasts, including a draw down on cash reserves, are based on the assumption that we maintain a minimum of $500 million in cash and investments. 8 This figure could range between $8 billion and $9.6 billion depending on uptake rates and includes 10% cost savings on all expenditures 9 The Net Asset position is calculated according to standard accounting principles and is provided on an unconsolidated basis (i.e. standalone without consideration to the IFFIm). This approach intends to provide the Board financial information on a basis that is consistent with its fiduciary responsibility to oversee the financial condition of the GAVI Alliance on a standalone basis. For this reason, this unconsolidated (i.e. standalone) information does not include the asset base of the IFFIm nor the $1.55 billion in programmatic obligations that are targeted to be discharged by the IFFIm over time. 9

10 FOR DECISION 7. Bridging the gap: contribution models Four contribution models have been developed to explore hypothetical options for bridging an average annual gap of $400 million. Each model is rooted in a different rationale for allocating GAVI s resource needs across the global donor community in light of their historical potential to contribute financially and their political commitment to the causes of development and health. Where donors have made commitments to the IFFIm and the AMC, their future payments to these mechanisms have been discounted to reflect the additional funding required from these donors in the respective contribution models. A summary of the model outcomes is provided in ANNEX 4. GAVI CONTRIBUTION MODEL (ANNEX 5) this model allocates GAVI s resource need pro rata to donors current support to GAVI. Average annual income between 2000 and 2015 on the basis of current donor commitments is approximately $745 million per year. This includes an average of donors direct disbursements to GAVI since the first year of contributing, and an average of annual IFFIm and AMC payments on the basis of expected payments in GAVI s donor base consists of a sub-group of large donors who account for a substantial part of GAVI s income ( donor concentration ), primarily thanks to their contributions to the IFFIm and AMC. The GAVI contribution model shows that if we apply current donor shares to GAVI s actual financial needs, many donors would have to nearly double their support to GAVI, and large donors would have to make even larger contributions to GAVI. It is clear that a strategy focusing only on increasing contributions from existing donors is highly unlikely to succeed. Some smaller donors may have the capacity to increase or even double their support, but the significant increases required from larger or medium size donors could be difficult to pursue. New donors will have to be attracted to the Alliance - in addition to increases from existing donors - in order to bridge the funding gap and reduce the risk associated with donor concentration. GDP CONTRIBUTION MODEL (ANNEX 6) this model is based on adjusted GDP shares of current and potential donors 10. Adjusted GDP 11 is a recognised measure 10 Includes all 23 OECD DAC donors, as well as Brazil, Russia, South Africa, China, Czech Republic, India, Israel, Republic of Korea, Kuwait, Mexico, Saudi Arabia, Singapore, Turkey and a group of smaller donors labeled other which includes Barbados, Estonia, Latvia, Cyprus, Lithuania, Egypt, Iceland, Slovenia, Slovak Republic, Romania, Thailand and Hungary. 11 Adjusted GDP is the product of a country s total gross domestic product (GDP) and its GDP/capita. It is designed to measure a country s capacity to provide foreign aid, which depends on both its absolute economic size and its affluence. By itself, a country s total GDP, converted to a common currency using exchange rates, might seem like an adequate proxy: bigger economies can give more. But consider that Luxembourg and Sudan have nearly the same GDP (just under $50 billion in 2007, converting to dollars using exchange rates). Multiplying GDP by a measure of a country s affluence produces a much more realistic proxy for capacity to give. To measure affluence, we use GDP/capita converted to dollars using purchasing power parities (PPPs). PPPs reflect the fact that a dollar goes much farther in poor countries, where many things are cheaper, and provide a more accurate measure of purchasing power and wealth. Luxembourg s PPP GDP/capita was 10

