Innovative Financing and its Role in Global Health
At the March 2015 Consortium of Universities for Global Health (CUGH) Conference, there was a notable, repeated emphasis on the importance of health system strengthening, universal health coverage, and the Sustainable Development Goals (SDGs). Panelists and experts frequently argued that the future of global health rests in translating these concepts into reality, ensuring that all countries have – to quote Paul Farmer’s new global health mantra – the necessary “staff, stuff, space, and systems.” However, many speakers glossed over how to sustainably fund these ideas, instead referring vaguely to “innovative financing” mechanisms as the answer. Clarifying this nebulous concept was the focus of the CUGH sessions “Financing Global Health: Challenges and Innovations.”
Maureen Lewis, former Chief Economist for Human Development at the World Bank, opened the session by providing a broad overview of global health financing. She showed how shifting diseases burdens, the emergence of more middle-income countries, the rise of new non-state investors (private companies, philanthropic organizations, etc.), and shrinking ODA budgets have changed the nature of global health funding, creating a constant flux that is highly sensitive to external political, economic, and social pressures. These changes are causing donors to rethink their health assistance, shifting away from traditional disease-specific programs towards broader health system reform. These more encompassing programs may not be fiscally sustainable under current financing schemes, which is one primary reason why innovative financing mechanisms are seen as increasingly necessary.
Another panelist, Derek Strocher, CFO of the Calvert Social Investment Foundation, tried his hand at clarifying what it meant to be “innovative.” He emphasized that global health funding, at its core, is the transfer of value, where money is converted into health impacts. In this context, innovative financing seeks to add value as money travels – in other words, improving the health impacts of each dollar. Strocher emphasized that innovative financing is not, as many perceive, the creation of money and warns against conflating “innovative as inventive…because money does not grow on trees.”
According to Strocher, there are two ways to be innovative. The first is simply to increase efficiency. For example, using existing health infrastructure to deliver services rather than building a parallel system. The second method is to increase efficacy, which according to Strocher, means “using current value to leverage more value.” He cited the Advance Market Commitment (AMC) for pneumococcal disease as an example of “effective” funding because donors commit in advance to purchase new health products (like a vaccine) to be used in developing countries; thereby creating a guaranteed market that incentivizes pharmaceutical research and development. In essence, it resolves market failures to provide niche health products in low-income countries. Strocher also discussed the International Financing Facility for Immunization (IFFIm), which issues bonds in markets that convert long-term government pledges into immediate, readily available cash for buying and distributing urgently needed vaccines in low resource settings.
Strocher noted how more often than not, these innovative financing schemes are familiar approaches – “old tricks” – newly applied in the field of global health. Therefore, he cautioned the global health community to temper its expectations for future, undiscovered fiscal methods that will create large amounts of cash to sustainably fund emerging health priorities like the SDGs.
The AMC and IFFIm also reveal other potential risks of innovative financing. These mechanisms often have high start-up costs, which donors may be unwilling to cover. Large initial investments can also reduce donor willingness to contribute to future financing initiatives. In addition, these endeavors are often technically complex and require a long time to plan and implement, making them less useful for immediate global health problems.
These limitations do not mean we abandon the idea of innovative financing options altogether. Both speakers emphasized their continued importance to future global health goals, but there is a need for discipline and realism: developing funding mechanisms that are effective, efficient, and sustainable is complex and difficult. As the new SDGs are set in 2015 for the coming 15 years, it will be essential to systematically factor in current financing constraints, accurately cost new objectives, and confront the difficult questions of where additional funding for an expanding agenda will originate.