INNOVATIVEFINANCINGMECHANISMSFORHEALTHUPDATEFEBRUARY2011

Introduction

InOctober2010,theMillenniumDevelopmentGoals
(MDG)SummitwasheldinNewYorkCity.Theaim
oftheSummitwastoreviewandaccelerate
progresstowardsthe2015deadlineforthe
achievementoftheeightMDGsthatwereagreedto
bytheworldscountriesanddevelopment
institutionsin2000.TheaimoftheMDGsisto
eradicateextremepovertyandhunger,achieve
universalprimaryeducation,promotegender
equality,improvehealthandreducediseaseburden,
protecttheenvironmentandstrengthenglobal
partnerships.

InhisFebruary2010reportKeepingthePromise:A
forwardlookingreviewtopromoteanagreedaction
agendatoachievetheMillenniumDevelopment
Goalsby2015,UnitedNationsSecretaryGeneral,
BanKiMoon,outlinedprogressmadesofaraswell
assomeemergingchallengessuchasclimatechange
andtheglobalfinancialcrisis.Healsohighlightedthe
lackofadequateandpredictableinternational
financingasbeingamajorbarriertoachievementof
theMDGs.Hecalledfortheneedtolookbeyond
traditionalODA(OverseasDevelopmentAssistance)
towardsmoreinnovativefinancingmechanismsto
increasetheflowandpredictabilityoffinances.

Therearestilllargegapsinmeetingfundingtargets.
The2005GleneaglesG8targetforODAby2010was
approximately$35billionshort.G8leadershavenot
kepttheirpastcommitmentstohealth,foodsecurity
andeducation.Atthe2010G8SummitinMuskoka,
additionalpledgesweremadeformaternalandchild
health.

AIDSfundingisincrisis.IntheUnitedStates,
financingfortheglobalAIDSepidemichasbeen
flatlined.TheGlobalFundtoFightAIDS,TBand
Malaria(GFATM)atitsOctober2010replenishment,
fell$10billionshortoftheamountitneedsin2011

2013tocontinuethemassivesuccessand scaleup
ofinterventionsthatwehaveseenrecently.

Inits2010annualstatusreport,UNAIDS
demonstratedthatalthoughtherehasbeen
progresstowardsreachingMDG6aswellas
achievingthegoalofuniversalaccesstoHIV
prevention,treatment,careandsupport,wehave
fallenfarshortoverallofachievingtheMDG6target
ofhaltingandbeginningtoreversethespreadofHIV
by2010.

Itisdifficulttoaccuratelyassessthefinancial
resourcesneededtoachievethesegoals.Professor
BrookBakerundertookthistaskin2010(contracted
byActionforGlobalHealthandInternationalCivil
SocietySupport)andproducedapaperentitled
CTLforhealth/FTTwithHealth:ResourceNeeds
EstimatesandanAssessmentofFundingModels.In
thisstudyheusedasabasetheresultsofthe
costingstudyundertakenin2009bytheTaskforce
onInnovativeandInternationalFinancingforHealth
Systems,andsupplementedthissomewhat
underestimationoftheneedstocalculateamore
globalresourceneedsestimatefor20092016.His
finalestimateofresourceneedstocovermalaria,
TB,HIVandAIDS,maternal,newbornandchild
health,chronicandneglecteddiseasesandhuman
resourcesforhealth,comestoapproximately$456
billionfortheperiod20092016.Takingintoaccount
anincreaseinhealthspendingonthepartof
developingcountriesandthecontinuedassistance
ofdonorcountries,therearestillsignificantgapsto
befilled.

(ThepaperbyProfBrookBakercitedabovecanbe
viewedat:
http://www.actionforglobalhealth.eu/index.php?id=
180&tx_ttnews%5Btt_news%5D=308&cHash=0d1d2
bea48c3d9725863a7b0def521fe)

Thisfactsheetexploressomeoftheproposalsfor

1 Nicholas Street, Suite 726, Ottawa ON K1N 7B7

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E-mail: info@icad-cisd.com www.icad-cisd.com

February2011


INNOVATIVEFINANCINGMECHANISMSFORHEALTHUPDATEFEBRUARY2011

innovativefinancingmechanismsthathavecome
totheforeinthepast45yearsandisanupdate

ofthefactsheetofthesametitledevelopedby
ICADin2007.Someoftheinnovativefinancing
mechanismsdiscussedherewillcontribute
directlytocombatingHIVandAIDSthroughthe
fundingoftreatmentandvaccineinitiatives.
OthershavethepotentialtoimpactHIVandAIDS
indirectlybycontributingtodevelopment
initiativesandfightingglobalpoverty.

