Advance Market Commitments for Vaccines Working Paper and Spread Sheet
AbstractThe G8 is considering committing to purchase vaccines against diseases concentrated in low-income countries (if and when desirable vaccines are developed) as a way to spur research and development on vaccines for these diseases. Under such an “advance market commitment,” one or more sponsors would commit to a minimum price to be paid per person immunized for an eligible product, up to a certain number of individuals immunized. For additional purchases, the price would eventually drop to close to marginal cost. If no suitable product were developed, no payments would be made. We estimate the offer size which would make revenues similar to the revenues realized from investments in typical existing commercial pharmaceutical products, as well as the degree to which various model contracts and assumptions would affect the cost-effectiveness of such a commitment. We make adjustments for lower marketing costs under an advance market commitment and the risk that a developer may have to share the market with subsequent developers. We also show how this second risk could be reduced, and money saved, by introducing a superiority clause to a commitment. Under conservative assumptions, we document that a commitment comparable in value to sales earned by the average of a sample of recently launched commercial products (adjusted for lower marketing costs) would be a highly cost-effective way to address HIV/AIDS, malaria, and tuberculosis. Sensitivity analyses suggest most characteristics of a hypothetical vaccine would have little effect on the cost-effectiveness, but that the duration of protection conferred by a vaccine strongly affects potential cost-effectiveness. Readers can conduct their own sensitivity analyses employing a web-based spreadsheet tool.
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Bibliographic InfoPaper provided by Center for Global Development in its series Working Papers with number 98.
Length: 43 pages
Date of creation: Aug 2006
Date of revision:
Contact details of provider:
Web page: http://www.cgdev.org
advance market commitment; vaccine; disease; HIV/AIDS; malaria; tuberculosis; cost-effective;
Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- I12 - Health, Education, and Welfare - - Health - - - Health Production
- I10 - Health, Education, and Welfare - - Health - - - General
This paper has been announced in the following NEP Reports:
- NEP-AFR-2007-02-17 (Africa)
- NEP-ALL-2007-02-17 (All new papers)
- NEP-HEA-2007-02-17 (Health Economics)
You can help add them by filling out this form.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- William Easterly cannot ridicule the aid community into irrelevance
by Chris Conrad in The Big-Push on 2010-03-07 18:20:00
- Fidel Perez-Sebastian & Chris Papageorgiou & Shankha Chakraborty, 2008. "DISEASES AND DEVELOPMENT: A Theory of Infection Dynamics and Economic Behavior," 2008 Meeting Papers 777, Society for Economic Dynamics.
- Chakraborty, Shankha & Papageorgiou, Chris & Pérez Sebastián, Fidel, 2010.
"Diseases, infection dynamics, and development,"
Journal of Monetary Economics,
Elsevier, vol. 57(7), pages 859-872, October.
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