Innovative Health Financing Mechanisms for Advancing Pandemic Preparedness: ‘Huge Untapped Potential’ or False Advertising?

While the public health world is focused on the pandemic agenda and centralization of management, few understand the financialization of health and the transition to commercial-based approaches that have underpinned this. Health must pay, if the corporate world is to contribute. Hiding this within terms such as ‘innovative financing’ has enabled such approaches to be sold as a virtue rather than simply bowing to corporate power. The public health world needs to look deeper, rather than obediently accept each private sector interest as a public good. 

What Is Innovative Financing?

Innovative financing gained prominence “as a means to provide additional financing for global health” following the 2002 International Conference on Financing for Development in Monterrey (Mexico). Since then, it has become somewhat of a buzzword, finding prominence at events like the World Economic Forum (WEF) and within the negotiations on the Pandemic Agreement. As a general definition, innovative finance is understood to encompass a heterogeneous group of “financing mechanisms and solutions that mobilise, govern, or distribute funds beyond ODA” (overseas development assistance), which its advocates argue “increase the volume, efficiency, and effectiveness of financial flows.” 

In global health, the push to break human well-being down into quantitative monetary terms has raised concerns about the role of financial actors, motives, institutions, and markets on the resource management and operation of health systems and outcomes. This is often referred to as ‘the financialization of health’. It includes the rise of public-private partnerships (PPPs), the use of bond and equity markets for health financing, the overemphasis on health products, and the ‘commodification of health.’

The latter refers to the transformation of healthcare to a tradeable and saleable asset for investors. The concern with the financialization of global health, and its role for pandemic prevention, preparedness, and response (PPPR), is how it influences which health services are available and who can access them. This influence can often operate outside the control of local legislators and/or can be imposed through global financial mechanisms and their conditionalities.

Here, we raise several concerns with the use of innovative financing for pandemic preparedness and why we should remain sceptical of their continued influence and entrenchment within the emerging PPPR agenda.

The Entrenchment of Financialization in Health and Pandemic Preparedness

MedAccess deems innovative financing as pivotal to the pursuit of the Sustainable Development Goals (SDGs), as it “helps to bridge gaps in development financing, bringing additional sources of funding and unlocking the potential of existing capital to accelerate and increase impact.” Since the early 2000s, innovative financing has largely evolved by “either combining existing financial instruments or applying existing financial instruments in new contexts – sectors, countries, or regions – and/or introduc[ing] new partners,” with a marked growth in the range of financial instruments used and actors involved over the past two decades.

Innovative Financing Solutions to Bridge the PPPR Financing Gap

As the WHO observes, prior to the Covid-19 outbreak, “few international financial institutions had specific funding mechanisms in place for PPPR,” among which was an innovative financing mechanism known as the Pandemic Emergency Financing Facility (PEF). Launched in 2016 by the World Bank, the PEF was an insurance-based financing mechanism, which issued bonds to private markets, to raise capital earmarked for responding to pandemic outbreaks. The PEF’s high bar to qualify for payouts during an outbreak meant that the Facility failed to provide surge funding for two Ebola outbreaks in 2018 and 2019, and to provide timely financing for Covid-19, even though it eventually allocated $195.4 million in late April 2020 to help 64 low-income countries fight the outbreak. The PEF’s failings, attributed largely to its poor design, led to its official closure on 30 April 2021. To date, no further attempts have been made to create an umbrella innovative financing facility for pandemic response, although a new Coordinating Financial Mechanism for the Pandemic Agreement and International Health Regulations has a remit to take on this role in the future. 

The WHO Council on the Economics of Health for All claimed that “even though COVID-19 is no longer deemed an international public health emergency of international concern, an investment gap lingers between potential needs and current funding.” To be precise, according to the WHO and World Bank, this investment requirement amounts to $31.1 billion per year, plus an additional $10.5 billion international financing gap in ODA. In response to these financing requests, there has been an increased interest in non-ODA solutions, especially innovative financing, to boost PPPR financing efforts. Notably, the WEF has advocated the “huge untapped potential” of innovative financing for advancing PPPR by “making fast and efficient use of funds to make health interventions available rapidly,” to stop outbreaks in their tracks, and to save “countless lives and livelihoods.” Specifically, the WEF proposes expanding the scope of existing innovative financing mechanisms, such as the International Finance Facility for Immunisation (IFFIm), to encompass PPPR. 

Expanding into New Territories

A demand for urgent financing to put an end to the Covid-19 pandemic, coupled with hopes that innovative financing could provide the solution, led both to an expansion of the scope of existing mechanisms and the application of tried and tested innovative financing tools in a new context – pandemics.

