• Inside Development
In the news: Global health

USAID and Merck put skin in the health finance game

By Michael Igoe17 May 2013

U.S. Agency for International Development Administrator Rajiv Shah. Photo by: Center for Strategic and International Studies / CC BY-NC-SA

The U.S. Agency for International Development and pharmaceutical giant Merck have joined other donors and companies in a massive ramp-up of an existing public health financing program built to help countries that need health supplies get more bang for their buck.

The Pledge Guarantee for Health, a loan insurance program for health commodities, is emerging from a pilot phase, which supporters say showed that the program can work to get health supplies where they are needed most, faster and in larger quantities.

Early on, the PGH showed promise when it helped UNICEF deliver bed nets to Zambia months faster than usual, staving off a feared malaria outbreak during the rainy season.

USAID Administrator Rajiv Shah announced on Thursday that the agency and the Swedish International Development Cooperation Agency will commit $50 million to insure 50 percent of any loan that commercial banks issue to PGH over the next five years. The guarantee doubles the amount of funding that PGH can leverage from $50 to $100 million and signals a strong vote of confidence in the two-year-old program.

Merck and the public health product developer Vestergaard-Frandsen also pledged to provide discounted health products purchased through PGH, so the loans will carry even more weight in the health commodities market.

The companies will lower pricing so that the average savings on health commodities will offset the average costs of financing the loans to purchase them.

“This announcement builds on our efforts to partner with the private sector to help end preventable child death within a generation,” Shah said in a statement.

He added: “USAID’s partnership with PGH will help make this promise a reality by ensuring that people around the world — especially mothers and their children — have access to life-saving vaccines, bed nets, and other supplies that are delivered more quickly, cheaply, and broadly than ever before.”

‘Major leap forward’ for PGH

The pledge was first assembled two years ago by the United Nations Foundation and partners including the Bill & Melinda Gates Foundation and USAID.

In this next phase, UNF will continue to support the program, but will no longer have a financial stake in any loan guarantees.

PGH allows third-party guarantors to guarantee rapid bank loans so that recipient countries, or the NGOs that they select, can purchase and distribute antibiotics, vaccines, contraceptives, bed nets and other life-saving treatments six-to-eight months faster than if they did so through traditional donor funding channels. This fast-track process aims to address the problems of stock shortages and higher costs associated with slower supply deliveries.

With the new commitments from USAID and Merck, the pledge is poised to take a major leap forward, supporters say.

“By joining in this partnership with PGH, our company will help to provide developing countries and local health workers with improved faster access to our life-saving medicines and vaccines,” Merck President for Global Human Health Adam Schechter said in the joint statement with the USAID chief.

Schechter echoed Shah’s call for more public-private partnerships to jump-start the final push towards lagging Millennium Development Goals. According to USAID public health officials, ending preventable child death is one goal where innovative financing and risk-sharing between government agencies and the private sector can remove road blocks and save lives.

“While the financial mechanisms may be complex, the goal of PGH is simple: to quickly and effectively reduce deaths from easily preventable diseases,” noted UNF President & CEO Kathy Calvin.

With more partners sharing more risk than ever before, there will be no shortage of scrutiny as to whether or not the pledge pays off.

Read more on U.S. aid reform online, and subscribe to The Development Newswire to receive top international development headlines from the world’s leading donors, news sources and opinion leaders — emailed to you FREE every business day.

About the author

Michael igoe 400x400
Michael Igoe

Michael Igoe is a Global Development Reporter for Devex. Based in Washington, he covers US foreign aid and emerging trends in international development and humanitarian policy. Michael draws on his experience as both a journalist and international development practitioner in Central Asia to develop stories from an insider's perspective.


Join the Discussion