On September 19, 2019, our Center Director Gavin Yamey gave a video presentation at the 5th Annual Public Policy Conference in the Philippines. The conference was called “Navigating the New Globalization: Local Actions for Global Challenges.” Dr. Yamey’s presentation was on financing global public goods for health. The blog below is an updated version of his talk.
I am delighted to have the opportunity to talk to you today about financing of what we at the Center for Policy Impact in Global Health call “global functions,” and what the World Health Organization (WHO) is calling global common goods for health.
The work that I will be presenting today is part of a new program of work led by the WHO on Financing Common Goods for Health, published in a special issue of the journal Health Systems and Reform coming out in September in time for the UN General Assembly.
In that special issue, there are eight main papers on this topic of common goods for health.
- When both markets and governments fail
- Common goods for health: economic rationale and tools for prioritization
- When do governments support common goods for health?
- Financing common goods for health: core government functions in health emergency and disaster risk management
- Financing common goods for health: a country agenda
- Financing common goods for health: when the world is a country (the paper that I led)
- The case for public financing of environmental common goods for health
- International funding for global common goods for health.
Today, in the next 10 minutes or so, I am going to focus on the paper that I co-authored on financing global common goods for health.
In this series, we are addressing a number of questions:
- What are “common goods for health” (CGH)?
- Why have they not been financed by markets or by governments?
- How much would it cost to finance these goods?
- What country-level financing mechanisms are able to finance CGH?
- And, as I am going to talk about today, what are potential global-level financing mechanisms and challenges?
Let me just briefly give you the definition that we are using in this series on common goods for health. This term refers to population-based functions or interventions that require collective financing—either from governments, or donors, or both. Funding these functions as CGH is based on the following conditions: they contribute to health progress and economic progress, and there is a very clear economic rationale for these interventions based on market failures with a focus on public goods.
CGH refers to public goods, which economists define as goods that are non-rival and non-excludable, and goods/interventions with large social externalities. The series makes the point that not all public or common goods are within this definition, and vice versa, but all common goods for health must generate large societal health benefits that cannot be financed through market forces alone.
I want to focus specifically on global common goods for health. In the Lancet Commission on Investing on Health (the CIH)—Global Health 2035—which came out in December 2013, we, the commissioners, used the term “global functions.” This is another way of saying global common goods for health. When we talked about global functions, we were referring to activities that addressed transnational health issues that go beyond the boundaries of individual nations.
When you invest in global functions, you derive, by definition, transnational benefits. The CIH categorized these global functions into three types:
- Supporting global public goods, such as generating and sharing health knowledge across borders, market shaping to bring down the prices of drugs, or setting international norms and standards;
- Fostering leadership and stewardship, such as convening for consensus building; and
- Managing cross-border regional and global externalities, such as outbreak preparedness and response or responding to antimicrobial resistance.
In our paper on financing global common goods for health, we lay out an investment case or a value proposition. We argue that there are at least five reasons why it is valuable to invest in global CGH, like pandemic preparedness or research and development for diseases of poverty.
- The first is that, if we do nothing, the costs are extraordinary. For example, Victoria Fan, Dean Jamison, and Larry Summers showed in a paper in the Bulletin of the WHO that the expected annual losses from pandemic risks are around USD 500 billion a year. There is also research by Nichola Naylor and colleagues that shows that if the current rates of antimicrobial resistance continue, the annual GDP loss in 40 years from now would be around USD 454 billion. So, the costs of doing nothing are enormous.
- Secondly, if we do invest in global functions, the payoffs are very large. There are very impressive health and economic returns. For example, the returns to investing in an HIV vaccine will be very large when eventually we develop such a vaccine. Rob Hecht, Dean Jamison, and colleagues showed, for example, that if by 2030 we are able to develop an HIV vaccine of even partial efficacy (50% efficacy for example), the returns would be huge. If the costs of the investment in the HIV vaccine are around USD 900 million a year to 2030, which is what we are currently spending, then the returns are still going to be orders of magnitude greater than the investment—somewhere between 2 and 70 dollars in return for every dollar invested. We know that there are similar examples of large returns to investing in other global functions like market shaping for the pentavalent vaccine.
- It is also possible that by investing in transnational activities, global functions could have in the end greater benefit for low- and middle-income countries than the direct funding of services, because the funding of global functions could be less fungible.
- It also could be a way to address the so-called middle-income dilemma. The middle-income dilemma is that middle-income countries are now graduating out of development assistance for health. They have reached a national income level (the GDP per capita) that is disqualifying them from receiving aid and yet around 70% of the world’s poor are in those transitioning middle-income countries. Thus, there is a dilemma: these middle-income countries do not qualify for aid and yet most poverty and most poverty-related ill health is now in middle-income countries and not in low-income countries.
