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Advance Market Commitments for Vaccines Working Paper and Spread Sheet

Author

Listed:
  • 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.

Suggested Citation

  • Ruth Levine & Ernst R. Berndt & Rachel Glennerster & Michael R. Kremer & Jean Lee & Georg Weizsacker & Heidi Williams, 2006. "Advance Market Commitments for Vaccines Working Paper and Spread Sheet," Working Papers 98, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:98
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    File URL: http://www.cgdev.org/content/publications/detail/9897
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    References listed on IDEAS

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    1. Marta Reynal-Querol, 2002. "Political systems, stability and civil wars," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(6), pages 465-483.
    2. Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-573, October.
    3. Scheper-Hughes, Nancy, 1996. "Small wars and invisible genocides," Social Science & Medicine, Elsevier, vol. 43(5), pages 889-900, September.
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    1. William Easterly cannot ridicule the aid community into irrelevance
      by Chris Conrad in The Big-Push on 2010-03-08 00:20:00

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    Cited by:

    1. Chakraborty, Shankha & Papageorgiou, Chris & Pérez Sebastián, Fidel, 2010. "Diseases, infection dynamics, and development," Journal of Monetary Economics, Elsevier, pages 859-872.

    More about this item

    Keywords

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

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I10 - Health, Education, and Welfare - - Health - - - General

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