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Advance Market Commitments for Vaccines Working Paper and Spread Sheet

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Author Info

  • Ruth Levine

    ()

  • Ernst R. Berndt
  • Rachel Glennerster
  • Michael R. Kremer
  • Jean Lee
  • Georg Weizsacker
  • Heidi Williams

Abstract

The 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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File URL: http://www.cgdev.org/content/publications/detail/9897
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Bibliographic Info

Paper provided by Center for Global Development in its series Working Papers with number 98.

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Length: 43 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:cgd:wpaper:98

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Web page: http://www.cgdev.org

Related research

Keywords: advance market commitment; vaccine; disease; HIV/AIDS; malaria; tuberculosis; cost-effective;

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  1. William Easterly cannot ridicule the aid community into irrelevance
    by Chris Conrad in The Big-Push on 2010-03-07 18:20:00
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Cited by:
  1. 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.
  2. Chris Papageorgiou & Fidel Pérez Sebastián & Shankha Chakraborty, 2010. "Diseases, infection dynamics and development," Working Papers. Serie AD 2010-28, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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