29 Pages Posted: 6 Apr 2005
Date Written: 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.
Keywords: Advance purchase commitment, R&D, pharmaceuticals, vaccines, malaria
JEL Classification: I18, O19, O31, O38
Suggested Citation: Suggested Citation
Berndt, Ernst R. and Glennerster, Rachel and Kremer, Michael and Lee, Jean and Levine, Ruth and Weizsacker, Georg and Williams, Heidi L., Advanced Purchase Commitments for a Malaria Vaccine: Estimating Costs and Effectiveness (April 1, 2005). Available at SSRN: https://ssrn.com/abstract=696741 or http://dx.doi.org/10.2139/ssrn.696741