Advance Market Commitments Research Articles

Economic challenges and possible policy actions to advance stratified medicine.

In this article, we present a simple economic model to illustrate the economic challenges facing an oncology stratified medicine developer when scientific discoveries lead to ever smaller, targeted patient populations.We provide preliminary empirical evidence suggesting that at least some developers and their investors are retreating. We then examine the armamentarium of policy actions beyond higher reimbursement that may be employed to enhance the economic incentives for developing stratified medicines. In the absence of significant pricing and total oncology outlay flexibility by payers, our analysis suggests that private sector investment in small oncology segments, and in stratified medicine generally, may not prove economically sustainable, thus endangering the translation of scientific advances into bedside medicines. Beyond increasing reimbursement, decreasing development cycle time and costs, or both, would most directly improve the economic incentives facing developers. By contrast, extending exclusivity periods, or initiating advance market commitments and awarding prizes would likely have less impact and involve greater implementation challenges.

Promising Trends in Access to Medicines.

It is a vast understatement to say that the problem of access to medicines in developing countries is complex. Access is limited by a range of factors including inability to pay, a lack of infrastructure, and corruption in some countries. Surrounding and exacerbating these structural and technological problems is the layer of legal rights created by patents and their licensing that complicate and render more expensive the preparation and delivery of needed medicines, particularly those that need to be adapted to the social, health and cultural environment of developing countries. This article provides a survey of innovative strategies that aim at maximizing the potential of patents to facilitate the development and delivery of medicines against diseases, the burden of which falls principally on developing country populations. To understand the context in which these strategies are being proposed and implemented, the article reviews the battles over access to medicines beginning in the late 1980s. It then surveys some of the principal suggestions put forward to better direct innovation systems in addressing the critical health needs of the world’s majority including advance market commitments, patent buy‐outs, prize funds, public–private partnerships and patent pools.

Is the pneumococcal vaccine Advance Market Commitment motivating innovation and increasing manufacturing capacity? Some preliminary answers

This paper seeks to give some preliminary evidence on the potential outcome of the pneumococcal vaccine Advance Market Commitment (AMC), with a focus on its impact on innovation in 'emerging' vaccine manufacturers in developing countries. The evidence is derived from a series of interviews with executives at industrial vaccine developing organizations with pneumococcal vaccines in their R&D portfolio, including both multinational pharmaceutical companies and 'emerging' manufacturers. The main findings are that so far there is no evidence to support any claim that the AMC is speeding innovation of pneumococcal vaccines, or that it is contributing to productive capacity expansion. Representatives of emerging manufacturers consistently state that the AMC is either irrelevant or inappropriate for supporting their innovative activities on pneumococcal vaccines.

Advance market commitment for pneumococcal vaccines: putting theory into practice

Markets for life-saving vaccines do not often generate the most desired outcomes from a public health perspective in terms of product quantity, quality, affordability, programmatic suitability and/or sustainability for use in the lowest income countries. The perceived risks and uncertainties about sustainably funded demand from developing countries often leads to underinvestment in development and manufacturing of appropriate products. The pilot initiative Advance Market Commitment (AMC) for pneumococcal vaccines, launched in 2009, aims to remove some of these market risks by providing a legally binding forward commitment to purchase vaccines according to predetermined terms. To date, 14 countries have already introduced pneumococcal vaccines through the AMC with a further 39 countries expected to introduce before the end of 2013.This paper describes early lessons learnt on the selection of a target disease and the core design choices for the pilot AMC. It highlights the challenges faced with tailoring the AMC design to the specific supply situation of pneumococcal vaccines. It points to the difficulty - and the AMC's apparent early success - in establishing a long-term, credible commitment in a constantly changing unpredictable environment. It highlights one of the inherent challenges of the AMC: its dependence on continuous donor funding to ensure long-term purchases of products. The paper examines alternative design choices and aims to provide a starting point to inform discussions and encourage debate about the potential application of the AMC concept to other fields.

Economic Perspectives On The Advance Market Commitment For Pneumococcal Vaccines

Pharmaceutical companies have long been reluctant to invest in producing new vaccines for the developing world because they have little prospect of earning an attractive return. One way to stimulate such investment is the use of an advance market commitment, an innovative financing program that guarantees manufacturers a long-term market. Under this arrangement, international donors pay a premium for initial doses sold to developing countries. In exchange, companies agree to continue supplying the vaccine over the longer term at more sustainable prices. This article provides a preliminary economic analysis of a pilot advance market commitment program for pneumococcal vaccines, explaining the principles behind the program's design and assessing its early performance. Spurred by the advance market commitment--and other contemporaneous initiatives that also increased resources to vaccine suppliers--new, second-generation pneumococcal vaccines have experienced a much more rapid rollout in developing countries than older first-generation vaccines.