An example of the former is PRODUCT(RED), also known as (RED), an innovative financing initiative that seeks to raise money from the private sector and raise awareness of the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM) efforts to reduce the HIV/AIDS burden in Africa. (RED) is a brand licensed to companies, including Apple, Nike, and Starbucks, whereby “every purchase of a (RED) branded product activates a corporate contribution to the Global Fund.” At the onset of the Covid-19 pandemic, Apple redirected its (RED) contributions to the GFATM’s COVID-19 Response Mechanism until the end of June 2021, thus contributing to mitigating Covid-19’s impact on HIV/AIDS-affected communities and strengthening health systems under threat.

Apple also committed to donating “$1 for every purchase made with Apple Pay on apple.com, in the Apple Store app, or at an Apple Store” in the first week of December 2020. Although the expansion of Apple’s partnership with (RED) to combat HIV/AIDS and Covid-19 illustrates how innovative financing can be employed for PPPR, in this case by using private sector partnerships with large global brands, it does not show serious promise of raising funds at the scale the WHO suggests is required for PPPR ($10.5 billion annually). Given that up until 2020 Apple’s broader partnership with (RED) had only raised $250 million over 14 years, reliance on this form of innovative financing to fill the $10.5 billion annual PPPR gap lacks promise.

Yet, (RED) is the most straightforward form of innovative financing, with more problematic versions lurking.

For example, the IFFIm is another existing innovative financing mechanism whose scope was expanded since 2020, to focus on Covid-19 and future PPPR financing. The IFFIm financing model, known as frontloading, turns long-term government pledges (typically payable over 20+ years) into vaccine bonds, which are issued in capital markets to make pledged funding immediately available for Gavi’s (The Vaccine Alliance) immunisation programmes. Since its launch in 2006, the Facility has claimed to have raised over $9.7 billion to support Gavi’s vaccine mission and suggests that it has helped vaccinate over 1 billion children sooner than would have been possible through conventional rounds of donor pledging.

During the Covid-19 pandemic the IFFIm rebranded itself as an “ideal vehicle to support future pandemic preparedness financing,” frontloading close to $1 billion to support the Gavi COVAX Advance Market Commitment (AMC) for Covid-19 vaccines, and contributing $272 million to CEPI’s (Coalition for Epidemic Preparedness Innovations) 100 Days Mission to develop new vaccines. IFFIm’s frontloading approach was touted by the WEF as a means to “improve global pandemic preparedness now [in the current underwhelming economic climate], while allowing donor governments to spread the cost” in the future. 

On the surface, there is no shortage of self-congratulatory claims made by the IFFIm and its affiliates (Gavi and the WEF), promoting the Facility’s success and potential to become a prime tool for PPPR financing. However, a closer look into the inner workings of the mechanism and its governance reveals several serious concerns. 

First, an in-depth ‘follow the money’ analysis of the IFFIm exposed a lack of transparency around “who benefits and by how much,” which conceals excessive private sector profiteering at the expense of donors and beneficiaries. This is a major red flag that undermines the mechanism’s claims to effectiveness, ‘value for money,’ and potential for playing a key role in PPPR financing. Second, critics also question the lack of inclusivity in the governance of the IFFIm, with strategies conceived and decisions made largely in London via bond issuance operations conducted by UK financial institutions, “while state actors and technical advice from the countries that are supposed to be IFFIm’s beneficiaries are not present.”

Revisiting the Tried and Tested

In addition to expanding the scope of existing innovative tools to finance pandemic response during Covid-19, a new advance market commitment (AMC) mechanism was launched to boost the development of Covid-19 vaccines – the Gavi COVAX AMC. Created as a financial incentive to encourage manufacturers to invest in the development of vaccines, the AMC rose to prominence when it was first employed “to support pneumococcal vaccines that would protect against strains of the disease more commonly occurring in LMICs [low- and middle-income countries].” 

Similarly, the Gavi COVAX AMC (2020-2023) sought to ensure equitable access to vaccines for the world’s poorest countries by incentivising vaccine manufacturers to develop and “accelerate the manufacture of a COVID-19 vaccine on a massive scale and to distribute it according to need, rather than ability to pay.” Even though Covid-19 vaccines were developed and authorised for emergency use at record pace, vaccine supply to LMICs lagged far behind the provision of vaccines to HICs (high-income countries). While many would recognize that this is commensurate with a lower need, in its failed intent, it also illustrates the failure of such financial incentives for health.

