Vaccines for COVID-19 are not yet a reality, but plans are afoot to enable trading in stocks of potential vaccines. Gavi says the plan will allow countries to exchange vaccines doses with each other, allowing each economy to optimise to their own needs.

In order to get a firm commitment from rich countries to commit to buying vaccines from Gavi’s Covax Facility, the immunization agency is working on a plan for a “Covax Exchange” – where countries can trade their ‘vaccine credits’, according to sources. This is ostensibly because the Facility needs funds to support poorer countries so that they can access vaccines when they become available.

Under Gavi’s Covax Facility, countries are classed into two types – fully-financed countries who can buy vaccines doses when they become available, and other countries supported by development assistance, so that they are also able to afford vaccines.

In a bid to get rich countries into the Covax club, Gavi is putting together plans for a Covax Exchange, where countries can trade their vaccines doses earmarked for them, a source familiar with the discussions, told Geneva Health Files.

A Gavi spokesperson confirmed the plan, but clarified that it would not generate a financial return.

Gavi, along with World Health Organization and the Coalition for Epidemic Preparedness Innovations CEPI, is spearheading The Covax Facility – a mechanism that seeks to deliver vaccines for the COVID-19 pandemic. The Covax Facility is the vaccines pillar of the ACT Accelerator, an initiative coordinated by the WHO, but financed and pulled together with lightning speed by the European Union.

The Facility, at the interface between countries who seek to vaccinate their populations and the vaccine manufacturers, aims to pool and procure orders for vaccines. The Covax portfolio, currently has nine vaccine candidates and authorities are in discussions to include more number of candidates soon. The Facility is expected to distribute vaccines based on an allocation framework, being formulated by WHO – one hopes to ensure equitable access.

The Covax Exchange

Under the Covax Exchange plan, countries can buy, sell, and trade their vaccine credits like stocks. However, this could potentially drive up prices for everyone else, and limit availability. Thus, incentivizing rich countries could result in few countries having access to the most suitable vaccine candidates, the source, who did not wish to be identified, told Geneva Health Files.

A Gavi spokesperson clarified, “COVAX partners CEPI, Gavi and WHO, are working with advisers to explore ways for all economies participating in the COVAX Facility to exchange vaccine doses with each other to allow each economy to optimise for their individual needs, not generate a financial return. Such an exchange would be co-created with participants of the facility, both COVAX AMC eligible and self-financing. Any regulatory or territorial restrictions would need to be considered.”

This statement was in response to emailed queries from Geneva Health Files. This clarification from Gavi that the Covax Exchange will not generate financial return, is contrary to what sources suggested in conversations with Geneva Health Files. If it is indeed the case, it will become clear in the days to come. Without financial returns, some countries may not be incentivized enough to buy into the Facility, sources said.

Earlier in the week, WHO said that the Covax Facility is the world’s most diverse COVID-19 vaccine portfolio. WHO believes that the Covax Facility is the answer to vaccine nationalism and the rash of bilateral deals rich countries are striking up with vaccine manufacturers.

The specific proposal of potentially letting countries trade their vaccine stocks, has reportedly been put forth by some high-income countries. “Rich countries want some flexibilities and some options, when they are being asked to pay up to be a part of the Covax Facility”, the source said.

Asked if this flexibility will mean, that rich countries will have the first right on the most suitable vaccine candidate in the Covax Facility, the source confirmed that this is to be expected. As a result, poorer countries will potentially be left with less suitable candidates. “Gavi is trying to explore, find solutions to and anticipate some of these problems. It is a work in progress,” the source said.

Another person familiar with the matter said, “Deals have been struck that will put vaccines in the hands of rich countries as a priority. When rich countries have been vaccinated, then Gavi will look at what is left over to share with everyone else,” the source added. Gavi has “thrown the idea of equity out the window.” The term equity has been entirely dropped and is no longer a factor of any consideration, the source added.

It is not clear, if and to what extent McKinsey, the global consulting firm (a big player in global health), also working with Gavi on the Covax Facility had any role in incubating the idea of the Covax Exchange. One source indicated that McKinsey consultants were mooting this idea as an “investment opportunity” for rich countries. Geneva Health Files was not able to confirm this at the time of writing. Queries sent to McKinsey were not answered before this story was published. (Gavi did not respond to queries seeking information on McKinsey’s role in this.)

Both WHO and Gavi, have repeatedly reiterated their efforts to ensure equitable access in the distribution and access to COVID-19 vaccines.

If the Covax Exchange becomes a reality, it raises questions on whether poorer countries can indeed access the best vaccines available through Gavi’s Facility. Gavi has been conducting consultations with countries over the last few weeks. Countries are already aware of such a proposal, sources said.

“The Covax Exchange should be seen in light of a broader solution, on getting richer countries on board. Their participation is key,” the source said. Gavi is hoping for a broad-based support to the Covax Facility, so that a wide range of vaccine candidates can be pursued for as many countries as possible.