11 FOR DECISION of countries wealth, combining both absolute and per capita economic wealth. This approach could be seen as parallel to GAVI s co-financing policy where developing countries contribute to the cost of vaccines on the basis of their ability to pay. In this model the financial burden is spread across more donors thereby reducing the risk of donor concentration. Even when the burden is shared more broadly, this model shows that some current OECD DAC donors in particular could fund GAVI at higher levels based on relative wealth. In this scenario, the US stands out as it accounts for 40% of the total adjusted GDPs of all these countries. IDA CONTRIBUTION MODEL - (ANNEX 7) this model attributes shares based on donors pledges to the 15 th replenishment of the World Bank s International Development Association. The IDA is the largest multilateral channel for providing concessional financing mainly for economic growth and poverty reduction and can be seen as an indicator of donors relative commitment to development. The first IDA replenishment cycle was launched in 1960 and yielded $1 billion. The latest 15 th replenishment ( ) in 2007 generated $16 billion in new donor pledges. IDA s donor base includes non-traditional donors such as new EU members states, Mexico, Saudi Arabia, Singapore and Turkey. This scenario shows a more equal distribution of shares compared to scenario B and more accurately approaches a burden sharing framework on the basis of donor commitment to development. Donors like the UK, the US, Japan, Germany and France stand out as significant contributors. GFATM CONTRIBUTION MODEL (ANNEX 8) apportions GAVI s resource need based on donor shares to the Global Fund to fight AIDS, TB and Malaria (GFATM). Shares are based on donor commitments in the 2007 pledging conference for the GFATM s 2 nd replenishment cycle ( ), when donors pledged $9.7 billion. Whereas pledges to the IDA reflect donors commitment to development more generally, pledges to the GFATM can be seen as indicative for a commitment towards health specifically and reflect buy-in to the innovative business model of this organisation, which was based on GAVI s. In this model, burden sharing is distributed among fewer donors than in the IDA contribution model, while the US and Germany stand out in terms of contribution. $80,000 in 2007, almost 40 times Sudan s, at $2,100. So Luxembourg s adjusted GDP is about 40 times bigger too, reasonably suggesting that Luxembourg can afford some 40 times as much support. (All figures are from the World Bank s World Development Indicators database.) 11

12 8. Funding model FOR DECISION Replenishment GAVI had substantial resources available in its early years to finance the support requested by countries and needed by partners in furtherance of the Work Plan. Donors supported GAVI because they were committed to the GAVI concept of bringing new and under-used vaccines to poor countries through an efficient global programme. Funds were pooled to become a source of finance that could be used purely and directly in line with country demand for GAVI s programmes and to have the greatest impact on the vaccine market. Thanks to steady and consistent donor support, GAVI was able to programme flexibly in keeping with countries needs, and to provide long term commitments to countries. In this situation, with relatively significant reserves, spending was guided by demand from countries and a strategy to have significant impact on the MDGs, rather than by actual income. In recent years the success of GAVI s programs has led to an increase in demand for new and underutilised vaccines. This increase in uptake of life saving vaccines has not yet been met by a similar increase in donor support. In addition, GAVIs decision to agree to the change to AMC terms, requiring participation in the AMC for pneumococcal vaccines over and above the anticipated level of AMC donor funding, has resulted in a significant increase in GAVI s long term funding needs. As a result, today s reserves are no longer sufficient to finance future commitments to countries. Fundraising can no longer happen in isolation from country demand as gradual increases in funding have not been keeping pace with scaled up capacity to introduce new vaccines. With a fast approaching funding gap and clear demand forecasted for GAVI s programmes, the ingredients are in place to institutionalise a funding model based on voluntary replenishments. In a replenishment model, demand and expenditure forecasts for a set period of time (e.g. over 3 years) form the starting point for a process in which donors come to an agreement on sharing the burden of this financial need. The process has the primary purpose of increasing the predictability and efficiency of resource mobilisation by providing a means for donors to exchange views on the operations and effectiveness of the organisation, consider its funding needs and arrive at a consensus on contributions. GAVI currently has an ad hoc fundraising model which does not directly synchronize the timing of income with need. In addition, it requires labour-intensive individual donor strategies and outreach. In a replenishment process, efficiencies in resource mobilisation efforts are acquired, thanks to a uniform message on demand and funding gaps over a set period, which can be delivered to all donors at the same time. In addition there are efficiency gains in liquidity management thanks to a synchronisation of replenishment pledges. The Secretariat proposes that GAVI starts planning for the launch of a replenishment process in 2010 in order to increase the probability and predictability of increased income and gain efficiencies in its fundraising and advocacy operations. 12