Innovative Financing Mechanisms

1. CurrencyTransactionLevyandtheFinancial
TransactionsTax(CTLandFTT)

Theideaofasmalltaxonwholesalecurrency
transactions(CTL)toleverageresourcesforfunding
healthneedshasbeenexploredforoveradecade.
Morerecently,abroadertaxonstocks,bonds,
commoditiesandderivativesandotherfinancial
instruments(FTT)hasgainedgrowingpolitical
supportinsomeareas.

InitiallytheideaofaCTLforHealthwastoinstitutea
levyof0.005%,sufficienttomobilizesignificant
fundsbutnothighenoughtohaveanyimpacton
themarkets,whichwasinfactitsprimaryselling
pointtoraisemoneyfordevelopmentthatcould
notberaisedinanyotherway.However,sincethe
globalfinancialcrisisithasbecomeclearthataCTL
orFTTatahigherlevel(e.g.0.05%)wouldbothraise
significantresourcesandcontributetoacooling
affectonspeculativetrading.Itiswidelyaccepted
thatabroadlysupportedFTTat0.05%couldraise
approximately$650billionayearforpoverty
alleviation(bothdomesticandglobal)aswellas
climatechangemitigationandadaptationstrategies.

IntheUKandotherEuropeancountries,FTT
advocateshaverecognizedthatpublicangeratthe
bankscontributiontotheglobaleconomiccrisis
helpsgathersupportfortheideaofanFTTatavery
broadpubliclevel.Politicalsupportforabroader
FTTbeganwithformerUKPrimeMinister,Gordon

Brownssupportoftheidea,quicklyfollowedby
FrancesSarkozyandGermanysMerkel.Japan,
Australia,Austria,Belgium,theEUParliamentand
EuropeanCommission,IndiaandSouthAfricahave
allstatedtheirsupportforanFTT.Over350
academicsandeconomistssignedalettercallingfor
anFTT.Canadadoesnotsupporttheintroductionof
anFTToraCTL.

AttheG20meetinginPittsburghin2009,Germany
proposedanFTTbutitwasnotuniversallyendorsed.
TheIMFwasaskedtowriteareportonthedifferent
kindsofoptionsbeingdiscussedandtheirfeasibility.
ThereportdidnotgosofarastoendorseanFTTbut
itdidconfirmthatanFTTwouldbefeasibleto
implement.Aroundthetimeofthe2010G8andG20
SummitsinToronto,thediscussionaboutthe
optionsforbanklevies(includinganFTT)ledto
confusioninthemediaandthegeneralpublic.At
theG20inToronto,theideaofanFTTwasnot
advanced.WithFranceassumingtheG8andG20
Presidencyin2011,manybelievethattheFTTisan
ideawhosetimehasnowcomeandthatthisissue
willbeenergeticallypursuedbyPresidentSarkozy.

FormoreindepthinformationontheFTT,please
seetheKairosbriefingpaperAnIdeaWhoseTime
hasCome:AdoptaFinancialTransactionsTax
http://www.kairoscanada.org/fileadmin/fe/files/PDF
/Publications/PBP24FTT.pdf

Otheronlineresources:
www.robinhoodtax.ca

2. AviationSolidarityLevy(UNITAID)

UNITAIDwasfoundedin2006ontheinitiativeof
Brazil,France,Chile,NorwayandtheUKandthere
arenow29membercountries.Themissionof
UNITAID,theInternationalDrugPurchaseFacility,is
toprovidepeopleinthedevelopingworldwithlong
termaccesstoqualitydrugtreatmentfordiseases
suchasmalaria,TBandHIVandAIDS,atthelowest
pricepossible.Inordertofulfillthismission,a
sourceoflongtermpredictablefundingisrequired.


