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With national budgets stretched, countries are trying to find new ways to fund aid to developing countries, Tatum Anderson reports

Morocco’s airline travellers will soon be contributing to the cost of drugs to treat malaria and antiretrovirals to prevent mother to child transmission of HIV and treat infected children after a new tax on flights is introduced. Morocco joins over 30 other countries that collect taxes on airline tickets (Norway also contributes part of its tax on carbon dioxide emissions). So far, the $1.2bn (£75m; 80m) raised has enabled aid agencies to negotiate up to 70% discounts on drug purchases and buy more drugs for people who cannot afford them.

This levy is one of numerous novel methods to raise money for health interventions in developing countries that have captured the imagination of countries around the world. "Innovative financing is the new architecture for development," said Phillippe Douste-Blazy, UN secretary general’s special adviser on innovative financing and chairman of Unitaid, the Geneva based agency that manages the levy.

France’s President Chirac inspired the air tax and the UK has spearheaded a few innovative financing schemes of its own, including one that borrows money from bond markets to subsidise the cost of childhood vaccines in 72 of the world’s poorest countries. And a World Health Organization working group is consulting on some 92 mechanisms that could be used to fund research into diseases that disproportionately affect developing countries. Another, on innovative funding for non-communicable diseases, will begin next year.

Last year world leaders set up a taskforce, chaired by UK prime minister Gordon Brown and World Bank president Robert Zoellick, to examine ideas for innovative financing of health systems. At the UN General Assembly in September the taskforce announced schemes to fund improvements in maternal and child health. They have committed to innovative financing schemes worth $5.3bn so far.

Members of the taskforce are sponsoring a range of schemes that they want other countries to try. The UK, Norway, and Australia want more bond issues; the Italians are keen on a levy based on consumer purchasing; a Unitaid off-shoot is working on a scheme to enable travellers to make voluntary donations when booking flights, trains, and hotels online worldwide; Germany is keen to forgive debts to developing countries on condition that the repayments indebted nations would have made are diverted to health projects. Other ideas in the pipeline include taxes on currency exchange transactions and tobacco and voluntary contributions from mobile phones.

Structural focus
 

Innovative financing is being pushed to plug the enormous gap in spending on health systems in developing countries and, as such, the taskforce says innovative financing could raise $10bn a year. It has calculated that this money could establish functioning health systems in the 49 poorest countries, saving the lives of four million children and 780 000 adults a year.

Although aid for health has doubled since 2000, and great strides have been made in several areas including malaria, maternal mortality figures across sub-Saharan Africa have barely changed. WHO and Unicef estimate that around 2100 mothers die for every 100 000 live births in Sierra Leone, for instance.

That is because half of all aid has been focused on infectious diseases—predominantly AIDS, tuberculosis, and malaria—and less than a fifth on basic healthcare services, nutrition, and infrastructure. Maternal health, which is dependent on health systems for trained birth attendants and processes to manage emergencies, has suffered.

Thabale Jack Ngulube, executive director at Zambia’s Centre for Health, Science and Social Research, says money has been pumped into drugs and vaccines rather than developing a workforce and infrastructure to administer them. "In Zambia there have been so many processes and policies for buying drugs and equipment that they forget human beings are needed," he said.

Another reason for the neglect of health systems is that they are complex and expensive. They require buildings, power, roads, trained health workers, drug procurement systems, inspectors, managers, logistics experts and laboratories and take years to show results. Indeed, they are much harder to sell to voters than bed nets or children’s vaccination programmes.

And even poor countries that choose to fund health systems struggle to raise enough money through tax receipts because average annual incomes are so low. Many low income countries spend around $25 per patient a year, of which $10 is usually paid by patients when they reach health facilities or pharmacies—an unaffordable sum for many.

So, most of the money raised by innovative financing will pay for interventions that are likely to have the biggest impact and have been recommended by agencies including WHO, Unicef, and the World Bank. They range from training community healthcare workers and nurses to funding antibiotics and micronutrients said Robert Fryatt, a senior adviser on health systems and services at WHO who helped set up the taskforce.

Governments of rich countries argue that innovative financing has many benefits, as will be outlined by Amrita Palriwala at the Global Forum for Health Research meeting later this month. Firstly, it could guarantee money over many years in a way that normal aid cannot because it is subject to political whims of governments. This predictability helps developing countries to plan ahead—to build clinics or recruit more health workers, for instance.

Secondly, it could reduce future need for development assistance. Investment in health systems will result in more healthy people who can lift their families and communities out of poverty.

And, unsurprisingly, innovative financing is extremely attractive in a recession, because it could raise extra cash at a time when donor governments are struggling with shrinking economies and enormous debts.

Certainly rich countries are under pressure to fulfil aid commitments. The Global Fund to Fight AIDS, Tuberculosis, and Malaria and the GAVI Alliance, which subsidises vaccine payments, face enormous funding shortfalls that may prevent them from funding more projects, including bed nets, malaria drugs, and rotavirus and pneumococcal pneumonia vaccinations. Julian Lob-Levyt, the alliance’s executive director said: "The financial crisis is impacting on us, and frankly the pressure is on the donors. If they are serious about matching the commitments that developing countries have met, they have to step up with some more money."