Vaccines As A Global Imperative—A Business Perspective

During the past thirty years, vaccines have experienced a renaissance. Advances in science, business, and distribution have transformed the field to the point where vaccines are recognized as a "best buy" in global health, a driver of pharmaceutical industry growth, and a key instrument of international development. With many new vaccines available and others on the horizon, the global community will need to explore new ways of ensuring access to vaccines in developing nations. So-called tiered pricing, which makes vaccines available at different prices for countries at different levels of economic development; innovative financing mechanisms such as advance market commitments or offers of long-term and high-volume contracts to vaccine producers; and technology transfers such as sharing intellectual property and production techniques among companies and countries can all play a part in bringing new life-saving vaccines for pneumonia, rotavirus, malaria, and other diseases to developing countries.

Are advance market commitments for drugs a real advance?

Are advance market commitments for drugs a real advance?

Economic evaluation of pneumococcal conjugate vaccination in The Gambia

BackgroundGambia is the second GAVI support-eligible country to introduce the 7-valent pneumococcal conjugate vaccine (PCV7), but a country-specific cost-effectiveness analysis of the vaccine is not available. Our objective was to assess the potential impact of PCVs of different valences in The Gambia.MethodsWe synthesized the best available epidemiological and cost data using a state-transition model to simulate the natural histories of various pneumococcal diseases. For the base-case, we estimated incremental cost (in 2005 US dollars) per disability-adjusted life year (DALY) averted under routine vaccination using PCV9 compared to no vaccination. We extended the base-case results for PCV9 to estimate the cost-effectiveness of PCV7, PCV10, and PCV13, each compared to no vaccination. To explore parameter uncertainty, we performed both deterministic and probabilistic sensitivity analyses. We also explored the impact of vaccine efficacy waning, herd immunity, and serotype replacement, as a part of the uncertainty analyses, by assuming alternative scenarios and extrapolating empirical results from different settings.ResultsAssuming 90% coverage, a program using a 9-valent PCV (PCV9) would prevent approximately 630 hospitalizations, 40 deaths, and 1000 DALYs, over the first 5 years of life of a birth cohort. Under base-case assumptions ($3.5 per vaccine), compared to no intervention, a PCV9 vaccination program would cost $670 per DALY averted in The Gambia. The corresponding values for PCV7, PCV10, and PCV13 were $910, $670, and $570 per DALY averted, respectively. Sensitivity analyses that explored the implications of the uncertain key parameters showed that model outcomes were most sensitive to vaccine price per dose, discount rate, case-fatality rate of primary endpoint pneumonia, and vaccine efficacy against primary endpoint pneumonia.ConclusionsBased on the information available now, infant PCV vaccination would be expected to reduce pneumococcal diseases caused by S. pneumoniae in The Gambia. Assuming a cost-effectiveness threshold of three times GDP per capita, all PCVs examined would be cost-effective at the tentative Advance Market Commitment (AMC) price of $3.5 per dose. Because the cost-effectiveness of a PCV program could be affected by potential serotype replacement or herd immunity effects that may not be known until after a large scale introduction, type-specific surveillance and iterative evaluation will be critical.

Introduction of European priority review vouchers to encourage development of new medicines for neglected diseases

Every year 1 billion people worldwide are affected by traditionally neglected diseases, such as malaria, tuberculosis, leishmaniasis, and lymphatic filariasis, which impose tremendous public health burdens. Governments, foundations, and drug manufacturers have, however, started to support development of new treatments. European Union Member States have been leaders in implementing so-called push mechanisms (payment for drug development) and pull funding (reward for output), such as the advance market commitment, which creates a market for vaccines by guaranteeing prices. We propose an additional step that could be taken to encourage development of medicines for neglected diseases. A priority review voucher scheme, as is already in place in the USA, would reward a manufacturer that developed a new medicine for neglected diseases with a voucher that could be redeemed for priority review of a future medicine, probably a potential blockbuster drug. Unlike the US system a European voucher would also accelerate pricing and reimbursement decisions. This scheme would be likely to provide substantial benefits to voucher holders, society, and public health organisations.

A theoretical flaw in the advance market commitment idea

Infectious and parasitic diseases cause massive health problems in the developing world. Research and development of drugs for diseases that mainly affect poor people in developing countries is limited. The...

Taskforce on Innovative International Financing for Health Systems: what next?