INNOVATIVEFINANCINGMECHANISMSFORHEALTHUPDATEFEBRUARY2011

TwothirdsofUNITAIDstotalfundsraisedcome
throughaninnovativeairtaxleviedbymember
countries.TheUK,Spain,Luxembourg,Cyprusand
theGatesFoundationprovidemultiyear
contributionsinstead.Canadaisnotamemberof
UNITAID.

www.unitaid.eu

3. MASSIVEGOOD

MASSIVEGOODusesthepowerofsocialmediato
helpstopthemillionsofpreventabledeathsfrom
HIV/AIDS,malariaandTBandincreasematernaland
childhealthinthedevelopingworld.Theinitiative
allowsyoutomakea$2microdonationeverytime
youmakeaflightreservation,bookahotelroomor
rentalcar,onselectwebsites.Itbecameoperational
inMarch2010.MASSIVEGOODsupportstheClinton
Foundation,TheGlobalFundtoFightAIDS,TBand
Malaria,theWorldHealthOrganisation,UNITAID
andUNICEF.

www.massivegood.org

4. IFFIm(GAVI)

TheInternationalFinanceFacilityforImmunization
(IFFIm)hasbeendesignedtoprovideimmediateand
predictablefundsforhealthandimmunization
throughtheGAVIAlliance(GlobalAlliancefor
VaccinesandImmunizations).Theprogramworksby
providingmostoftheresourcesupfront,basedon
theassumptionthatacceleratingfundingnowwill
leadtoadecreaseonresourceneedsinthefuture.
TheIFFImsellsbondsontheinternationalcapital
markettoinvestorssuchascentralbanks,fund
managersandindividuals.Theinvestmentsarethen
disbursedtotheGAVIAlliance.IFFImrepays
bondholdersusingfundsfromparticipatingdonor
countrieswhoarelegallyboundtoschooledgrant
paymentstotheIFFImoverthenext20years.Sofar,
IFFImhasraisedmorethanUS$3billionandasof30
September2010,IFFImhadapprovedprogramsof

US$2.4billion,morethanUS$1.6billionofwhichhas
beendisbursedtosupportvaccineserviceand
deliveryto70developingcountries.

www.iffimmunisation.org

5. AdvanceMarketCommitments

AnAdvanceMarketCommitment(AMC)isabinding
contract,typicallybetweenadonorcountryanda
pharmaceuticalcompany,inwhichthedonor
governmentagreestopayapredeterminedpricefor
aparticularvaccineifitisdeveloped.Therecipient
developingcountryisalsoboundtomakingafixed
financialcontributionperdoseofthevaccine.By
guaranteeingamarketforavaccineifitis
successfullydeveloped,AMCsaimtoovercome
marketfailuresthatinhibitthedevelopmentof
vaccinesfordiseasesthatareconcentratedin
developingcountries.Oncethevaccineisdeveloped,
thedeveloperistobepaidthepreagreedpriceper
doseifthevaccinemeetscertainpredetermined
criteriaandifitisdemandedbydeveloping
countries.WhentheAMCfundingisdepleted,the
manufacturerisobligatedtocontinuetoprovidean
establishedamountatapredeterminedlongterm
price.

InFebruary2007,fivecountries(Canada,Italy,
Norway,RussiaandtheUK)andtheBill&Melinda
GatesFoundationcommitted$1.5billiontosupport
apilotAMCforthedevelopmentofananti
pneumococcusvaccinefrom20072020.TheAMC
pilotoperatesthroughtheGAVIAlliance,theWorld
BankandanIndependentAssessmentCommittee.
Canadacommittedacontributionof$230million
fromitsODAbudget.