Cost effectiveness

But while world leaders enthuse over innovative financing on the international stage, others warn that in-depth scrutiny is necessary to make sure it delivers. For a start, the taskforce claims innovative finance is not a substitute for international and domestic commitments. In private, however, no one expects countries to fulfil their commitments without innovative financing (if both developing and developed countries delivered the amounts they have already pledged, then little innovative financing would even be needed, according to cost estimates by the taskforce).

Brenda Killen, head of aid effectiveness at the Organisation for Economic Cooperation and Development’s Development Assistance Committee, which tracks official aid given by rich country donors and took part in the taskforce, said: "The focus on health systems is very positive but beware of the word innovative. We need to better define the circumstances under which it is a good thing."

The danger is that governments either back away from aid commitments altogether, as some countries have started to do, or they reduce the amount raised through normal (cheap) mechanisms in favour of fashionable innovative funding mechanisms. These new mechanisms may often be pet projects that do not necessarily yield the best returns. (Indeed, despite the taskforce’s in-depth analysis of different mechanisms it is still not clear why some mechanisms were sponsored over others.)

"There is a temptation to reduce how much you spend, look for other ways of spending the money to raise your international profile but if you are just recycling money overall, nothing has changed," she said.

The reality is that not all innovative mechanisms are equal. Some are expensive to set up in comparison to the returns. Taxing currency exchange transactions or tobacco could also have disadvantages. Mike Foster, the UK’s international development minister, said: "As a point of principle, the UK does not generally subscribe to the hypothecation of taxes. They can vary considerably and remove predictability. But we look on with interest." Indeed, money raised through taxes could disappear altogether because it can easily be diverted towards domestic priorities.

Some mechanisms could have effects on future aid commitments unless extremely well managed. If health systems are not improved by the time money borrowed from the bond markets must be repaid, recipients may have to make repayments to bondholders rather than use the money to continue to fix health systems. If they raise money too soon, they risk wasting funds or causing inflation according to aid experts.

Some proposals on innovative ways to spend money have raised eyebrows too. For instance, the UK’s brainchild, an advance market commitment scheme, which pays drug companies to manufacture vaccines for poorer markets they would not normally target, has been criticised for contributing aid money to the profits as well as costs incurring to entice manufacturers to participate. And proposals for target driven rewards for health workers are controversial, says Anne Mills, a health economist from the London School of Hygiene and Tropical Medicine, who also co-chaired the taskforce’s group on costing health systems. Paying workers on the basis of, say, the number of vaccinations they perform, risks diverting them from other valuable work, she says. "It is the whole problem of the target driven approach that we know from the NHS. In many of these areas there just isn’t enough research to conclude what are the best strategies."

That’s why it’s crucial that mechanisms’ pros and cons are carefully balanced before they are taken forward says Andrew Farlow, a University of Oxford research fellow specialising in health financing in developing countries. "We need to strive to choose on the grounds of what will work best in each case, and sometimes be prepared to lay aside politically predetermined preferences for the greater good," he said.

Taskforce participants also point out that the taskforce has missed a few tricks. The final report omitted a recommendation to fund more research into health systems research, which could help establish which interventions work and which don’t (some countries spend twice as much on health as others and achieve the same results, for instance). Others say it did not sufficiently address how the poor countries are expected to increase their own contributions to health, especially in a recession. Yashovardhan Pradhan, from the ministry of health and population in Nepal, says more money for health means convincing political leaders to divert money away from other priorities. In his country that means water and sanitation, education, agriculture, and roads. "It is next to impossible," he said.

But perhaps as important as innovative financing will be the introduction of efficiencies that will ensure aid is much better spent. Today, the aid system is ferociously complicated, with around 40 bilateral donor and 90 global initiatives demanding strict administrative accounting to ensure taxpayers’ money is not misused. They inevitably duplicate each other and paralyse already overstretched staff in developing countries with mountains of paperwork.

The taskforce has recommended several measures to ensure more donors join forces to streamline aid. The Global Fund, GAVI Alliance, and World Bank have, for instance, agreed to work together so that countries do not have to waste effort applying separately to the world’s three largest donors.

But achieving better health for the money is a huge job. Things are starting to change, but some donors, such as the US and Japan, remain outside streamlining initiatives, including the innovative financing taskforce. Many continue to dictate and fund flagship strategies that may not necessarily reflect recipient countries’ needs.

And Anders Nordström, director general of the Swedish International Development Agency, who chaired the taskforce working group that analysed mechanisms, warns that some innovative financing mechanisms could even end up adding to an already over-complex aid system. That’s because ideas being pushed by governments could create even more funding silos than those that exist today he said. "I think we have a problem. There are risks that we are complicating things more than we are simplifying it. We have to change our thinking."