Often, the interests of the public and private sectors are already aligned, but operational capacity is disjointed, and value cannot be realized in the real world. In these cases, even though the profit motive should provide a stable underpinning for a PPP, a third party is needed to increase operational capacity.
One important role that an independent non-profit entity can play is pooling of demand. Often, by aggregating demand from smaller, poorer regions, a non-profit can create a viable market where there was none before.
EXAMPLE Gavi, The Vaccine Alliance A potent example of demand pooling can be found in Gavi, the Vaccine Alliance (GAVI). While funding for vaccines comes from governments and donors, the vaccines themselves come from the pharmaceutical industry. GAVI, a non-profit, exists to aggregate demand for vaccines among a number of low-income countries. By pooling the demand of many low-income countries at once, GAVI lowers the cost of immunizations, making them cheaper to administer across entire regions. More importantly, by creating an economy of scale, GAVI creates an incentive for the private sector to enter into new marketplaces, connecting millions with much-needed vaccines. By ensuring the predictability of the introduction of immunization programs, GAVI helps to avoid the negative medical externalities associated with inconsistent immunization. Key Skills and Frameworks: • Strategic Thinking • Allocation of Risks and Opportunities • Conventional vs. Optimal Configuration • Innovation • Strategic Thinking • Financial Structuring |
Indeed, we have observed this type of demand-pooling happening at the national level regarding the coronavirus vaccines. Large-scale purchases of hundreds of millions of doses around the world have justified the development of a Covid-19 vaccine at record-breaking speed. In the United States, for example, a July agreement with the federal government and Pfizer-$1.95 billion for 100 million doses (but only if their vaccine proved successful)-provided the company with a guaranteed buyer, and incentivized a massive $2 billion investment on the part of the company in vaccine development costs.39
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39LaFraniere, Thomas, Weiland, Gelles, Stolberg, & Grady. "Politics, Science and the Remarkable Race for a Coronavirus Vaccine," The New York Times. 21 November 2020.
https://www.nytimes.com/2020/11/21/us/politics/coronavirus-vaccine.html?referringSource=articleShare