AnumberofcritiquesofAMCshavebeenput
forward,thepredominantbeingthatAMCsare
essentiallysubsidiesforlargepharmaceutical
companies.Inaddition,theDrugsforNeglected
Diseasesinitiative(DNDi)arguesthatneglected
diseaseresearchanddevelopmentisbetter
conductedthroughcollaborativeandmorecost


INNOVATIVEFINANCINGMECHANISMSFORHEALTHUPDATEFEBRUARY2011

effectivepublicandprivateventuresthanby
industryapproachesalone,andthatAMCs

encouragesecrecyratherthancollaboration.
Further,asrecipientcountriesareboundtoafixed

financialcontributionperdoseofvaccine,the
quantitytheypurchasewillbebasedonwhatthey

canaffordratherthanwhattheyneed.Finallythere
existsconcernoverthequalityoftheproductsthat
willbedeveloped.Theracetoregisteranew
medicaltoolmayprovideadisincentivetomeetthe
higheststandardsofsafetyandefficiency.

www.vaccineamc.org

6. Debt2Health(GlobalFundtoFightAIDS,TBand
Malaria)

Foreigndebtisaseriousobstacletodevelopmentin
manypoorcountries.Debtreliefinitiativessuchas
theHighlyIndebtedPoorCountry(HIPC)initiative
andtheMultilateralDebtReliefInitiative(MDRI)
haveprovidedsomerelieftolowincomecountries.
However,therearemanylowtomiddleincome
countriesthathavecripplinglyhighlevelsofforeign
debtbutdonotqualifyfortheseformsofdebtrelief
(e.g.Indonesia).

Debt2HealthinvolvesGlobalFundfacilitated
agreementsunderwhichcreditorsforego
repaymentofaportionoftheirsovereigndebts(i.e.
developmentaidcredits)ontheconditionthatthe
beneficiarycountriesinvestanagreedupon
counterpartamountinhealththroughtheGlobal
Fund.

Forthefirsttime,debtswapsarecarriedout
throughtrilateralarrangementsinvolvinga
multilateralorganization,thusenhancingaid
harmonizationandimplementingtheParis
DeclarationonAidHarmonizationand
Effectiveness.Throughthecounterpartpayments
thebeneficiarycountrybecomesadonortothe
GlobalFund.

Thisprojecthasundergoneapilotphasefrom2007

to2009involvingIndonesia,Coted'Ivoireand
Pakistanasbeneficiarycountries.

Currentagreementsare:
AustraliaandIndonesiahaveanagreement
realizingUS$37.2millionbetween2010and
2016.
GermanyandCoted'Ivoirehaveanagreement
realizingUS$12.95millionbetween20112018.
GermanyandIndonesiahaveanagreement
realizingUS$35.14between20082012.
GermanyandPakistanhaveanagreement
realizingUS$26.67millionbetween20092012.

ThetotalcontributionsrealizedbyDebt2Healthto
dateareUS$37,116,481.

http://www.theglobalfund.org/en/innovativefinanci
ng/debt2health/

Conclusion

Significantnewresourcesareneededforthefight
againstpovertyanddiseasessuchasHIVandAIDS,
TBandmalaria,aswellasaddressingtheMDGsthat
arelaggingfurthestbehind(maternalandchild
health)andtheeffectsofclimatechange.An
overwhelmingpercentageofdevelopedcountries
havenotmettheircommitmenttoallocate0.7%of
theirGNItoODA,norhavetheyestablished
timelinestodoso.Theeffectofthefinancialcrisis
hasbeensevereinmanycountries(particularlyin
Europe).Innovativefinancingisacreativeand
essentialwayofgeneratingnewfundsfor
development.However,itisimportanttonotethat
innovativefinancingismeanttocomplement
ordinarybudgetaryallocationsandnotreplace
them.Canadassupportforinnovativefinancing
mechanismsthusfarhasbeenlimitedtosupportfor
theAdvanceMarketCommitmentinitiative.Through
increasedparticipationininnovativefinancing
mechanisms,Canadahastheopportunityto
contributeitsfairsharetothefundingofthe
resourcegapandtotheachievementofthe
MillenniumDevelopmentGoalsby2015.

ICADsmissionistolessenthespreadandimpactofHIVandAIDSinresourcepoorcommunitiesandcountriesbyprovidingleadershipandactivelycontributingtothe
4
Canadianandinternationalresponse.FundingforthispublicationwasprovidedbythePublicHealthAgencyofCanada.Theopinionsexpressedinthispublicationare
thoseoftheauthors/researchersanddonotnecessarilyreflecttheofficialviewsofthePublicHealthAgencyofCanada.