The high-level Taskforce on Innovative International Financing for Health Systems was set up in 2008 and chaired by Gordon Brown, Prime Minister of the United Kingdom of Great Britain and Northern Ireland, and Robert Zoellick, President of The World Bank. Its aim was to identify innovative and additional sources of funding for health systems strengthening in the 49 lowest-income countries of the world. The taskforce delivered its final recommendations in September 2009 together with two detailed working group papers.1,2 Here we summarize the main outputs and recommendations of the taskforce according to three areas: (i) costing the financing gap; (ii) new and innovative sources of finance; and (iii) making development assistance for health work better (Box 1). We then examine their limitations and propose further actions for the international health community. Box 1 Summary of recommendations by the high-level Taskforce on Innovative International Financing for Health Systems3 New sources of finance: Extend the mandatory solidarity levy on airline tickets to more countries (currently in place in several countries and used primarily to finance paediatric AIDS treatment through UNITAID); Explore the viability of levies on tobacco and currency transactions; Encourage voluntary private giving through: (i) voluntary levies on the purchase of airline tickets and mobile phone minutes (expected to raise US$ 3.2 billion by 2015); and (ii) a scheme called a “de-tax” which would earmark a share of value added tax receipts when participating businesses agree to add a share of their profits (estimated potential of US$ 220 million in 2010); Secure more private investment in health systems through establishing capital/risk mitigation fund(s). Out-sourcing to non-government providers and encouraging greater use of advanced market commitments, such as for vaccine purchases, were also mentioned as ways of securing investment from private sector actors. Making development assistance for health work better: More frontloading (i.e. concentrating payments at the beginning of an agreement) and predictability of aid, possibly by expanding the mandate of the International Financing Facility for Immunization. Expand the use of results-based “buy-down” (use of grant funding to reduce the cost of loans when specific performance targets are met) funding and more performance-based donor funding for the health sector. Establish a common health systems funding platform for the Global Fund to Fight AIDS, Tuberculosis and Malaria, the GAVI Alliance and The World Bank. Undertake a review of technical assistance, in view of evidence that it consumes a large proportion of aid and appears to be poor value for money. Gaps and challenges Costing Three issues stand out. The first relates to the models used for calculating the costs of scaling-up essential health services, including the assumptions on what is required to achieve that scale-up.1 The different models used by the taskforce did not just produce alternative costings, but also reflected different approaches to health systems strengthening as well as different levels of ambition. The World Health Organization (WHO)’s normative approach, for example, was bolder and advocated the simultaneous scaling-up of facility and community-based services, while The World Bank and the United Nations Children’s Fund (UNICEF) were less ambitious and advocated expanding low-cost, community-based services before undertaking any strengthening or expansion of facility-based services. In addition to the confusion of having different costing models, the taskforce reveals fundamental differences in opinion about the minimum requirements to strengthen health systems and the best way to expand coverage of essential health services. The second issue is that the individual country costings used to produce an aggregated “price tag” for all low-income countries are unavailable. And yet a full and proper discussion about the best way to fund and scale-up essential health services can ultimately only be conducted at the country level. In addition, the costings generated for health systems inputs such as “governance” are novel and need further empirical testing. A disaggregation of the data by country is therefore a vital next step. Third, an implicit recommendation of the taskforce is that a significant proportion of funding should come from private expenditure, in spite of the need to reduce the burden of health expenditure on poor households. This suggests that the required future funding from governments and donors has been underestimated.

Incentivizing Innovation: Adding to the Tool Kit

Executive Summary Intellectual property rights (IPR) create incentives for research but impose static efficiency losses and other costs. In this essay, we discuss recent proposals of other mechanisms for rewarding innovation and argue that incremental experimentation with mechanisms that supplement rather than replace IPR can help to test and refine these mechanisms without undermining existing institutions. Prizes, such as those recently offered by the X‐Prize Foundation, have been successful in spurring research but have typically targeted demonstration projects rather than innovations capable of being used at scale. To spur the creation of products for widespread use, the design of prizes could be usefully extended by conditioning rewards on a market test, as in the recent $1.5 billion pilot Advance Market Commitment (AMC) for a pneumococcus vaccine.

IN DEFENCE OF PRIORITY REVIEW VOUCHERS

Infectious and parasitic diseases cause enormous health problems in the developing world whereas they leave the developed one relatively unscathed. Research and development (R&D) of drugs for diseases that mainly affect people in developing countries is limited. The problem that relatively few drugs are available for diseases that cause an enormous burden of disease in the developing world is called the 'availability problem'. In recent years, the availability problem has received quite a bit of attention. A number of proposals have been fielded as to how this problem might be minimized. Wild-card patent extensions, advance market commitments, cash prizes and the Health Impact Fund are prominent examples of such proposals. These proposals can be thought of as pull-mechanisms for R&D of drugs for neglected diseases. What has been coined a 'priority review voucher' is another pull-mechanism. This paper is a critical discussion of this pull-mechanism. First, the original priority review voucher scheme, as proposed by Ridley et al. (2006), is described. A number of objections to this scheme are thereafter presented. A few amendments to the original scheme are then suggested, and it is argued that with these amendments in place, the priority review voucher scheme constitutes an attractive way of stimulating R&D of drugs for neglected diseases.