Earlier in the week, Dr Bruce Aylward, WHO Senior Adviser and Head of the ACT-Accelerator Coordination Hub, at WHO, laid out the upcoming stages in the Covax sign-up process – countries submit Expressions of Interest by August 31, 2020; file a confirmation of intent by September 18, 2020; and make an intial “down payment” to secure access to doses by early October 2020. He was speaking at a regular press briefing [on 24, August 2020], where he also indicated new changes in the design of the Covax Facility.

According to a presentation on the Facility, made at a member state briefing by WHO, dated August 13, 2020, although there are many vaccines in development, none are guaranteed to succeed. No single manufacturer has the capacity to supply the global volume required. Therefore, a basket of deals is needed to increase the chances of delivering two billion doses by end of 2021. Further, that deals for more than two billion doses are needed to account for the risk of unsuccessful development. Hence Covax is creating a basket of 10-15 vaccines, the document says.

In the presentation, the language used appears to confirm Gavi’s plans on the yet-to-be-public Covax Exchange. “The Facility, consolidates buying power and provides participants access to a broad and actively managed portfolio. And provides manufacturers access to a massive, demand-assured market,” the document said. This shows that there are implications for rich countries’ abilities to play with their potentially excess vaccine stocks within the Covax structure – given also their exclusive bilateral deals with companies. This also has real significance for vaccine manufacturers – those whose candidates are listed in the Covax portfolio.

The briefing document for countries, also discusses three costs categories under Covax: a “speed or access premium” of 15-20%; an ex-factory cost (80-85%) that includes variable cost to manufacturers of producing the doses and facility operating costs (about 3%) that includes the cost of limiting risk exposure and reducing upfront payment requirements (such as insurance and interest associated with debt financing) and management fees (e.g., staff costs). (It also cites an all-inclusive illustrative price of $10-11 per dose.)

There is a brief mention of “a weighted average for vaccines with tiered prices”, but there no details of what these ex-factory costs could be. These are described as “confidential”. (The document notes that the vaccines in the portfolio have different prices given the different technology platforms.)

Concerns have been raised over the lack of transparency and the exclusion of civil society on these discussions and on negotiations between Gavi and vaccine manufacturers.

Potential for misuse?

Geneva Health Files also spoke to a diplomatic source who confirmed the proposal on the Covax Exchange. He said that capitals have been sent documentation by Gavi seeking their participation.

Speaking on the Covax Exchange, the person raised the real possibility of those countries supported by the Gavi AMC, trading cheaper vaccines for a higher price on the Exchange to other bidders. Any country hoping to benefit from an arbitrage can trade on the exchange.

He also added, that the Exchange could be important for countries looking to offset their vaccine credits. “Countries may not want to be stuck with vaccine candidates that are probably not suitable for their specific populations, or needs,” he said. It will also depend on the epidemiological movement of the virus among populations, as experts have said. Countries can therefore then, sell their vaccine stocks to others in need, the source said.

Whether this will be deemed a financial innovation at the height of the worst pandemic the world has seen in 100 years, will remain to be seen.

“Gavi’s Covax has a lot of shortcomings. But the world needs vaccines now, especially in the light of potential re-infections. Countries have few options,” the diplomatic source said.

Exit or Opt-Out Clause

It seems that fully-financed countries may be able to opt-out of their financial commitments made at Covax – for a price. After all these countries will cough up a “committed amount” upon signing up to Covax – as determined by an all-inclusive cost per dose, multiplied by a defined number of doses per regimen, spread over the percentage of population to be vaccinated.

In order to get out of this binding commitment, rich countries can pay a higher “entry fees” as it were. “These are sovereign countries, they cannot be forced to buy vaccines they may not want” one source said. So Gavi is also considering exit clauses in these contracts with countries.

On Gavi’s part, it is making its own assessment of countries’ credit-worthiness, their depth of commitment and other factors. This is important because all participating countries in the Facility are expected “to hold the adequate financial exposure to each manufacturer agreement,” as per the Facility’s initial design.

Gavi is also looking at guarantors and insuring the process, so that in the event countries pull out of the Facility, Gavi is protected, a source explained. (Its preliminary design on the Facility had said that “All Covax volume guarantees offered by the Facility to manufacturers under the agreements are back- stopped by secured capital and do not create a financial exposure for Gavi.”)

“This is not just about vaccines. Sure, vaccines are a final product, but this a multi-faceted challenge, involving finance, health capacities, previous policy milieus. It is an intellectual challenge to bring all this together and Gavi is doing its best under the circumstances”, the source explained.

Sources say that WHO has been involved in discussions on these issues, although it is not clear whether WHO has been able to lead or influence discussions on the pricing of COVID-19 vaccines. In fact, a recent press statement from Gavi says, “Decisions around investment in manufacturing are taken in close collaboration between these three lead organisations (WHO, CEPI and GAVI) of the COVAX pillar, a recent press release from Gavi said.” (Queries also sent to CEPI and WHO, went unanswered. WHO said that the queries sent were meant for Gavi.)

Implications for poor countries?

