*This post is co-authored by Michael Kremer and Ruth Levine co-chairs of a CGD working group on Advance Market Commitments that wrote the 2005 report, Making Markets for Vaccines: Ideas to Action There were no fireworks when several wealthy countries announced Friday in Rome that they were making an advance market commitment to help pay for a life-saving vaccine for children in poor countries. But there should have been. These countries - including Italy, Canada, Norway, Russia and the United Kingdom - are breaking new ground by committing in advance to help finance the purchase of vaccines against pneumococcal disease (pneumonia, meningitis, and other killers), which annually claims the lives of up to one million children a year.
By promising in advance to pay for life-saving vaccines once they are produced, these countries are creating incentives for biotechnology and pharmaceutical companies to produce vaccines appropriate for use in poor countries, and to sell them at affordable prices. Estimates from the World Bank and the Global Alliance for Vaccines and Immunizations (GAVI), who have worked closely with donor governments to hammer out the design of the innovative financing program, suggest this pneumococcal commitment could prevent an estimated 5.4 million childhood deaths by 2030.
Why is an advance market commitment needed? An effective vaccine is currently available in the U.S. (under the Prevnar brandname), but at around $60 for each of the three doses required, it is too expensive for the poorest countries, and it needs to be adapted to prevent the strains of disease that are common in developing countries but not the industrialized world. Normally it takes 10 to 15 years for a vaccine introduced in the U.S. to become widely available in the developing world. While maximizing the benefits of the funding commitments depends on important contractual details, the "pay for results" approach can shorten this lag and help to ensure that the vaccine will be adapted to suit the patterns of disease and health care systems of poor countries.
Just as the U.S. market provided incentive for pharmaceutical companies to develop a vaccine to cover the disease strains most common in North America, an advance commitment strengthens incentives for firms to finish the work necessary to adapt the vaccine for global use, and to make large numbers of doses of the vaccine available to poor countries at lower prices. By linking a defined payment to a final product, advance commitments encourage investors to provide researchers with support to do whatever they can to ensure that the final vaccine is a usable product. In addition, because funding is open to all comers, firms feel the heat of potential competition - spurring them to develop the best possible vaccine in the shortest period of time.
We recently co-chaired a Working Group - convened by the Center for Global Development and supported by a grant from the Bill & Melinda Gates Foundation - which brought together a group of public health professionals, economists, top pharmaceutical lawyers, and individuals with in-depth knowledge of the vaccine industry. The Working Group concluded that an advance commitment could effectively stimulate greater private sector investment in the development of new vaccines appropriate for use in poor countries, and accelerate their adoption.
Putting in place this type of commitment for a pneumococcal vaccine is a vital step forward - and is a pathbreaker for the use of advance commitments to encourage R&D on more distant and technologically challenging vaccines, such as for malaria and HIV. The goal of an advance commitment for a vaccine at an earlier stage would be different and more ambitious, and because the scientific and regulatory hurdles are more substantial the appropriate total value of a commitment would be larger.
Advance market commitments for vaccines are a smart way to save millions of lives. We congratulate the donors who are supporting the pneumococcal disease vaccine advance market pilot for having the courage and conviction to try something new, for asking themselves "why not?" and then proceeding to give it a try. And we hope that the international community will be encouraged by this example to undertake advance market commitments for other urgently needed vaccines, and indeed for other health products for which there are compelling human needs but no commercially viable market.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise.
CGD is a nonpartisan, independent organization and does not take institutional positions.
