Background: The Global Fund to Fight AIDS, Tuberculosis and Malaria (the Global Fund), created in 2002 with a performance-based funding model, grounded in country ownership and based on achievement of performance indicators. In 2004, the Global Fund faced international pressure calling for a shift to a more effective treatment regime - artemisinin Combination Therapy (ACT) for malaria grants and to accelerate efforts at country level. The Global Fund responded by taking immediate action requesting countries to switch to the new drug treatment regime on short notice. The study examines special performance-based funding tools used by the Global Fund and the impact on countries requested to reprogramme. This tension due to the technical shift in drug treatment and the processes undertaken during this period is part of this research and its findings through the lens of learning organisations. Methods: Case study research methodology was applied for this research involving both quantitative and qualitative methods including participant observation and narration. Findings: The study provided insights into unintended effects of Global Health Initiatives (GHIs) and various intervention complexities in malaria programmes within the health sector. Several factors significantly impacted ACT reprogramming at the Global level, within the Global Fund Secretariat, and at the country level. Despite the availability of special PBF instruments, countries were unable to meet the performance targets due to time taken to change national drug policies to implement these activities compounded by other factors including a global supply shortage with limited supplier selection. These externally driven events led to countries being penalized from securing future malaria grant funding by the lack of programmatic progress achieved during the period of 2004-2006. There was an 80% failure rate for all malaria proposals submitted by the countries earmarked for reprogramming for two successive rounds of funding. Conclusion: The study examined policy decision-making process at multiple levels, analysing efforts to accommodate changing scientific evidence at a global scale and the requirements on country level policymakers to change national drug treatment policy. The change and transition to ACTs have shown that innovation and creation of flexible instruments by the Global Fund required a balance; i.e. a balance between the desire to continually innovate before policies take into effect and repercussions of a system-wide effect in implementing Global Fund procedures at country-level. This is vital not only for changing malaria treatment policies but for all technological changes in light of new scientific evidence for the three diseases. Through the application of a theoretical approach from organisation studies, this research takes into question conventional thinking in public health and contributes to practice by generating insights and suggestions for how the Global Fund could move forward with the Learning Organisation Principles – improving organisational process and outcomes through a more effective learning process.