WHO global coordination mechanism on the prevention and control of noncommunicable diseases Working Group on how to realize governments’ commitment to provide financing for NCDs (Geneva, 23-24 February, 2015) Policy Brief Innovative financing for NCDs by Craig Courtney This document was prepared by Mr Craig Courtney. The author is responsible for the views expressed in this publication. This document does not represent an official position of the World Health Organization. It is a tool to explore the views of interested parties on the subject matter.
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WHO global coordination mechanism on the
prevention and control of noncommunicable diseases
Working Group on how to realize governments’
commitment to provide financing for NCDs
(Geneva, 23-24 February, 2015)
Policy Brief
Innovative financing for NCDs
by
Craig Courtney
This document was prepared by Mr Craig Courtney. The author is responsible for the views expressed in this publication. This document does not represent an official position of the World Health Organization. It is a tool to explore the views of interested parties on the subject matter.
1
This policy brief is one of three relating to the commitment by Heads of State and
Government at the High Level Meeting of the UN General Assembly on the
Prevention and Control of Noncommunicable Diseases in September 2011 to explore
the provision of adequate, predictable and sustained resources, through domestic,
bilateral, regional and multilateral channels, including traditional and voluntary
innovative financing mechanisms. A separate discussion paper summarises lessons
learnt to date and possible approaches to support Member States to realize this
commitment. All papers are available on the website of the WHO global
coordination mechanism on the prevention and control of noncommunicable
with initiatives that would expand on the idea of the UNITAID airline tax scheme. A
proposed Solidarity Tobacco Contribution “micro levy” would skim very small
percentages off the top of tobacco product purchases and redirect these monies
towards international efforts, namely health related16. There is strong support for
such initiatives but one of the challenges that remains is the ability of developing
countries to ensure adequate collection and effective redistribution of such a tax for
which there is learning to be garnered from several Scandinavian countries. An
additional consideration is that lotteries tend to be a regressive instrument for
raising revenues, with the poor contributing more as a share of their income than
the rich. Moreover, the potential of new earmarked mechanisms such as lottery
revenue have the possibility to be offset by declines in discretionary allocations.
3) Financing mechanisms and facilities
Financial mechanisms and facilities is a broad category that covers all models
including funds, guarantees and loans from both the sustainable and impact
investing sector. From the existing research, there is not one type that emerges as a
more popular mechanism than another in addressing health and specifically NCDs,
although many of the most successful innovative financing mechanisms globally, are
examples from the health sector, namely Global Fund and GAVI17. Furthermore,
there are very few focused specifically on NCDs. The vast majority of the
mechanisms designed to address NCDs are funds that are expected to identify
additional financing like the Battle Against Cancer Investment Trust – which donates
a portion of its fees to cancer charities18. Another example of a fund supporting a
specific NCD is the Livestrong Foundation that collaborates with an investment fund
and channels money into the foundation to support its activities in cancer
prevention and treatment and patient support 19 . There are few funds that
encourage a more sophisticated role for innovative financing that might include the
development of a mechanism via which the private sector can share risks and
rewards or via results-based financing. For example, there are a few investment
funds investing in clean cook stove technologies to alleviate respiratory diseases
(e.g. Global Alliace for Clean Cookstoves Spark Fund)20. NCDs are also often included
in funds that seek to invest in healthcare, hospitals or childcare themes, and/or that
have a focus on primary health or services. There are few select investment funds
with an approach to seek different healthcare models for investment globally – for
example in primary health and clinics in developing countries. There also exist a few
investment funds for the health sector but these are in early days of development
and investing. According to JP Morgan estimates, of impact investments totaling
over US$46 billion, only US$2.76 billion have been invested in the health sector in
recent years. Nevertheless, estimates indicate a growing market and based on their
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review of existing and forecast market demand they also estimate that the total
market for investment in health is growing and could be as large as US$ 18 billion –
US$ 123 billion21. In fact, healthcare is behind only food and agriculture as the
category that will see the biggest increase in investments in the coming years. Many
innovative finance mechanisms involve the private sector as a key partner and as
such it is important to recognize the potential conflicts of interest that may warrant
further consideration.