13 FOR DECISION ANNEX 11 provides an overview of key elements of replenishment models of comparators. Long term predictable funding Long term predictable support gives countries the confidence to plan for the introduction of new vaccines and invest in their health systems. GAVI s capacity to make long-term commitments depends on having secure long-term sources of finance. Currently there are few direct donor pledges with a duration beyond 3 years (see ANNEX 9). The exceptions are Norway and the Gates Foundation; both have made 10 year pledges in 2005, though in the case of the Gates Foundation annual funding was reduced by 50% over the same time period. Only two direct government donor pledges are in place beyond 2009 on the basis of legally binding grant agreements (the Netherlands 2010 and Denmark 2011). Fundraising efforts must focus on multi-year pledges that support GAVI's reputation as a reliable financial partner, thus enabling countries to securely plan new investments in health. Avoid earmarking Earmarking means that donors target their funding towards specific programme areas within GAVI, in line with specific interests. In deference to equity among eligible countries and to ensure maximum impact resulting from its support, GAVI, GFATM and most multilateral institutions rightly encourage donors to accept the model, and to give unrestricted funding 12. Opening up to targeted donations is counter to established harmonisation and alignment principles which strongly encourage untied aid for countries. It will restrict programme flexibility, and is not in line with GAVI s principle to encourage a country-driven approach through the absence of earmarking of funds 13. In addition, earmarked funding would result in a significantly increased administrative burden and cost for implementing countries, and for the GAVI Secretariat 14. The only potential pro to considering earmarked funding is that this could potentially attract some government donors not currently contributing who. Earmarking under certain conditions could therefore be explored, in particular in relation to new vaccines. However, the amount to be potentially raised would have to be very significant to make it worthwhile, and the resourcing implications for the GAVI Secretariat would need to be considered Exceptionally, GAVI receives earmarked contributions from the European Commission, as this is currently the only possibility for accessing funds from this donor. While very welcome, this comes with a significant administrative burden on both sides. The development of grant proposals and reporting in order to obtain reimbursement from the EC (i.e. financial and narrative reporting and an independent verification of expenditures, outside GAVI s regular reporting system) has required significant GAVI resources. 13 GAVI principle 4 14 In the case of the AMC, which could be considered as a large earmarked source of funds, GAVI has actively sought targeted contributions for pneumococcal vaccines because vaccine specific funding is an inherent part of the AMC model which is designed to generate a pull effect on the market in relation to a specific vaccine. 15 For private sector donors there must be more flexibility around targeting. While donor cultivation and outreach is focused on securing unrestricted contributions, some funders from this sector wish to align charitable giving with their philanthropic priorities. This is particularly true of leading foundations, corporations, and prominent philanthropists who have the propensity for major giving. GAVI already affords soft targeting to private sector funders whose giving crosses certain funding thresholds, but then only to restrict contributions for vaccine procurement more generally (no funding for administrative costs), or to support specific GAVI programmes, regions or countries. In these extraordinary circumstances, the team 13

14 9. Focused outreach FOR DECISION Focus on public donors The far majority (>99%) of GAVI s in income comes from public sector sources - either directly or through innovative financing mechanisms - and from the BMGF. Even if private philanthropy targets are met in the coming years, income from this initiative will not exceed 2% of GAVI s total income. An evaluation of GAVI s private philanthropy initiative in 2011 will inform a Board decision around the scope and geographical focus of GAVI s private fundraising efforts. The Secretariat in Geneva will continue to focus its efforts on public donors. Broaden the donor base GAVI s current donor base (17 governments, the European Commission, the BMGF and smaller private donors) includes a small subset of major donors who collectively have provided significant support to GAVI, greatly contributing to a rapid start of GAVI and enabling the launch of the innovative financing mechanisms GAVI has championed. The UK, the US, France, Italy, Norway and the Gates Foundation (ANNEX 2) provide 88 % of aggregate commitments secured to date. This profile suggests that GAVI s existing base of major donors, while substantial, is somewhat narrow and vulnerable to policy directions in a small number of donor countries. In order to overcome this degree of concentration within its donor base, it will be critical that GAVI diversifies its donor base and secures new donors both large and smaller donors; both traditional and nontraditional donors (e.g. the oil-rich countries and new EU member states). It is proposed that the lead donors join in the effort to secure new donors and encourage smaller donors to step up their contributions. The GAVI Secretariat will facilitate and support leading donors in their outreach to existing smaller donors and to the broader donor community. Where government donors are severely constrained in their capacity to commit funding, the IFFIm could be offered pro-actively as a way to spread the financial burden while maximising investment in immunisation up front. Broadening GAVI s donor base will not only help increase funding to GAVI but will also diminish the inherent risk associated with donor concentration. No donors have been lost since 2000 and renewals of contribution agreements have consistently increased funding levels. However, some donors have switched their direct contributions to innovative financing mechanisms (IFFIM and / or AMC). While the IFFIm in particular has shown to be an increasingly important source of predictable income, it is of critical importance that GAVI retains a solid basis of direct, un-earmarked funding. GAVI needs to maintain its base of direct donors to assure that its donor base overall is robust and well-diversified. The IFFIm and AMC programmes are specialised programmes that fulfil certain purposes for GAVI. For example, the AMC provides funding to GAVI specifically to finance the purchase of pneumococcal vaccine. Further, though IFFIm has developed a strong track record in the capital markets, its continued market access is subject to market conditions. Finally, for technical reasons, certain key GAVI funders are not in a position to provide funding through innovative finance endeavors to make clear the challenges GAVI incurs with regard to accounting for and reporting on designated contributions. 14

