MedAccess underwrote malaria-net demand so BASF could cut prices 40%

A Financial Times teaching case by Prashant Yadav of the Center for Global Development and Insead, published 15 October 2023, examines why life-saving innovations stall in lower-income countries: manufacturers will not carry the risks of unpredictable demand, fragmented funding, regulatory uncertainty and political instability, while limited ability to pay forbids charging more to offset them. The result is chronic underinvestment — especially in production capacity — that donor purchases alone do not fix.

The instrument at the case's centre is the volume guarantee: an assured minimum order volume over a set period, exchanged for a commitment to better pricing and guaranteed supply. The model had already expanded access to contraceptive implants and vaccines against rotavirus, diphtheria, pertussis, tetanus, hepatitis B and hib. In 2016 the UK's development agency and CDC (now British International Investment) created MedAccess with $200 million of guarantee capacity; chief executive Michael Anderson had the structures running by late 2017.

The case study follows one application: malaria nets. Resistance to pyrethroid insecticides was spreading, and BASF's next-generation nets combining pyrethroid with chlorfenapyr cost more, with demand too thin for BASF to scale up and cut costs. In 2019 MedAccess and the Bill & Melinda Gates Foundation jointly gave BASF a four-year volume guarantee; in exchange the company reduced prices by two-fifths. The case flags the open question — whether guarantees lock in the first supplier or invite competitors — and criticism that they hand the backed manufacturer an advantage.

Donors stopped buying doses and started selling certainty: guarantee a manufacturer a minimum order, and it will invest capacity and cut price without a per-unit subsidy.

The guarantee re-prices the manufacturer's risk: if demand never materialises, the donor pays; if it does, the private market supplies at a lower price.

It moves public money from buying units to absorbing uncertainty, which is the actual bottleneck stopping capacity investment.

The mechanism is product-agnostic — the same paper has backed nets, implants and vaccines — so one institution can reuse it across markets.

When a market fails on demand uncertainty, underwrite the demand rather than the product: a guarantee costs nothing if sales never happen, and unlocks private capacity if they do.

Volume guarantees had by 2023 expanded access to contraceptive implants and several vaccines, with MedAccess holding $200 million in guarantee capacity; the FT case leaves open whether first-supplier guarantees invite competition or entrench incumbents, noting criticism and continuing scrutiny of the model.