4. Opportunity – Innovative finance models for NCDs
For NCDs it will be important to determine what strategy to adopt going forward for
innovative finance, namely, i) getting existing innovative finance mechanisms to
embrace NCDs (i.e. get the leading group on innovative financing for development to
focus also on NCDs, how do we collaborate with the existing organisations in this
field (GAVI, UNITAID, GFATM) to include NCDs linked to the post 2015 agenda) or ii)
developing new innovative finance mechanisms for NCDs. No matter which strategy
is chosen it will be important that the innovative finance models set out below
should promote integration of the overall health system, particularly interventions
delivered at the primary health care level and the provision of a comprehensive
package of care which includes NCD related interventions.
Building upon the review of the landscape of existing innovative finance models a
few innovative finance model ideas are described below which would be new for
NCDs. The models are a starting point for GCM/NCD consideration and are based on
the voluntary contribution, taxes/levies and financial mechanisms precedents set
out above. They would attract new additional fund flows or investors’ interest in
areas relevant to NCDs and cover different types of investment opportunities, with
different roles for Member States, and different levels of design and implementation
complexity. Set out in the diagram below is an overall view of the various models
available to support addressing NCDs:
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Figure 1 Overview of innovative financing modalities for NCDs
There are many models to explore, and this paper offers just three to test different
parameters of how to build and what architecture to test which will best fit the
demand from donors/investors, the need for different types of capital (investment,
public and philanthropic), industry players and how Member States could be active
in this space. The three models are not exhaustive, and many more models and
variations of these may be explored. Three models are presented here to generate
creative debate, namely: NCD Financing Trust Fund, NCD Global Solidarity Levy and
the NCD National Bond:
1) NCD financing trust fund (a financial mechanism and voluntary contribution model) A NCD Financing Trust Fund (FTF) could be a mechanism financed by a
government/foundation and administered by a group of Member States with
another multi-lateral agency (e.g. World Bank) as the trustee. Select partners of the
WHO (International Finance Institutions or Development Finance Institutions) could
be authorized to issue debt instruments with sovereign entities in high burden
countries, and other institutions (i.e. NCD sector experts/implementing agencies) be
integrated to accept resources from donors. The FTF could be developed in close
collaboration with a broad range of stakeholders, including WHO, Member States,
the World Bank Group, civil society organizations; bilateral and multilateral
development partners; foundations; private sector and others working in the areas
relevant to NCDs. The FTF resources could be provided to countries in conjunction
with low-interest loans and grants from the International Development Association
Expandingsolidaritylevies
EncouragingVoluntary
Contribu ons
CatalyzingPrivateFinancialInvestment
NCD Funding Platform
Raisingnewtaxes(e.g.tobacco,alcohol,fats)
Raisingtaxes/levies
Interna onalFinanceFacili es
Financialriskmi ga onmodali es
Resultsbasedfinancing
S mula ngnon-taxflows
GenerateResources
Redu
cerisk/Add
resscon
straints
Resultsfocused Morepredictable Flexiblestructures Mi gaterisks
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(IDA), the World Bank Group’s fund for the poorest countries. In addition, the FTF
could align the International Finance Corporation or other relevant regional
Development Finance Institutions to create a private sector financing facility to be
available in select countries. The FTF will support countries in their efforts to
mobilize additional domestic and international resources required to scale up and
sustain essential services for vulnerable populations and has been pursued in other
sectors (e.g. as is planned with the new Global Financing Facility for Reproductive,
Maternal, Neonatal, Child and Adolescent Health)22.
2) NCD global solidarity levy (a tax/levy example) There is an established link between cigarettes, alcohol and unhealthy foods
consumption and the prevalence of NCDs. A small micro levy with proceeds
earmarked for NCDs is administratively similar to any other indirect tax.
Furthermore, it can be used to raise funds on a global or regional basis to
redistribute funds from middle income to lower income countries. The Solidarity
Tobacco Contribution (STC) concept builds on and is additional to existing national
taxes on tobacco, alcohol and fats products and broader WHO recommendations for
countries to raise their taxes for public health goals. The STC does not replace
existing national excise taxes or the need to increase them to WHO recommended
levels. For international health purposes, it represents a voluntary contribution by
participating Member States based on a solidarity principle. The STC benefits from
lessons learned from other innovative financing for health mechanisms (i.e.