15 FOR DECISION channels which often require long-term binding commitments. For all of these reasons, GAVI needs to maintain a strong dialogue with both direct and innovative finance funders. Broadening GAVI s donor base will require increased outreach and staff time. The secretariat recommends that the Programme Funding Team is expanded by redeploying internal resources to ensure sufficient capacity at the appropriate levels for intensified fundraising efforts. Identify priority donors In order to identify those donors (new and current) where fundraising efforts could lead to maximum returns, the following parameters are proposed to assess a) donor financial capacity and b) alignment of donor development and health policies with the GAVI mission. Graphs ranking donors on this basis can be found in ANNEX 10. a) ODA / GNI (figure 5) as an indicator of donor commitment to development. b) Health share of ODA (figure 6) as an indicator of donor commitment to health. c) GAVI share of health ODA (figure 7) When a large share of ODA is allocated for health, a low GAVI share reveals a degree of potential underfunding on the basis of the donor s commitment to health d) Degree of underfunding based on adjusted GDP (figure 8) A significant different between a donor s hypothetical contribution in the GDP contribution model and its real contribution to GAVI, reveals a degree of potential underfunding on the basis of wealth. e) Degree of underfunding based on IDA shares (figure 9) A significant difference between a donor s hypothetical contribution in the IDA contribution model and its real contribution to GAVI reveals a degree of potential underfunding on the basis of commitment to a replenishment model for development as reflected by the donor s pledge to IDA f) Degree of underfunding based on GFATM shares (figure 10) A significant difference between a donor s hypothetical contribution in the Global Fund contribution model and its real contribution to GAVI reveals a degree of potential underfunding on the basis of a commitment to global health and a resultsdriven business model as reflected by the donor s pledge to the GFATM g) Special opportunities I.e. (non-traditional) donors planning to significantly increase ODA (see figure 11 for OECD DAC projections of ODA trends); donors with a particular interest in immunisation; outreach opportunities through special connections, with a focus on using the Board to their comparative advantages Implementing strategic outreach An approach to strategic outreach to donor countries is described in the Advocacy and Communications paper. 15

16 10. Board engagement FOR DECISION The GAVI Fund 16 was created to provide financial support to GAVI Alliance programmes and initiatives and a board of prominent individuals was formed to support resource mobilisation and advocacy efforts of the GAVI Fund. The dual structure, which separated fundraising and fiduciary management from policy and programmatic strategies, was designed to enhance accountability. However, over time it became clear the two organisations the GAVI Fund and the GAVI Alliance would be more effective, efficient and accountable as one organisation. Now that the management and governance structures have completed the transition to a single entity, it is timely to revisit the role of board members on the new GAVI Alliance Board in GAVI s resource mobilisation efforts. GAVI s unique public/private nature, and its partnerships between public sector donors, countries, multilaterals (particularly WHO, UNICEF and the World Bank), foundations (particularly the Bill and Melinda Gates Foundation), unaffiliated board members (with varied backgrounds and extensive contacts), the private sector and civil society, puts it is a unique position to leverage maximum influence across a very broad spectrum. Ensuring success will require active participation of Board members. GAVI has already been fortunate in having some Board members, and other high profile figures, who use their connections and status, or experience of fundraising (either from public or private sources) to advocate for GAVI, and to help significantly in fundraising. For example, French board member Gustavo Gonzalez-Canali recently joined GAVI s CEO in high level meetings with European Commission officials and HM Queen Rania and Ms. Graca Machel have acted as powerful advocates for GAVI on numerous occasions. With the challenge ahead, there is scope to do more. As the Board is responsible for overall governance, strategic direction, and also financial accountability, this entails not just meeting commitments, but also ensuring that GAVI has sufficient funds to meet the demands placed upon it by its eligible countries. There are various ways the Board can be engaged: As advocates and spokespeople To help build networks of friends, decision makers, etc Through the fundraising committee providing guidance on resource mobilisation efforts Changing the pace on resource mobilisation in a time of financial crisis is going to require unprecedented efforts, and more proactive engagement by the Board will be of critical value. 16 Formerly called the Vaccine Fund 16