Lockdown-hit countries, including upper middle-income (UMICs) ones are short on cash, with unprecedented strains on their public finance, as the pandemic continues to rage in some of these countries in the midst of ravaged economies. To access Covax-backed vaccines, not only UMICS, but also lower middle-income countries and low-income countries will need support from development finance institutions.

Gavi’s Covax Advance Market Commitment (AMC), a financing instrument expressly launched in June this year, seeks to support 92 of these countries (Gavi’s board has recently approved this list of countries).

Gavi has described the AMC as the ODA-supported financing instrument of the Covax Facility, that will be limited to the duration of the pandemic. It will use official development assistance (ODA) funds from OECD donors to incentivise manufacturers. This, it will do through guarantees to ensure sufficient global capacity is installed before vaccines are licensed, Gavi has said. It will then procure vaccines and assist in delivery for LICs and LMICs among others.

Further, the Covax Facility is expected to be funded by the self-financed advance commitments by richer countries towards pooled procurement of doses. Earlier this month, Gavi said that 80 higher-income economies, which would finance the vaccines from their own public finance budgets, had submitted Expressions of Interest ahead of the 31 August deadline for confirmation of intent to participate. These countries are expected to “partner” with 92 low- and middle-income countries that will be supported by the AMC “if it meets its funding targets.” It is not clear, what will be the outcome, in case the AMC does not meet its funding targets. There is no clarity on what “partnering” between countries will entail. (See full list COVAX vaccine candidates and the Gavi-eligible countries here.)

(Recently, Gavi has negotiated a collaboration with the Serum Institute of India (SII), and the Bill & Melinda Gates Foundation for 100 million doses COVID-19 vaccines for low- and middle-income countries in 2021.)

Gavi’s convening power to raise funds is one thing, negotiating the right prices for vaccines in the midst of a pandemic potentially affecting billions of people is another.

Critics have said that Gavi is giving massive guarantees to manufacturers without perhaps sufficient conditions on not only access but also pricing. The AMC seeks to “fund volume guarantees to specific manufacturers for vaccine candidates before they are licensed, and commit to market-wide demand guarantees available to any manufacturer,” Gavi has said. Finally, doses will be purchased when they are licensed and prequalified by WHO.

By incentivising manufacturers, it hopes that companies will have the confidence to invest in the scale-up of manufacturing capacity for vaccines candidates even before the products are licensed.

However, there continues to be silence on potential implications for IP related issues for COVID-19 vaccines. Gavi has said that it is important to diversify manufacturing capacities and therefore enabling technology transfer is crucial. However, the extent to which such conditions will be a part of Gavi’s contracts with vaccine manufacturers, is not clear.

According to Gavi, “the COVAX AMC has raised more than US$ 600 million against an initial target of securing US$ 2 billion seed funding from sovereign donors as well as philanthropy and the private sector, needed by the end of 2020.” Funding flows to the AMC could include concessional finance allocations from multilateral development banks (MDBs), Gavi has said.

Groups such as the MSF, have said that although Gavi may be able to raise funds through the AMC, but it may not have sufficient negotiating power with the industry to discuss prices of vaccines. “…The competition that Gavi price negotiations will face from wealthy countries seeking access to the same vaccine supply, information asymmetries put Gavi at a distinct disadvantage when negotiating prices..” MSF has cautioned.

As a way out of this what seems like an intractable challenge- the Covax Exchange may have been proposed as a solution that will give countries flexibility. But far from equitable access, the Exchange could possibly, result in unintended consequences including exacerbating price differentials among vaccines and spur opportunism between countries.

Gavi has also hinted at using its International Finance Facility for Immunisation (IFFIm) that brings in funding for immunisation by issuing Vaccine Bonds. It has argued that these bonds were used to fund CEPI. (Nearly US$1.4 million has been routed for R&D COVID-19 vaccines, but an additional US$1 billion is needed to continue to move the portfolio forward, Gavi has said.)

Reconciling bilateral orders with the Covax facility

Responding to a question recently, on how bilateral deals on vaccines will reconcile with the global effort of pooling vaccines under the Covax Facility, top officials have referred to “managed orders”. It is not only the question of who will have the vaccines, but also how they will be rolled out globally, one official seemed to suggest. Countries that have struck bilateral deals have also shown interest in the Covax Facility, in order to bet on a wider number of vaccines candidates. But what is not clear is what will be the upside for these countries, if indeed they will be able to trade their vaccines stocks on an exchange. And more importantly, what will be the consequences in terms of affordability and access to vaccines for populations in poorer countries?

All this just shows how difficult it is to operationalise vaccines as a “global public good” – even when this pandemic has already claimed more than 8,00,000 lives and there are in excess of 23.5 million confirmed cases and counting.

This pandemic season has seen unprecedented innovation, will this innovation of trading vaccine doses translate into greater common good? Further financialization of health may not be the best way forward.





The article first appeared in Geneva Health Files.

Priti Patnaik is the Founding Editor of Geneva Health Files. She tweets @Pretpat and @filesgeneva.

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