Vaccine supply, demand, and policy: A primer

ObjectiveTo provide an overview of supply and demand issues in the vaccine industry and the policy options that have been implemented to resolve these issues.Data sourcesMedline, Policy File, and International Pharmaceutical s were searched to locate academic journal articles. Other sources reviewed included texts on the topics of vaccine history and policy, government agency reports, and reports from independent think tanks. Keywords included vaccines, immunizations, supply, demand, and policy.Study selectionSearch criteria were limited to English language and human studies. Articles pertaining to vaccine demand, supply, and public policy were selected and reviewed for inclusion.Data extractionBy the authors.Data synthesisVaccines are biologic medications, therefore making their development and production more difficult and costly compared with “small-molecule” drugs. Research and development costs for vaccines can exceed $800 million, and development may require 10 years or more. Strict manufacturing regulations and facility upgrades add to these costs. Policy options to increase and stabilize the supply of vaccines include those aimed at increasing supply, such as government subsidies for basic vaccine research, liability protection for manufacturers, and fast-track approval for new vaccines. Options to increase vaccine demand include advance purchase commitments, government stockpiles, and government financing for select populations.ConclusionHigh development costs and multiple barriers to entry have led to a decline in the number of vaccine manufacturers. Although a number of vaccine policies have met with mixed success in increasing the supply of and demand for vaccines, a variety of concerns remain, including developing vaccines for complex pathogens and increasing immunization rates with available vaccines. New policy innovations such as advance market commitments and Medicare Part D vaccine coverage have been implemented and may aid in resolving some of the problems in the vaccine industry.

Introducing HPV Vaccine in Developing Countries - Addressing the Challenge.

Sir, Vaccines have played a crucial role in preventing infectious disease-associated morbidity and mortality, worldwide. Vaccinations have achieved several milestones e.g. eradication of smallpox, imminent eradication of polio, and a dramatic reduction in the prevalence of childhood infections like diphtheria, tetanus and pertusis. Many newer, safe and effective vaccines, like those against Hib, Pneumococcus, Hep A, Chicken pox, Rotavirus, HPV to name a few, are only now making an entry into the market of developing countries, though they were introduced decades earlier in the developed countries.(1) Current findings based on results from clinical trials indicate that a three-dose schedule of both bivalent and quadrivalent vaccine formulations against HPV are highly immunogenic with sero-conversion rates to all targeted HPV types of over 98%.(2) However, the mere availability of an effective vaccine is not synonymous with an effective vaccination program. Challenges to the introduction of HPV vaccine in our country: Relatively high cost of HPV vaccine.(3) How to reach the target population? Coverage with existing EPI vaccines is only 43.5% for fully vaccinated children aged 12-23 months with an estimated 12.5 million under-immunized children each year.(4) Poor healthcare infrastructure, inadequate maintenance of cold chain and injection safety. Limited resources of UIP and competition faced from other newer vaccines like Hib, pneumococcal, rotavirus, meningococcal, JE vaccines etc.(5) Poor success of secondary prevention methods e.g. HPV screening, Pap testing, or visual inspection in the country. Religious barriers, cultural taboos and misconceptions influencing acceptance by doctors, parents, adolescents and public in general e.g. a vaccine targeted primarily to females and associated with a sexually transmitted infection may exacerbate rumors like a plot to sterilize young girls.(5) Lack of political will. Without a doubt, one of the greatest barriers to the introduction of this vaccine is its price.(6) Several mechanisms to make vaccines affordable in the context of developing countries have been proposed, like differential pricing, advance market commitments (AMC) and voluntary and compulsory licensing. The most prominent model is differential (or tiered) pricing, where the patent owner retains production and control of pricing between segmented markets.(7) Proposals based on advanced market commitment provides an assured price subsidy for developing country purchase of a future vaccine meeting predefined standards. This mechanism can provide the industry with greater assurances of earning a reasonable return on their investment and act as a motivation to serve the poorest developing countries.(8) Differential pricing may be combined with donor financing support and advance market commitments. A new type of license that uses market forces to lower prices through generic competition in low and middle-income countries while ensuring that pharmaceutical companies are appropriately reimbursed for their research and development holds much promise.(7) Wider global availability of affordable vaccines can be achieved through building local or regional clinical trial and vaccine production capacity.(1) Hepatitis B vaccine production in South Korea was a major factor in bringing the price of this vaccine to affordable levels in the developing world.(5) Countries can use the established immunization networks or networks of Sexual and Reproductive Health (SRH) services such as family planning, pre- and post-natal care or a mixture of systems to deliver the vaccine to the target population. Immunization service delivery is the most successful public health system in the world and the infrastructure of trained staff, cold chain and logistics, clinics and outreach services, and information systems is a resource that could be utilized to deliver HPV vaccine.(5) The immunization system will need to be substantially enlarged to reach large numbers of adolescents and women of child-bearing age outside the ambit of pre-natal services.(5) Local logistical hurdles must be overcome and the opportunity of strengthening health care infrastructure through vaccination must be utilized.(1) SRH services could simultaneously provide important contacts for health education and advocacy for HPV and dispel myths and misconceptions regarding the vaccination. Ultimately, the decision of whether and when a vaccine will be introduced will depend on individual countries. To prepare for decisions on HPV vaccine use, the sexual and reproductive health (SRH; including adolescent health), immunization, and cancer control communities need to work together to analyze the appropriate data and build international and national consensus.(5) Local leaders must be convinced of the benefits of vaccination to make immunization a high priority. Finally, ‘translational research’ can provide the answer to rational introduction of newer vaccines like HPV in developing countries for optimum utilization of available resources.(9)