17 Vaccine costs and performance metrics ( ) ANNEX 1 Disease/Vaccine GAVI Vaccine Cost ($M) Country Copayment ($M) Deaths Averted (x1000) <5 Deaths Averted (x1000) Cases Averted (x1000) Long-Term Sequelae Gender Bias HPV $9.55 $ Severe Yes JE $77.87 $ Severe No Measles (2 nd dose) $24.82 $ No data available Meningitis A $ $ , Severe No Pentavalent (Hib) $2, $ , Severe No Pneumococcal $2, $ , Mild No Rotavirus $ $ , Mild No Rubella $68.42 $ Severe Yes Typhoid $1.58 $ Mild No Yellow Fever $ $ , Mild No TOTAL ( ) $6, $1, , , , NOTES: 1. Demand forecasts are largely consistent with those underlying GAVI s financial expenditure forecasts. However, since the performance metrics model used for this analysis was designed primarily to assess the impact of each vaccine on deaths and cases, the GAVI Vaccine Costs are approximations and these costs vary slightly with those included in the financial forecast (vaccine expenditures in the financial forecast total $6,489). GAVI s financial forecasts present the current and most accurate picture of costs. In aggregate, there is around 1% difference between the two forecasts. 2. No data was found on the impact of measles second dose on the number cases averted per 1,000 children vaccinated 3. For pneumococcal vaccines: o The GAVI Vaccine Costs include the portion of the $1.5 billion of donor funds for the Advance Market Commitment that is spent during the timeframe o Estimates are based on demand for the 10- and 13-valent vaccines only 4. Description of assumptions regarding long term sequelae: o Severe = >5% of cases result in severe complications (e.g., neurological complications with meningitis) o Moderate = less impact but long-term > 1yr (e.g. deafness) o Mild = rare severe cases or mild long-term effects (e.g. decrease in fertility) Mild No 17

18 ANNEX 1 This analysis of the costs and disease impact of GAVI s current portfolio of vaccines rests on four crucial sets of information: (i) The vaccine characteristics including the timing of availability (expected year of licensure and WHO prequalification), and the presentation and delivery strategy since these affect the resource use (number of doses, syringes, safety boxes, wastage rates) (ii) The demand forecasts (year of adoption, time to peak coverage, and anticipated level of annual coverage within each GAVI-eligible country) (iii) The vaccine pricing assumptions (price evolution over time; market share between competing vaccines); (iv) The metrics of disease impact (deaths or cases averted per 1,000 vaccinated; cases; the proportion of these that occur in children <5 years old); This information that was gleaned from published sources, previous investment cases submitted to GAVI, the vaccine investment strategy and contributions from product development partnerships (PDPs) and WHO. These data were placed into a static decision model to project the costs and disease impact of each vaccine by GAVI-eligible country over time periods from to match GAVI s current financial forecast horizon 17. Finally, it is important to note that the effects of the vaccines in this analysis are assumed to be homogenous across all GAVI-eligible countries; i.e. the cases and deaths averted do not differ by country as a result of potential country-level epidemiological differences. It should be noted that the results detailed above are the outputs of a preliminary analysis that requires further validation and input from Alliance members. More work to validate the assumptions and refine the methodology of this analysis will be important. Future analyses should consider (i) use of dynamic disease transmission modelling to assess the effects of herd immunity and strain substitution on the effectiveness of vaccines; (ii) additional analyses of country-specific vaccine impact to account for heterogeneous epidemiological characteristics of countries; (iii) sensitivity analyses using various discounting rates to assess the effects of time preference on costs and health impact. 17 Looking at the vaccine metrics presented above over a longer timeframe to for example through 2020, will create a different picture. Peak demand will have been achieved in many more countries across all the vaccines and a reasonable amount of price maturation should have occurred. 18

