Gavi and the Economics of Buying Vaccines Together

How Gavi, the Vaccine Alliance, pools demand to lower vaccine prices, and how advance market commitments encouraged companies to make vaccines for poor countries.

Vaccines are among the most cost-effective health investments. But in 2000, many new vaccines were too expensive for poor countries, and manufacturers had little incentive to make them for low-income markets. Gavi, the Vaccine Alliance, was created to address this.

What Gavi does

Founded in 2000 with support from the Gates Foundation and others, Gavi:

Pools demand from many low-income countries, creating a large, predictable market.
Negotiates lower prices with manufacturers in exchange for large, long-term orders.
Funds vaccines such as pentavalent, pneumococcal, rotavirus and HPV vaccines.
Works with UNICEF, which procures vaccines on its behalf.

Gavi reports that it has helped vaccinate more than a billion children.

Pooled procurement economics

When buyers combine orders:

Manufacturers can produce at larger scale, lowering costs.
Predictable demand reduces risk, encouraging investment.
Buyers gain bargaining power.

Advance market commitments

In 2009, donors launched an advance market commitment for pneumococcal vaccines. Donors promised 1.5 billion dollars to top up payments for vaccines meeting set standards, if companies committed to supply them at low, long-term prices. This created a guaranteed market and helped bring pneumococcal vaccines to many low-income countries within a few years of their introduction in rich countries.

Co-financing and transition

Countries contribute part of the cost, called co-financing, which rises as they grow richer. Eventually, countries transition out of Gavi support and pay fully themselves. India transitioned out of most Gavi support and now funds its large Universal Immunisation Programme domestically.

Challenges

Funding: Gavi relies on donor pledges, which faced pressure in 2025.
Reaching zero-dose children: millions of children still receive no routine vaccines.

Buying in bulk

A single small country ordering a new vaccine might pay a high price for a few hundred thousand doses. Through Gavi, fifty countries order together, totalling tens of millions of doses. The manufacturer offers a much lower price per dose because of the scale and reliable demand.

Thinking vaccine prices are fixed by production costs alone

Prices depend on market size, competition and bargaining. Pooling demand and guaranteeing markets can bring prices down sharply.

Key takeaways

Gavi pools demand from poor countries to lower vaccine prices.
Pooled procurement gives scale, predictability and bargaining power.
The 2009 pneumococcal advance market commitment guaranteed a market in return for low prices.
Countries co-finance and eventually transition to paying fully.