Reflections on 15 Years of “Market Shaping”: The Case of the Pentavalent Vaccine

Over the past two decades, several global health institutions have attempted to improve public health by influencing the characteristics of health product markets, including pricing, quality, overall production, and the supplier and product landscapes. In the August issue of Vaccine: X, former and current employees and partners of Gavi, the Vaccine Alliance reflect on their 15 years of “market shaping” experience—that is, Gavi’s efforts to use its purchasing power and other tools to create more favorable market conditions—for the pentavalent vaccine (often called “penta.”) This five-part vaccine offers children protection against diphtheria, tetanus, pertussis, hepatitis B, and haemophilus influenzae type b (Hib).

Since the 2001 introduction of penta, the market has grown to 300 million doses per year; prices, in turn, fell from about $3.60 per dose in 2005 to between $.60 and $1.40 per dose for 2017–2019. The rapid expansion of demand and quality-assured supply, coupled with (seemingly) stable price reductions, is cited as a success of market shaping efforts.  

As we highlighted in our recent report on Global Health Procurement (based on an exhaustive literature review), the evidence base in the public domain on effective procurement and “market shaping” strategies remains thin—and mostly descriptive (versus empirical) in nature. As a case study, the new paper in Vaccine: X also deploys a descriptive/qualitative rather than empirical methodology. Even so, the detailed documentation of “market shaping” experience is a welcome addition to the literature base in this area, and helpful to policymakers for other products/disease areas who may consider similar interventions.

The whole paper makes for an interesting read, and the authors (two of whom served on our procurement Working Group) offer their own reflections and conclusions. Reading through, and abstracting away from the specific details of the penta case to the broader context of procurement, I had a few additional takeaways of my own.

1. Gavi’s Very Existence (and Financing) Was the Most Significant Market Intervention. The paper details the evolution of the penta market and the specific efforts to influence that market over time. However, it’s clear that specific and intentional market “interventions” were all contingent on the most significant market intervention of all: the establishment, expansion, and financing of Gavi to support vaccination in lower-income countries. The authors argue that Gavi’s existence per se served as a foundation for active-market shaping, but was, by itself, “insufficient to drive rapid change.” This may well be true in the narrow sense for the outcomes they’re describing—but it was Gavi’s existence itself that even created the market that could subsequently be “shaped.” Interestingly, this is also the view of manufacturers; according to the authors, “manufacturers have cited Gavi funding as the market shaping force for pentavalent and some were less fluent in recognizing specific active market shaping interventions.” The authors attribute this to manufacturers’ lack of experience with certain procurement methods or information, but it may also reflect the relative importance of various factors for their decision-making.

2. With Great Buying Power Comes Great Responsibility. Gavi’s experience in market shaping for penta was itself shaped by its role within that market: controlling almost entirety of the market, Gavi was a monopsonistic buyer. Up until 2015 (when India started procuring in large quantities), Gavi-supported purchasing accounted for nearly the entire penta market; even now, Gavi (via UNICEF) finances about two-thirds of the total global procurement. Gavi’s status as a monopsonist financer creates a dynamic where any procurement approach or decision ripples across the entire market—for better or worse. Certain manufacturers live or die depending on their success in responding to Gavi demand and winning UNICEF tenders; they have no back-up option if they fail to win a tender cycle, so they would be deeply responsive to any Gavi signal. This generates enormous “market shaping” leverage to influence market conditions for the better—but it also amplifies its responsibility to carefully consider any potential adverse consequences for its actions. It also supports a dynamic where close collaboration and open communication between supplier and purchaser are essential; the parties to the transaction are mutually dependent for their survival and/or fulfillment of their missions.

   The converse is also true. In a more decentralized market (which we may see following aid transition), no single actor will have the power to control overall market conditions; this could compromise efforts at quality assurance and price negotiation, plus increase transaction costs and manufacturer uncertainty. However, decentralization of purchasing may also remove some of the systemic supply risk that currently requires careful, active management to mitigate. A more mutually competitive market, with several suppliers and many purchasers, would lower the stakes for each individual tender/transaction. In such a world, it may be less necessary to carefully manage the supplier landscape, instead allowing forces of supply and demand to resolve in a more natural equilibrium.

   Importantly, there are a couple of asterisks here. First, Gavi is now being displaced as a monopsonist not just by a collection of small buyers, but also by emerging foci of purchasing power—most notably China and India. For penta, the authors note that the entry of the government of India as a large buyer had positive externalities for Gavi; India was able to achieve a lower price point for the vaccines, which helps change suppliers’ overall expectations about pricing without directly impacting supply security. But for some vaccines—most notably HPV and rotavirus—rapidly increasing demand from China, at much higher price points than paid by Gavi, may outpace the expansion of supply to meet the needs of all vulnerable children, particularly those living in Gavi countries where disease burden tends to be highest.

   Second, decentralization of purchasing requires Gavi to think more carefully about how its own market shaping activities and purchasing behavior affect access and pricing in non-Gavi countries. For the pneumococcal conjugate vaccine (PCV), Gavi has been able to secure a price of about $3 per dose, or $9 per complete course. But with only two suppliers of PCV (GSK and Pfizer), other countries face much higher “market” prices for the same vaccine—up to $50 per dose for middle-income countries in Eastern Europe. Some countries, for example Thailand, have found that the vaccine is not locally cost-effective at available prices and therefore decided against its introduction. The MSF Access Campaign argues that Gavi’s market shaping activities for PCV, including subsidies through the Advance Market Commitment (AMC), “band-aid” the PCV market for Gavi itself without addressing the underlying structural issue (lack of competition) that has led to persistently high prices. To date, I’m skeptical that Gavi could have done much more to encourage competition—but with the anticipated entry of a third, less-costly competitor (Serum Institute of India), Gavi should think strategically about how it can leverage the expanded supplier base to improve not only its own pricing, but also access for countries outside of Gavi eligibility. (For more on Gavi’s approach to market shaping and procurement, see this note by my colleagues Janeen Madan Keller and Amanda Glassman.)

My takeaways here are quite high-level; the paper itself gets far further into the weeds of the penta market itself and the specific approaches Gavi deployed to influence market conditions. I encourage you to read the whole thing—and I urge others in the market shaping world to clearly document (and empirically evaluate!) your efforts.