19 GAVI income ANNEX Figure 1: Total donor disbursements, including payments to the IFFIm ( ) Millions 0Millions Total donor disbursements: $2.8 billion Figure 2: Total donor receipts and share of IFFIm proceeds ( ) 19 Total receipts: $3.8 billion 18 Figure 1 shows contributions from government donors and the EC, including payments made by donors to the IFFIm. 19 Figure 2 presents donors share of GAVI s income, including the additional frontloaded income generated through the IFFIm. Bond proceeds have been attributed to the 7 IFFIm donors on the basis of their share of total IFFIm pledges. In this presentation, the UK, the US, France and Norway were GAVI s largest donors as at the end of This does not take into account the pledges made to the AMC, as these funds have not yet been received by GAVI 19

20 Figure 3 - Share of public and private contributions received ANNEX 3 $2,74 billion 72% $1,08 billion 28% $1,06 billion 98% $16 million 2% Direct contributions + IFFIm proceeds The Bill & Melinda Gates Foundation Private and institutions Other private Figure 4 Donor shares of total commitments to GAVI (inc. IFFIm and AMC commitments) 35% 30% 25% 32% Total commitments: $9.9 billion 20% 15% 18% 13% 16% 10% 5% 5% 4% 4% 3% 2% 0% 1% 0.8% 0.4% 0.3% 0.3% 0.2% 0.2% 0.1% 0.04% 20

21 ANNEX 3 Detailed breakdown of income and expenditure forecasts Table 1 summarises the elements included in the expenditure forecast: Expenditure Cost (US$ million) Admin 325 Vaccine introduction support (AVI, Work Plan, procurement fees) 704 Vaccine support (total) 6,489 - Current vaccines 6,309 - New vaccines (HPV, JE, Typhoid, rubella) 180 HSS / ISS / CSOs 629 Total 8,147 Table 1 Expenditures Table 2 outlines the various sources of guaranteed income in : Income source Income (US$ million) Expected direct Government contributions in Guaranteed direct Government contributions after Private income (inc. Gates) 460 IFFIm bond proceeds 1,554 AMC donor funding for pneumococcal vaccines 828 Drawdown on GAVI s cash and investment portfolio 395 Total $3,546 Table 2 Guaranteed Income 20 Contributions from the Netherlands in 2010 ($31 million) and Denmark in 2010 and in 2011 ($18 million) 21

22 ANNEX 4 Current projection of annual contributions to GAVI Past trend Avg annual amount Contribution models summary GAVI model: Based on current GAVI support shares GDP model: Based on adjusted GDP, 2007 IDA model: Based on IDA 15 pledges Addl. bond income Cash reserves Total contributions In Million $/year IFFIm AMC TODAY Share Need Share Need crease Share Need crease Share Need d=a+ a b c b+c e f g=f d h i j=i d k l m=l d q r s=r d Australia % % % % 13 8 Austria 0.0% % % % 0 0 Belgium 0.0% % % % 8 8 Brazil 0.0% % % % 0 0 Canada % % % % China 0.0% % % % 1 1 Czech Republic 0.0% % % % 0 0 Denmark % % % % 11 6 EC % % % % Finland 0.0% % % % 1 1 France % % % % Germany % % % % Greece 0.0% % % % 0 0 India 0.0% % % % 1 1 Ireland % % % % 14 6 Israel 0.0% % % % 0 0 Italy % % % % Japan 0.0% % % % Korea (Republic of) 0.0% % % % 1 1 Kuwait 0.0% % % % 0 0 Luxembourg % % % % Mexico 0.0% % % % 0 0 Netherlands % % % % 35 8 New Zealand 0.0% % % % 0 0 Norway % % % % Poland 0.0% % % % 0 0 Portugal 0.0% % % % 1 1 Russia % % % % Saudi Arabia 0.0% % % % 2 2 Singapore 0.0% % % % South Africa % % % % Spain % % % % Sweden % % % % Switzerland 0.0% % % % 2 2 Turkey 0.0% % % % 0 0 United Kingdom % % % % United States % % % % Other 0.0% % % % Total public % % % % Gates Foundation Other private Total private In Increase Global Fund model: Based on 2nd replenishment Increase 22

