INNOVATIVE FINANCE

Volume guarantees

A volume guarantee is an agreement with price and volume commitments of a product. The objectives of volume guarantees are to increase demand and ensure stable, affordable supply.

A warehouse full of mosquito nets showing volume guarantees in action

In the health sector, it involves a guarantor (such as MedAccess) entering into a partnership with a healthcare manufacturer and a governor or another procurer such as a global health institution.

The manufacturer commits to:

01.

Define a price

Sell the product at or below the agreed ceiling price(s) during the term of the agreement.

02.

Define a volume

Make an agreed minimum volume of product available for each year of the guarantee.

03.

Provide support

Conduct supporting regulatory and other activities, including registration, product support, and pharmacovigilance.

SHORTFALL VOLUME PRODUCT SALES

If product sales are less than the agreed upon annual target, guarantors will either purchase the shortfall volume or make a payment to reflect the shortfall to the manufacturer.

Delivering reduced prices to drive higher demand

By encouraging changes in behaviour of suppliers and purchasers, volume guarantees address market failures that restrict wider access to healthcare interventions. They deliver reduced prices to drive higher demand and improved health outcomes while also realising significant cost savings for donors and other funders.

PRICE DEMAND

In the right circumstances, a volume guarantee can resolve many of the root causes of market failures related to affordability, availability, and appropriate design.