Financing Global Health Security Fairly

The world is in the midst of its worst pandemic in 100 years. We have seen human health, livelihoods, and businesses destroyed, but we have also seen unprecedented collective efforts to bring the pandemic under control. Since its inception in April 2020, the Access to COVID-19 Tools Accelerator (ACT-A) has been at the centre of these efforts. Led by a Facilitation Council co-hosted by the World Health Organization (WHO) and the European Commission, ACT-A brings together nine core implementing partners in collaboration with country governments, civil society organizations, and the private sector to develop the tools needed to test, treat, and prevent COVID-19.

Thanks to financial contributions to ACT-A of US$14 billion, the vast majority of WHO member states have now been able to start COVID-19 vaccine roll out, reduce transmission by testing, and save lives by treating the disease. More than 110 countries have already received vaccines through the COVAX Facility, the vaccine pillar of ACT-A. However, ACT-A faces a remaining financing gap of US$19 billion, and if the world is to win the fight against COVID-19, this gap must be filled in 2021.

To address the funding shortfall, the co-chairs of the ACT-A Facilitation Council—the finance ministries of South Africa and Norway—together with Facilitation Council members, have developed a financing framework for fair-share contributions to ACT-A. This “how to split the bill” approach, a financial burden-sharing model, is now being used as a starting point for outreach to all 89 high-income and upper-middle-income countries to contribute to ACT-A. This will be crucial to secure a fair share of financing for ACT-A as a global public good. It is too early to reflect on the experiences at this stage, but there will be a progress report at the Global Health Summit on 21 May 2021.

Assessed contributions, and thereby agreed burden shares, is already standard practice for membership dues in UN organizations. However, a burden-sharing approach has also proved useful for a global health objective in the past. In 1967, the World Health Assembly agreed on a burden-sharing approach for global eradication of smallpox, even though this only contributed a small proportion of what was necessary. Twelve years after this change from voluntary to agreed contributions, smallpox was eradicated, providing huge health and economic benefits.

Even while we work to control the current pandemic, we need to start planning for the future. Proper national and international epidemic preparedness and response capacities are urgently needed to prevent or detect and respond to cross-border infectious threats. Substantial investments are needed to support full implementation of core capacities in countries to enable timely sharing of information, data, and samples, and for the development and manufacturing of medical countermeasures, as well as ensuring equitable access to these technologies.

Global health security is a global public good. We need predictable and sustainable models for financing such global public goods fairly and collectively among states. To that effect, we have used the ACT-A experience and approach in addressing this problem and generalized the model for other needs. This simple mathematical approach is based on three consensual macroeconomic indicators to determine the “fair share by country.”

A three-step approach is used to determine a rational range of financial contributions by country, inspired by the IMF quota formula and adjusted with GDP/capita to account for income-level differences across countries:

• Step 1 – Market exchange rate GDP (MER GDP): the financial contribution to realise global public goods can be perceived generally as a tax. As a tax, the natural starting point would be each country’s income, or economic strength, measured by GDP at market exchange rate.

• Step 2 – Adjusted MER GDP to account for openness: it is assumed that countries that will record higher economic benefits from a stable world economy and global trade should contribute more. To account for this, the approach leverages the IMF quota formula, which considers several indicators including MER GDP and economic openness. The relative weights between GDP and openness in the IMF formula are replicated in our formula. To limit outliers, a cap on economic openness is applied.

• Step 3 – Progressivity based on GDP/capita: it is also assumed that the richer countries, countries with higher income per capita, should bear a higher contribution as a proportion of their GDP than less advanced economies with lower average income. This is incorporated into the approach by adjusting each country’s calculated share with a progression factor that depends linearly on GDP/capita. Different values of the slope parameter span various scenarios from “no progressivity” to “steeper progressivity” that doubles contributions from the highest-income countries and similarly reduces those of the lowest-income economies.

All burden-sharing models imply some value choices, and these may be context and issue specific. The main political choice in this simple model is the level of progressivity. Views may differ on the weight given to openness. However, the relative weight used here is based on long-term IMF practices. We have used different levels of progressivity to create ranges of contributions. We show how this affects the relative contributions of individual countries with examples for some high-, middle-, and low-income countries (figure 1).

Figure 1. Relative contributions of select HICs, MICs, and LICs with different levels of progressivity

Source: WHO; IMF; World Bank

The economic might of countries is a skewed distribution, with a smaller number of countries constituting a large part of total global GDP. This means that any financial burden-sharing model for global public goods aiming to control negative externalities will, from a financial point of view, de facto need to mainly rely on a limited number of countries (see the table below). To illustrate, if we use the mid-points of the modelled contribution ranges, the G7 will together constitute 54 percent of the total, the G20 88 percent, and the US and western Europe 54 percent. If we rank the countries based on their fair contribution shares, the first 30 countries will contribute more than 90 percent of the total financing (see figure 2).

Figure 2. Cumulative contributions to financing of global public goods

Note: Cumulative percentage based on a total funding of USD 30 Bn obtained with b=5

These figures illustrate that building a coalition for financing global health security could start with a small set of countries and then expand to gradually become universal. Substantial investments are needed to support national and regional capacities and to ensure collective functions like research and development, production, stockpiles, and delivery of medical countermeasures. It can be anticipated that countries that invest will want a say in prioritizing and allocating these resources. However, any global governance mechanism would also need to take into account the need for legitimacy and representativeness to ensure inclusiveness and implementation. This also includes the engagement of civil society and the private sector.

There is a growing consensus that ensuring global health security, including to implement the ongoing COVID-19 response, is a global public good and that all countries should participate in its financing. Such financing is, therefore, beyond official development aid; it is part of financing sustainable development collectively. However, it is relevant to note that with a fair-share financing approach such as the one illustrated here, around 90 percent of the total investments will be borne by 30 countries. These countries would need to collectively lead to pave the way for the truly global solutions that until now we have heavily underinvested in. The COVID-19 pandemic has clearly taught us that the costs of investing in prevention and early response, to tackle the root causes of health crises, are minuscule compared to the costs of paying for the consequences of underinvestment.

Proportional contributions of the top 30 contributors that will, with a mid-level of progressivity, secure ~90% of funding needs.

John-Arne Røttingen is the Ambassador for Global Health in the Ministry of Foreign Affairs, Norway

Halvor Hvideberg is the Director for International Economic Affairs in the Ministry of Finance, Norway

Eero Tölö, is a Senior Advisor in the Ministry of Finance, Norway

Benjamin Sarda is a Project Lead at the Boston Consulting Group.

Bruce Aylward is a Senior Advisor to the Director-General and Head of the ACT-A Hub at the World Health Organization