23 ANNEX 5 GAVI CONTRIBUTION MODEL Current projection of annual contributions to GAVI Contribution model Million $/year Historical average TODAY TODAY Modeled Additional trend annual amount Average Average income/year income/year IFFIm AMC estimate estimate Model share needed vs. today a b c d=a+b+c e (=d) f=e/(column e total) g=f total need h=g d Australia % Canada % Denmark % EC % France % Germany % Ireland % Italy % Luxembourg % Netherlands % Norway % Russia % South Africa % Spain % Sweden % United Kingdom % United States % Total public % Gates Foundation Other private Total private Addl. bond income Cash reserves Total contributions , Notes Based on historical contributions to GAVI Column a shows the approximate historical level of annual direct contributions. Columns b and c show expected average annual contributions to the International Finance Facility for Immunisation (IFFIm) and Advance Market Commitment mechanisms (AMCs). Column d sums the previous three and represents the baseline for GAVI funding going forward. Column e is the same as d, but is retained for the sake of consistency with subsequent tables. Here, column e is the basis for allocating contributions across donors. Column f expresses column e in percentages of total historical funding. Column g applies these percentages to spread the total needed funding from public donors proportionally. Column h displays the increase this represents over today's funding levels (in column d). 6. "Other" donors are Barbados, Cyprus, Egypt, Estonia, Hungary, Iceland, Latvia, Lithuania, Romania, Slovak Republic, Slovenia, and Thailand. 7. Contributions from private sources have been fixed at $120 million per year based on conservative estimates. 23

24 GDP CONTRIBUTION MODEL Based on adjusted GDP GDP Million $/year HistoricalAverage annual TODAY 2007 Modeled Additional GDP/capita converted Model adjusted trend commitment Average (US $) with to US$ share need / year need / year GDP IFFIm AMC estimate PPPs billion vs. today a b c d=a+b+c e f g=e f/ 1,000,000 h=g/(col g total) i=h total need j=h d Australia , % Austria 38, % Belgium 34, % Brazil 9,570 1, % Canada ,729 1, % China 5,345 3, % Czech Republic 23, % Denmark , % EC % Finland 34, % France ,414 2, % Germany ,154 3, % Greece 33, % India 2,753 1, % Ireland , % Israel 25, % Italy ,935 2, % Japan 33,525 4, % Korea (Republic of) 24, % Kuwait 43, % Luxembourg , % Mexico 12, % Netherlands , % New Zealand 26, % Norway , % Poland 15, % Portugal 21, % Russia ,743 1, % Saudi Arabia 22, % Singapore 50, % South Africa , % Spain ,312 1, % Sweden , % Switzerland 39, % Turkey 12, % United Kingdom ,535 2, % United States ,790 13, % Other % Total public , % Gates Foundation Other private Total private Addl. bond income Cash reserves Total contributions , Notes Current projection of annual contributions to GAVI Projected GAVI support Column a shows the approximate historical level of annual direct contributions. Columns b and c show expected average annual contributions to the International Finance Facility for Immunisation (IFFIm) and Advance Market Commitment mechanisms (AMCs). Column d sums the previous three and represents the baseline for GAVI funding going forward. Columns e, f, and g show the computation of adjusted GDP, which it the product of total GDP and GDP/capita. As a measure of economic "throw weight," GDP is converted to dollars using exchange rates. (If a country's currency falls, its capacity to contribute does too.) As a measure of affluence, GDP/capita is converted to dollars using purchasing power parities i.e., is real GDP/capita. Column h expresses column g in percentages of total adjust GDP among the listed 5. Column i applies these percentages to spread the total needed funding from public donors proportionally. Column j displays the increase this represents over today's funding levels (in column d). 6. "Other" donors are Barbados, Cyprus, Egypt, Estonia, Hungary, Iceland, Latvia, Lithuania, Romania, Slovak Republic, Slovenia, and Thailand. 7. Since it would be misleading to use the EU's GDP for the EC, the EC's share in column h is set to be that in Model A. All nation states' shares are adjusted slightly so that shares still sum to 100%. 8. Contributions from private sources have been fixed at $120 million per year based on conservative estimates. ANNEX 6 24

