A Global Deal for Our Pandemic Age
Report of the G20 High Level Independent Panel on Financing the Global Commons for Pandemic Preparedness and Response
Estimated Financing Needs for Global Public Goods for Pandemic Prevention and Preparedness
This Annex explains the approach undertaken by the Panel and its Project Team to derive estimates of international and national financing needs for pandemic prevention and preparedness. The estimates represent the additional investment required in the global public goods that are at the core of effective pandemic prevention and preparedness. They do not include the costs of response, as this will depend on the nature of future outbreaks and the degree of implementation of pre-crisis pandemic prevention and preparedness measures at the national, regional and global levels.
The two tables below summarize the total public funding needs over the first five years. Investments would have to be sustained in subsequent years; a key lesson from outbreaks to date has been how the absence of continuous investments in prevention and preparedness leaves the global system vulnerable.
The explanatory notes that follow Tables 1 and 2 set out the definitions and assumptions used in this costing exercise. It has to be emphasized that we have on the whole adopted very strict definitions of global public goods for purposes of pandemic prevention and preparedness, and conservative assumptions of the required scale.
Table 1: Additional Public Funding for Prevention and Preparedness over 5 Years (US$ billion)
Table 2: Additional Public Funding for Prevention and Preparedness over 5 Years (US$ billion) (Breakdown by Global- and Country-Level)
This Report divides spending into three major gaps of global public goods: (1) robust surveillance and detection networks; (2) building resilience in health systems; and (3) supply chains for medical countermeasures.
These global public goods reside at both the national and global levels. International financing is required for both the global-level capacities and to support a portion of LICs’ and MICs’ national-level global public goods.
Our work benefited from the inputs of the Global Preparedness Monitoring Board (GPMB) on the scope of operations required for pandemic PPR (see Annex G for the GPMB’s submission to the Panel).
Sources of estimates and additional assumptions
The estimates provided in these tables are primarily based on two studies: the WHO’s report to the G20 “Assessment of Gaps in Pandemic Preparedness” in 2020, and McKinsey & Company’s report “Not the last pandemic: Investing now to reimagine public-health systems”. While a number of studies have attempted to measure pandemic PPR investment needs, recent estimates converge to a range which is higher than pre-COVID estimates, and point to a need to significantly scale up current financing. The Panel had chosen to use data from the WHO and McKinsey studies as they were the most recent and systematic estimates of needs at the global and country levels 3. However, while these two reports are used as the primary baseline, we have modified certain estimates following our consultations with industry experts to be consistent with GPMB’s categories. This included triangulating the estimates with those from the Coalition for Epidemic Preparedness and Innovations (CEPI) for the development costs of new diagnostics, vaccines, and therapeutics, and from Georgetown University on country-level financing.
Both the WHO and McKinsey studies apply a bottom-up methodology estimating total prevention and preparedness needs by identifying the set of functions or institutions necessary at global level, including coordination functions and the key functions which surveillance and health systems need to provide at country-level. The estimates at country-level are broken down according to income groups: High Income Countries (HIC), Medium Income Countries (MIC), and Low Income Countries (LIC). The Panel’s approach defines international financing as the public financing needed for global commons: the global-level capacities and the funding to incentivize countries to make the necessary investment in their surveillance and health systems. McKinsey computes only total needs, while WHO estimates both total needs and international financing requirements.
The WHO and McKinsey approaches differ in a number of respects, in particular in the scope and cost calculation methods or references. It is hence difficult to make straightforward comparisons of the estimates yielded by the two approaches. Some additional triangulation of data and judgments had to be made so that the two sets of data could be incorporated within the GPMB’s framework, and our best estimates derived.
The report has not retained the WHO’s estimate for HIC spending as it was a significant outlier when compared with other estimates of needs 4. McKinsey provided additional information to the Panel to break down all prevention and preparedness estimates between global- and country-level investment requirements, according to country income groups.
