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13th May 2008

The Nobel Prize winner Médecins Sans Frontières says a USD 1.5 billion aid deal to develop new vaccines for poor countries is much too lucrative for the drug industry. MSF has estimated an earlier version of the scheme to be overpriced by USD 600 million, but has been denied basic facts about the latest proposal.

Development Today has obtained a confidential document about the scheme sent to donors last month, which shows one company, GlaxoSmithKline, walking away with almost the whole prize. Donors are expected to settle the deal next week.

The mechanism is called Advance Market Commitment, or AMC, an innovative market-based financing arrangement that aims to provide a subsidy to pharmaceutical companies in order to reduce the financial risk of developing and supplying vaccines badly needed in the developing world.

The USD 1.5 billion AMC is to be ODA-financed by five donor governments - Italy, Canada, Russia, the United Kingdom and Norway - with a USD 50 million contribution from the Gates Foundation. (See DT 4/08) The six donors have decided to focus the pilot scheme on pneumoccocal diseases that kill almost 800,000 children under age five every year. On May 20, they are set to meet in Ottawa to finalise the deal.

Two companies are currently in late stages of developing pneumococcal vaccines. GlaxoSmithKline (GSK), with headquarters in the UK and operations based in the US, is in the lead. It has already filed its vaccine for approval with European regulatory authorities and hopes to have a vaccine available for use by GAVI as early as next year. The American firm Wyeth meanwhile expects to submit regulatory filings for pediatric use of its 13-valent vaccine beginning in 2009. A Wyeth spokesperson says to Development Today she is unable to speculate when the vaccine might come on the market.

AMC sponsors have been engaged in bilateral consultations with GSK and Wyeth over the past year. Industry has participated in these discussions on the condition that cost information remains confidential.

These sensitive consultations with pharmaceutical companies about costs appear to have overshadowed the transparency issue raised by MSF. And there is huge political momentum attached to this prestigious G8 project as the May 20 deadline looms.

In early April, the Global Alliance for Vaccines (GAVI), which acts as the AMC Secretariat, held a briefing on the AMC for civil society organisations. To be able to assess the scheme, MSF asked GAVI to provide more detailed background information on which the AMC model is based. Over the past month, MSF has repeatedly requested this information. Finally, on May 9, a telephone briefing with GAVI and AMC experts took place, but it was only verbal. No written documents were made available.

MSF has refused to give GAVI a written comment on the model due to the lack of information. MSF tells Development Today they do not want to lend legitimacy to an incomplete consultation process.

“Donors want to make the set-up of the pneumo AMC a success story," says Health Economist at the MSF Campaign on Access to Essential Medicines Laurent Gadot. “Until now the different versions of the economic models are still not made public. This needs to change."

Some donors clearly see MSF’s interventions as interference in a process that is in its 11th hour. Sources in Canada and Italy insist that the donors' objective is to save children’s lives, not to give profit to drug companies. A joint donor statement to DT issued by Norway and the UK plays down MSF’s concerns. “To our knowledge the AMC Secretariat has in line with donors’ recommendations taken on consultations and provided information to interested stakeholders, including MSF," it states.

Another factor adding pressure on these six donors to seal a deal quickly is a planned second AMC. Details have not been made public, but DT has learned that the United States and Australia are among the countries interested in a new round, possibly for a malaria vaccine. The pneumoccocal AMC donor group is considering announcing the launch of a second AMC as early as this summer, though the Gates Foundation and Norway are reportedly hesitant about rushing ahead with a second AMC before issues related to the pilot are settled.

In the meantime, Development Today has obtained a copy of a confidential spreadsheet showing an economic model of the AMC. It was distributed by GAVI to the donors last month. Several sources close to the process confirm that this is the latest version of this spreadsheet that donors have received. AMC donors refuse to comment on it.

The spreadsheet shows that the AMC will allow GSK to consolidate a monopoly on sales of pneumo vaccine in poor countries.

Development Today asked Laurent Gadot for his interpretation of the spreadsheet. He explains: the scenario presented in the spreadsheet plans that in 2014, GSK would have set up a plant with production capacity of 200 million doses per year at a nominal cost of about USD 400 million and receive the bulk of the USD 1.5 billion subsidy. Wyeth would not establish a production facility to supply the developing world because its cost of production would be too high compared to the USD 2 long term price, Gadot says. Wyeth would just sell a small amount of vaccines to poor countries from its existing factories. This seems to be mainly because their vaccine would be more complex to produce. Emerging suppliers are not shown to make the investment either.

Gadot notes that this model does not include key modifications that the donors have insisted upon: a “cap" on the proportion of the subsidy one company can claim and “sequential offering", another feature designed to encourage the participation of more than one firm.

It remains unclear why an incomplete spreadsheet with no explanation was sent to the AMC donors by GAVI in mid-April, one month before the final decision is to be made. DT put this question to GAVI. Nina Schwalbe, Deputy Executive Secretary of GAVI, said this was confidential information that she would not comment upon.

Gadot remarks: “The spreadsheet shows that USD 1.5 billion is too large a reward compared to the cost of creating sufficient production capacity for poor countries, which is the main AMC objective."