25 IDA CONTRIBUTION MODEL Based on IDA 15 pledges ANNEX 7 Current projection of annual contributions to GAVI Projected GAVI support Million $/year Historical Average annual TODAY Pledges to IDA 15 Additional trend commitment Average replenishment Modeled need/year IFFIm AMC estimate (million SDR) Model share need/year vs. today a b c d=a+b+c e f=e/(column e total) g=f total need h=g d Australia % Austria % Belgium % Brazil % Canada % China % Czech Republic % Denmark % EC % Finland % France , % Germany , % Greece % India % Ireland % Israel % Italy % Japan 1, % Korea (Republic of) % Kuwait % Luxembourg % Mexico % Netherlands % New Zealand % Norway % Poland % Portugal % Russia % Saudi Arabia % Singapore % South Africa % Spain % Sweden % Switzerland % Turkey % United Kingdom , % United States , % Other % Total public , % Gates Foundation Other private Total private Addl. bond income Cash reserves Total contributions , Notes Column a shows the approximate historical level of annual direct contributions. Columns b and c show expected average annual contributions to the International Finance Facility for Immunisation (IFFIm) and Advance Market Commitment mechanisms (AMCs). Column d sums the previous three and represents the baseline for GAVI funding going forward. Column e shows donors' pledges to the 15th replenishment round of the World Bank's International Development Association, covering July 1, 2008 June 30, 2011, in million SDR. Column f expresses these in percentages of the total for 5. Column g applies these percentages to spread the total needed funding from public donors proportionally. Column h displays the increase this represents over today's funding levels (in column d). 6. "Other" donors are Barbados, Cyprus, Egypt, Estonia, Hungary, Iceland, Latvia, Lithuania, Romania, Slovak Republic, Slovenia, and Thailand. 7. The EC did not participate in the IDA replenishment, so its share in column f is set to be that in Model A. All nation states' shares are adjusted slightly so that shares still sum to 100%. 8. Contributions from private sources have been fixed at $120 million per year based on conservative estimates. 25

26 GLOBAL FUND CONTRIBUTION MODEL Based on 2 nd replenishment pledges Current projection of annual contributions to GAVI Projected GAVI support ANNEX 8 Million $/year Historical Average annual TODAY Pledges to Global Modeled Additional trend commitment Average Fund 2 nd Model share need/year need/year IFFIm AMC estimate replenishment vs. today a b c d=a+b+c e f=e/(column e total) g=f total need h=g d Australia % Austria % Belgium % Brazil % Canada % Chi na % Czech Republic % Denmark % EC % Finland % France , % Germany , % Greece % India % Ireland % Israel % Italy % Japan % Korea (Republic of) % Kuwait % Luxembourg % Mexico % Netherlands % New Zealand % Norway % Poland % Portugal % Russia % Saudi Arabia % Singapore % South Africa % Spain % Sweden % Switzerland % Turkey % United Kingdom % United States , % Other % Total public , % Gates Foundation Other private Total private Addl. bond income Cash reserves Total contributions , Notes Column a shows the approximate historical level of annual direct contributions. Columns b and c show expected average annual contributions to the International Finance Facility for Immunisation (IFFIm) and Advance Market Commitment mechanisms (AMCs) Column d sums the previous three and represents the baseline for GAVI funding going forward. Column e shows pledges to the 2nd replenishment round for the Global Fund to Fight AIDS, Tuberculosis and Malaria, covering Column f expresses these in percentages of the total for the listed donors. 5. Column g applies these percentages to spread the total needed funding from public donors proportionally. Column h displays the increase this represents over today's funding levels (in column d). 6. "Other" donors are Barbados, Cyprus, Egypt, Estonia, Hungary, Iceland, Latvia, Lithuania, Romania, Slovak Republic, Slovenia, and Thailand. 7. Contributions from private sources have been fixed at $120 million per year based on conservative estimates. 26

27 Doc #2 Resource Mobilisation Strate Duration of donor commitments ANNEX

28 GAVI Alliance Board 2-3 June 2009 Donor prioritisation ANNEX Figure 5.a Net ODA in 2008 (US$ billions) top 22 countries Non-GAVI donors Figure 5.b - Net ODA as % of GNI in 2008 OECD countries UN Target 0.7% Non-GAVI donors