Advanced Purchase Commitments for a Malaria Vaccine: Estimating Costs and Effectiveness

29 Pages Posted: 6 Apr 2005

See all articles by Ernst R. Berndt

Ernst R. Berndt

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Rachel Glennerster

Massachusetts Institute of Technology (MIT) - Department of Economics

Michael Kremer

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER); Center for Global Development; Harvard University - Harvard Kennedy School (HKS)

Jean Lee

Harvard University

Ruth Levine

Center for Global Development

Georg Weizsacker

Humboldt University Berlin; DIW Berlin

Heidi L. Williams

MIT Department of Economics; National Bureau of Economic Research (NBER)

Date Written: April 1, 2005

Abstract

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

Berndt, Ernst R. and Glennerster, Rachel and Kremer, Michael R. 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

Ernst R. Berndt (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Rachel Glennerster

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Michael R. Kremer

Harvard University - Department of Economics ( email )

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Jean Lee

Harvard University ( email )

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Ruth Levine

Center for Global Development ( email )

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Georg Weizsacker

Humboldt University Berlin ( email )

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Heidi L. Williams

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