UNITAID). The STC would thus achieve three simultaneous benefits for countries and
people:
Strong public health benefits and impact by reducing tobacco, alcohol and fats
consumption and saving lives.
Raising national revenue that could be used to support health, specifically NCDs.
Support for international health efforts in developing countries.
3) NCD national/regional bond (a financial mechanism model)
Bond financing is predictable and would be purchased by individuals and institutions
and the government would use the monies raised for NCD interventions. Through
purchasing these bonds, the private sector may see this as a means to improve their
Corporate Social Responsibility (CSR) (and may also benefit them in terms of gaining
employee involvement). Therefore, an NCD-specific government bond could be
issued at a lower rate of interest than other government bonds. Because NCD service
delivery frameworks, and borrowing costs, vary by country, the case for borrowing
to finance an investment approach should be examined on a country-by-country
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basis. In addition, countries must be aware of the wider consequences of
government borrowing. For example, there can be negative macroeconomic
consequences of increasing the government deficit. An NCD bond backed by the
government with supplementary last-resort backing from international institutions,
carefully designed and issued by a specialized financial institution, to finance time-
limited cost-effective activities, seems to have all characteristics of a feasible and
potentially successful financing option and has been successful in other sectors (i.e.
education)23.
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References
1 Financing for Development. Monterrey Consensus of the International Conference on Financing for Development. United
Nations Department of Economic and Social Affairs Monterrey Consensus. March 2002.
10 JP Morgan and Global Impact Investor Network. Spotlight on the Market: Impact Investor Survey, May 2014.: 31-35 http://www.thegiin.org/binary-data/2014MarketSpotlight.PDF
11 http://www.unitaid.org/en/how/innovative-financing (accessed 4 December 2014) 12 http://www.iffim.org (accessed 21 November 2014) 13 Atun, Rifat et al. Innovative financing for health: what is truly innovative? 24 October 2012; Center for Global Development:
Development Impact Bond Working Group Report. Consultation Draft. Washington, DC, 2013; Center for Strategic &
International Studies - Innovative Financing for Global Health, 2012; Expert Working Group (WHO) Online database of
innovative financing mechanisms, 2009; Global Health Technologies Coalition - Incentives and Innovative Financing to
Accelerate Global Health Product Development, 2012; Innovative Development Finance (IDF), Reference Note for National
Committee Advocacy, Draft v11 – 3 September 2013; Joseph, J., Social Innovation in Acceleration: Building the Social Impact
Bond Ecosystem. Forbes Online, 2013; Social Impact Bonds: A new frontier of innovative financing for children? Kimberly Ochs,
2013; Taskforce on International Financial Transactions for Development – Globalizing solidarity: the Case for financial levies,
2013; U.S. Global Health Policy: Innovative Financing Mechanisms For Global Health: Overview & Considerations for U.S.
Government Participation, October 2011; World Bank – Landscape of innovative financing, 2007.
14 www.komen.org (accessed 21 November 2014)
15 www.goredforwomen.org (accessed 21 November 2014)
16 Ross, Alex and Douglas Bettcher. WHO Discussion Paper. The Solidarity Tobacco Contribution: A new international health
financing concept prepared by the World Health Organization. October 2011. (http://www.who.int/nmh/events/un_ncd_summit2011/ncds_stc.pdf)
17 Atun, Rifat, Felicia Marie Knaul, PhD, Yoko Akachi, PhD, Julio Frenk, PhD. Innovative financing for health: what is truly
innovative? Published online 24 October 2012. http://dx.doi.org/10.1016/S0140-6736(12)61460-3.
20 www.cleancookstoves.org/funding-opportunities/ (accessed 12 December 2014) 21 JP Morgan. Insight into the Impact Investment Market: An in-depth analysis of investor perspectives and over 2,200
transactions. December 2011: 31-35.
22 Global Financing Facility in Support of Every Woman, Every Child. 2014. (http://www.worldbank.org/en/news/press-