Introduction of Human Papillomavirus Vaccines into Developing Countries - International Strategies for Funding and Procurement

This paper explores different international vaccine financing and procurement strategies used by the Pan American Health Organization, United Nation's Children's Fund, the Global Alliance for Vaccines and Immunization, the Gulf Cooperation Model, and the Advanced Market Commitments. The aim is to identify lessons learned to help ensure equitable distribution of life-saving vaccines for cervical cancer prevention, with particular emphasis on sustainability. A critical first step in the cascade of activities necessary for Human papillomavirus (HPV) vaccine introduction should be the creation of an informed policy decision making process that is grounded in the best available information at a national level. This process will help ensure that decisions are financially sustainable. Any vaccine purchasing mechanisms should address the following essential points: 1) prioritization of cost-saving interventions; 2) flexible participation; 3) sufficient support to confront in-country challenges for managing vaccine procurement mechanisms; 4) a definite time-line for country ownership of vaccine purchases; 5) accuracy of vaccine demand forecasting; 6) maintenance of vaccine supply chains; and 7) well-functioning surveillance and regulatory bodies. In mapping the way forward, using the lessons learned and maintaining flexibility of financing and procurement mechanisms remain critical issues.

The Health Impact Fund: A Useful Supplement to the Patent System?

The Health Impact Fund has been proposed as an optional, comprehensive advance market commitment system offering financial payments or ‘prizes’ to patentees of new drugs, which are sold globally at an administered low price. The Fund is designed to offer payments based on the therapeutic impact of the drugs or vaccines, so that innovators will have efficient incentives to develop drugs that maximize health gains. Consumers would have improved access to such drugs because of low prices.

Market-Based Licensing For HPV Vaccines In Developing Countries

Human papillomavirus (HPV) vaccines hold great promise for preventing cervical cancer, but 93 percent of mortality worldwide occurs in low- and middle-income countries, where high vaccine costs can restrict dissemination. Current models for promoting international access to health care innovations include differential pricing, advance market commitments, and voluntary and compulsory licensing. Some of these mechanisms have been effective, but much room for improvement remains. We discuss the usefulness of a new type of license that uses market forces to lower prices through generic competition in low- and middle-income countries while ensuring that pharmaceutical companies are appropriately reimbursed for their research and development.

Financing Health Care Investments in Developing Countries: The Story of Debt and Equity

There is a significant problem of underinvestment in health care in developing countries. The main development instrument for promoting investment has been public debt which rarely reaches the majority private health care providers in developing countries. New instruments such as Advanced Market Commitments, the International Financing Facility for Immunizations and the Private Finance Initiative have been designed to engage the private sector in health care investment. But unlike recurrent financing which is well-researched, little is understood about the role of capital financing in health care - where there is a unique mix of public and private debt and equity instruments. The objectives are to contribute to filling this knowledge gap by examining the supply and demand of capital for financing health care investments in developing country contexts. Case studies in emerging markets will be presented that highlight the current challenges to capital financing and what the optimal capital structure mix is for firms under these conditions.

Advance Market Commitments for Vaccines Working Paper and Spread Sheet

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 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.