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Creating Markets for New Vaccines - Part II: Design Issues

In: Innovation Policy and the Economy, Volume 1

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  • Michael Kremer

Abstract

Several programs have been proposed to improve incentives for research on vaccines for malaria, tuberculosis, and HIV, and to help increase accessibility of vaccines once they are developed. For these programs to spur research, potential vaccine developers must believe that the sponsor will not renege on the commitment once research costs have been sunk. Given appropriate legal language, the key determinant of credibility will be eligibility and pricing rules, rather than whether funds are physically placed in separate accounts. Requiring candidate vaccines to meet basic technical requirements would help ensure that funds were spent only on effective vaccines. Requiring developing countries to contribute co-payments would help ensure that they felt that the vaccines were useful given the conditions in their countries. Purchases under a vaccine purchase program could be the conditions in their countries. Purchases under a vaccine purchase program could be governed by a market exclusivity provision similar to that in the U.S. Orphan Drug Act. A program could start by offering a modest price and increasing it if it proved inadequate to spur research. If donors pledge approximately $250 million per year for each vaccine for ten years, vaccine purchases would cost approximately $10 per year of life saved. No funds would be spent or pledges called unless a vaccine were developed.

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This chapter was published in:

  • Adam B. Jaffe & Josh Lerner & Scott Stern, 2001. "Innovation Policy and the Economy, Volume 1," NBER Books, National Bureau of Economic Research, Inc, number jaff01-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10777.

    Handle: RePEc:nbr:nberch:10777

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    1. Mark Johnston & Richard Zeckhauser, 1991. "The Australian Pharmaceutical Subsidy Gambit: Transmuting Deadweight Loss and Oligopoly Rents to Consumer Surplus," NBER Working Papers 3783, National Bureau of Economic Research, Inc.
    2. Shavell, Steven & van Ypersele, Tanguy, 2001. "Rewards versus Intellectual Property Rights," Journal of Law and Economics, University of Chicago Press, vol. 44(2), pages 525-47, October.
    3. Kremer, Michael R., 1998. "Patent Buyouts: A Mechanism for Encouraging Innovation," Scholarly Articles 3693705, Harvard University Department of Economics.
    4. Gilbert,Christopher L. & Vines,David (ed.), 2000. "The World Bank," Cambridge Books, Cambridge University Press, number 9780521790956, October.
    5. Michael Kremer, 1997. "Patent Buy-Outs: A Mechanism for Encouraging Innovation," NBER Working Papers 6304, National Bureau of Economic Research, Inc.
    6. Suzanne Scotchmer, 1999. "On the Optimality of the Patent Renewal System," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 181-196, Summer.
    7. William P. Rogerson, 1994. "Economic Incentives and the Defense Procurement Process," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 65-90, Fall.
    8. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G. & Lasagna, Louis, 1991. "Cost of innovation in the pharmaceutical industry," Journal of Health Economics, Elsevier, vol. 10(2), pages 107-142, July.
    9. Wright, Brian Davern, 1983. "The Economics of Invention Incentives: Patents, Prizes, and Research Contracts," American Economic Review, American Economic Association, vol. 73(4), pages 691-707, September.
    10. David S. Salkever & Richard G. Frank, 1995. "Economic Issues in Vaccine Purchase Arrangements," NBER Working Papers 5248, National Bureau of Economic Research, Inc.
    11. Michael Kremer, 1998. "Patent Buyouts: A Mechanism For Encouraging Innovation," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1137-1167, November.
    12. M. Ishaq Nadiri, 1993. "Innovations and Technological Spillovers," NBER Working Papers 4423, National Bureau of Economic Research, Inc.
    13. Lanjouw, Jean O. & Cockburn, Iain M., 2001. "New Pills for Poor People? Empirical Evidence after GATT," World Development, Elsevier, vol. 29(2), pages 265-289, February.
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