Estimates provided in the report cover a five-year period; both WHO and McKinsey have identified the need for some frontloading of spending. McKinsey’s approach identifies gaps compared to pre-defined targets for each function of prevention and preparedness, and distributes the total costs over a ten-year period with some degree of frontloading. For the purpose of this report, the frontloading embedded in McKinsey’s calculations has been slightly amplified, reflecting the need to catch up from a long period of underfunding, and the required urgency. Our estimates for the first five years assume that they would require the spending of 60% of the total ten-year figure. However, as highlighted above, our estimates for supply capacity for medical countermeasures are very conservative.
Additionally, the cost of antimicrobial resistance (AMR) has been excluded from the McKinsey estimates, for reasons explained below. (The WHO estimates had not included AMR.) The WHO estimates for R&D and manufacturing of medical countermeasures have been updated to take into account more recent projections by CEPI and ACT-A 5. The WHO estimates have also been adjusted to incorporate annual replenishments of the Contingency Fund for Emergencies (CFE) as part of a strengthened surveillance as in McKinsey’s estimates.
Calculation of public sector contribution
Finally, the report is focused only on the needs for public funding. The private sector plays a role in pandemic PPR, especially in R&D and supply of medical countermeasures. Concretely, arising from our consultations with various experts, it is estimated the private sector will cover 15% of research needs 6 for global countermeasures, and 30% of the cost of building and maintaining manufacturing capacity 7. These private sector costs have been excluded from the estimates presented in our costing tables here.
Calculation of international financing
In line with the global public goods approach adopted by the Panel, international financing is needed to support prevention and preparedness expenditures at the global level, but it should also account for some spending at country-level. National-level financing needs encompass measures that should be executed nationally, whose success, however, has direct global implications given the existence of global externalities. To avoid underinvestment and in light of existing budget constraints, we propose a formula for partial external financing of national level measures in low- and middle-income countries.
The estimates provided are computed under the assumption that low-income countries receive international support to cover 88% 8 of financing needs. While a certain degree of local ownership is beneficial, these countries face severe budget constraints and a large opportunity cost to financing prevention and preparedness activities. They also cover a set of conflict states which are more fragile. Further, the benefits of these investments in global public goods do not accrue primarily to the countries themselves; this is in their nature as global public goods. The report uses the WHO’s assumption on international support covers one-off capital expenditures; and a large share of recurrent expenditures.
Similarly, the estimates provided are computed under the assumption that middle-income countries will cover 76%9 of expenditure domestically, and receive international support for the remaining 24%. The WHO also assumes that support should be especially concentrated on capital expenditure, with recurrent expenditures being largely nationally financed. When using McKinsey’s figures, the estimates in the report assume a higher international co-financing rate for surveillance (30%) than for resilience in health systems (15%) which should be a national responsibility.
The ranges provided can generally be considered conservative. First and foremost, the cost focuses on the needs within the health sector. It does not make a costing of the whole-of-government approach, which would include prevention and preparedness activities in other sectors, such as water and sanitation or continuity of key services such as electricity supplies or transportation. Moreover, there is no unique definition of PPR and more or less extensive scope can be defined for some categories of prevention and preparedness.
In particular, some restrictive assumptions have been made in four areas to exclude certain activities that have indirect but still significant impact on prevention and preparedness.
Based on the methodology we have described above, Tables 1 and 2 show the estimates that the Panel has employed in this report. For more details referencing the respective estimates based on those by the WHO and McKinsey, please refer to Tables 3 and 4 below. (There are two estimates for each item in these tables. The figures on the left have been derived on the basis of WHO estimates, while those on the right have been derived from McKinsey.)
Table 3: Additional Public Funding for Prevention and Preparedness over 5 Years (US$ billion)
Table 4: Additional Public Funding for Prevention and Preparedness over 5 Years (US$ billion) (Breakdown by Global- and Country-Level)