We argue that investing in these global functions could be a very powerful way to continue to improve the health of the poor in middle-income countries. For example, if you take multidrug-resistant tuberculosis (MDR-TB), affected communities in middle-income countries would benefit from product development, from market shaping to reduce prices, and from collective purchasing of commodities.
- And our fifth argument is that middle-income countries are going to be graduating away from official development assistance from health—thus, there is an opportunity for aid reallocation. In other words this direct country support could instead be invested in global functions.
We also argue that you can invest in global functions at multiple different levels.
You can invest at the global level—the supranational level. For example, investing in the Coalition for Epidemic Preparedness Innovations (CEPI) or in global vaccine stockpiles—those are global investments in global common goods for health.
You can invest at the regional level, for example, investing in the Africa Centres for Disease Control and Prevention or in regional malaria elimination.
Moreover, you can also invest in global common goods at the country level—if, for example you invest in malaria elimination or in tackling drug-resistant tuberculosis—those have transnational benefits.
I have co-authored a paper led by Marco Schäferhoff that also came out in September in the special issue of Health systems and Reform, in which we quantified donor spending on global common goods for health in the years 2013, 2015, and 2017.
We showed that in 2013, out of the USD 25.7 billion in total official development assistance (ODA) for health, less than a quarter was spent on global common goods for health. That proportion has changed; it went up to 29% in 2015 but then it went down again to 24% in 2017. In the wake of the west Africa Ebola epidemic of 2014-2016, there was a temporary increase in spending on global common goods for health, which then fell post-Ebola.
How much funding do we need for global CGH? We estimate, based on the work of the Commission on Investing in Health, and of the Lancet Commission on Malaria Eradication, that an additional USD 11.5 billion is needed annually to invest in global common goods for health. This is a conservative estimate.
What would this USD 11.5 billion in annual funding pay for? It would fund product development for neglected diseases, pandemic preparedness, polio eradication, malaria eradication, the WHO’s core activities (i.e., the global public goods that the WHO supports), a pooled procurement mechanism for non-communicable diseases, and population policy and implementation research.
As mentioned earlier, the costs of inaction are enormous—many hundreds of billion dollars a year. This puts the USD 11.5 billion figure into context. This is a very important and feasible investment.
In our paper, we summarize the approaches that you could adopt to close this financing gap. We group these into resource mobilization, pooling, and strategic purchasing:
- Mobilizing resources. One way this can be done is through compulsory mechanisms such as global taxation. There is a growing appetite for global taxation e.g. a financial transaction tax and a carbon tax. For example, the nonprofit organization Unitaid is funded from a tax on airline tickets. Another way to mobilize resources is through voluntary earmarked mechanisms, such as CEPI mobilizing funding for pandemic vaccine development. This is clearly a way to raise money, however, this does risk the proliferation and fragmentation of the global health architecture. With voluntary earmarked mechanisms, you would still need an overarching governance structure, which is best provided by WHO.
Mobilizing resources can also be done through the reallocation of ODA. As I argued earlier, after middle-income countries graduate from direct country support, this ODA could be invested in global functions.
- A second approach is through the pooling of funding. An example of this is the pooling of research and development (R&D) funding through new coordination platforms, such as the G20 Global AMR (Antimicrobial Resistance) R&D Hub, or the pooling of multilateral agency funding. The Center for Policy Impact in Global Health has recently published an analysis that shows that the four major multilateral agencies in health (i.e. the WHO, World Bank, Gavi, and the Global Fund) are very interested in combining forces and collaborating more on funding of global public goods for health.
- A third approach is the strategic purchasing of global CGH. We know that Gavi is involved in pooled procurement and market shaping. The Global Fund has allotted USD 194 million for Strategic Initiatives; many of those are global public goods such as malaria elimination. We know that the International Development Association (IDA), for example, funds laboratory networks in Sub-Saharan Africa.
The WHO has a very key role as an overarching governance mechanism. We say in our paper that the most radical way to close this financing gap for global CGH would be changing the way the WHO itself is financed. If you look at WHO’s core functions, these reflect its role as the global health governance body; and if you look at the general program of work for 2019-2023, global public goods are absolutely at the heart of that program of work. Yet, voluntary contributions or extra budgetary funds now make up almost 80% of WHO’s funding and those are heavily earmarked.
We argue in the Commission on Investing in Health that, as a result of earmarking, WHO is struggling to fund its core functions, undermining its capacity to supply global public goods and other global functions. Thus, we have to address this dilemma if we are going to address the critical funding gap for common goods for health.
I hope that has been a useful overview of the landscape of the financing of global common goods for health. Thank you for your time.