This failing of the COVAX Facility to ensure ‘equitable access’ for countries that could not afford to independently and unilaterally secure vaccine doses for their populations could be attributed to a combination of factors, including HIC’s favouring bilateral agreements with manufacturers “to secure priority access to future vaccines” over procuring doses through COVAX, as well as rich countries’ unequitable hoarding of vaccines and other pandemic products resulting in accessibility constraints in lower-resource countries. These barriers to equitable access have been largely driven by so-called ‘vaccine nationalism,’ “whereby countries adopt policies which heavily prioritize their own public health needs at the expense of others.” These issues have become the main contention within the negotiations on the Pandemic Agreement and are still to be resolved.

In addition, there were major concerns over vaccine prices, affordability, and reasonable public fund spending. This potential ‘price gouging’ has raised alarms about the secrecy surrounding contracts with vaccine manufacturers signed under the COVAX umbrella. Namely, it raises several concerns about the increased use of innovative financing for PPPR, since the Gavi COVAX AMC’s lack of transparency, much like the IFFIm, carved out space for excessive private profiteering at the expense of taxpayers and lower-income countries, the very people that were supposed to benefit from the mechanism. 

Behind the Illusion of a Promising PPPR Financing Solution

Expanding the remit of existing innovative financing mechanisms certainly contributed to the Covid-19 outbreak response by redirecting private sector funds towards PPPR. While this approach has demonstrated its utility for providing surge financing in response to an active outbreak, it comes at a high cost, which renders it unsustainable. Repurposing existing mechanisms and redirecting funds raised by these mechanisms towards PPPR brings a high opportunity cost of diverting financing away from other large communicable and non-communicable disease burdens and health priorities financed through the same mechanisms. From a macro perspective, in a world where there are limited global health resources and numerous competing health priorities, one person’s gain is another person’s loss, quite literally. As some African scholars put it, “the proliferation of (multiple) financing mechanisms for pandemics does not focus efforts but diverts attention and resources.” 

Except for the PEF (which failed miserably), other attempts to employ innovative financing mechanisms for PPPR have been largely limited to responding to discrete infectious disease outbreaks with ‘pandemic potential’ after they materialise. Their application as response models to an already active outbreak is further circumscribed by an overwhelming focus on vaccine strategies to advance PPPR, as evidenced by notable attempts to apply innovative financing during Covid-19, including the Gavi COVAX AMC and the IFFIm. Thus, the application of innovative financing models favours an overly vaccine-heavy and modular approach to disease control and management, which can have wider negative health policy outcomes and implications.

Despite a highly biomedical focus, innovative financing mechanisms have historically underperformed, failing to deliver on their promise of effectiveness and ‘value-for-money.’ Naturally, for these mechanisms to work, they need to offer attractive investment opportunities to secure private sector buy-in. However, the impetus to attract investors at all costs has also proved to undermine the value they purport to provide to their intended beneficiaries. Vaccine bonds constitute a low-risk, high-profit investment opportunity for private sector actors, only because government donors and the public shoulder all the risk over long-term commitment timeframes.

Likewise, the lack of transparency highlighted by critics of the IFFIm and the Gavi COVAX AMC has raised serious concerns that private investors and vaccine manufacturers reap disproportionate benefits at the expense of donors and beneficiaries. Contrary to the promise of innovative financing solutions to be conducive to effective and efficient use of global health funds, there is compelling evidence that these mechanisms are a bad deal for donors and beneficiaries.

It is also unclear how these mechanisms are supposed to cater to the interests of low-income countries when they don’t get a seat at the table. Namely, those on the receiving end are not present when financial and strategic decisions about global health priorities and the distribution of resources are made, nor when vaccine prices and contracts are negotiated with manufacturers. Therefore, the governance and decision-making processes embedded in innovative financing blatantly undermine the normative principles of public health, purportedly codified into the Pandemic Agreement. Specifically, to promote equity in access to healthcare and health products.

In addition to being inconsistent with this ambition, innovative finance has so far fallen short of providing financing solutions compatible with a holistic public health approach for advancing PPPR. While innovative financing initiatives such as (RED) seem to offer promise in terms of leveraging private capital to finance PPPR and catalyse additional investments from private sector partners, their time-limited use in the context of advancing PPPR and relatively small sums raised leaves many unanswered questions regarding the prospect to scale up such initiatives, as well as their sustainability and long-term potential to promote health policies that are locally owned.

In other words, innovative financing looks to be yet more false advertising for global health financing reform, where its ‘huge untapped potential’ mainly lies with how to further promote vested interests at the expense of comprehensive global public health.

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