Advanced Purchase Commitments for a Malaria Vaccine: Estimating Costs and Effectiveness
Ernst R. Berndt
Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)
Massachusetts Institute of Technology (MIT) - Department of Economics
Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER); Center for Global Development
Center for Global Development
Humboldt University Berlin; DIW Berlin
MIT Department of Economics; National Bureau of Economic Research (NBER)
April 1, 2005
To overcome the problem of insufficient research and development (R&D) on vaccines for diseases concentrated in low-income countries, sponsors could commit to purchase viable vaccines if and when they are developed. One or more sponsors would commit to a minimum price that would 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 short-run marginal cost. If no suitable product were developed, no payments would be made. We estimate the offer size which would make the revenues from R&D investments on a malaria vaccine similar to revenues realized from investments in typical existing commercial pharmaceutical products, as well as the degree to which various contract models and assumptions would affect the cost-effectiveness of such a commitment for the case of a malaria vaccine. Under conservative assumptions, we document that the intervention would be highly cost-effective from a public health perspective. Sensitivity analyses suggest most characteristics of a hypothetical malaria vaccine would have little effect on the cost-effectiveness, but that the duration of protection against malaria conferred by a vaccine strongly affects potential cost-effectiveness. Readers can conduct their own sensitivity analyses employing a web-based spreadsheet tool.
Number of Pages in PDF File: 29
Keywords: Advance purchase commitment, R&D, pharmaceuticals, vaccines, malaria
JEL Classification: I18, O19, O31, O38
Date posted: April 6, 2005
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