Advance Purchase Research Articles

The EU’s Vaccine Diplomacy in the WHO

COVID-19 has posed a serious challenge for the European Union (EU) since 2020. The EU has adopted vaccine diplomacy, among other measures, to tackle this global pandemic. The EU also applied the Advance Purchase Agreements (APA) and export control for the COVID-19 vaccine in 2021, and did not fully support a waiver for vaccine and medicine Intellectual Property (IP) in the 2022 WTO negotiation. This paper focuses primarily on the following core issues and questions: What is the concept of vaccine diplomacy? What are the theories, policy decisions, jurisprudence and practices of the EU’s vaccine diplomacy? What is the strategy of the EU for cooperating with the WHO and the Access to Covid-19 Tools (ACT) Accelerator (COVAX)?What is the significance, and implications of EU vaccine diplomacy? The EU firmly supports WHO multilateralism and the COVAX framework for vaccine distribution and health cooperation. The EU also actively participates in WHO negotiations for a new health treaty, to respond effectively to future pandemics. This paper also suggests some ways to resolve the problem about how the EU can become a contracting party to the new WHO health treaty. Despite the fact that some policies such as the APA, vaccine export control and IP waiver were criticized by some other countries, the EU’s vaccine diplomacy in the WHO is largely a great success. The EU vaccine diplomacy is expected to increase the EU’s soft power and normative influence in the WHO, and contribute greatly to the health of European citizens, other human beings and a new emerging international health order. APA, COVAX, COVID-19, export control, EU, International Pandemic Treaty, vaccine diplomacy, WHO, WTO waiver

Intellectual Property Rights and Advance Purchase Agreements in a Crisis

Intellectual Property Rights and Advance Purchase Agreements in a Crisis

Improving Access to High-Value, High-Cost Medicines: The Use of Subscription Models to Treat Hepatitis C Using Direct-Acting Antivirals in the United States.

State payers may face financial incentives to restrict use of high-cost medications. Yet, restrictions on access to high-value medications may have deleterious effects on population health. Direct-acting antivirals (DAAs), available since 2013, can cure chronic infection with hepatitis C virus (HCV). With prices upward of $90,000 for a treatment course, states have struggled to ensure access to DAAs for Medicaid beneficiaries and the incarcerated, populations with a disproportionate share of HCV. Advance purchase commitments (APCs), wherein a payer commits to purchase a certain quantity of medications at lower prices, offer payers incentives to increase access to high-value medications while also offering companies guaranteed revenue. This article discusses the use of subscription models, a type of APC, to support increased access to high-value DAAs for treating HCV. First, the authors provide background information about HCV, its treatment, and state financing of prescription medications. They then review the implementation of HCV subscription models in two states, Louisiana and Washington, and the early evidence of their impact. The article discusses challenges to evaluating state-sponsored subscription models, and it concludes by discussing implications of subscription models that target DAAs and other high-value, high-cost medicines.

“No Regrets” Purchasing in a pandemic: making the most of advance purchase agreements

“No regrets” buying – using Advance Purchase Agreements (APAs) – has characterized the response to recent pandemics such as Avian flu, Zika Virus, and now COVID-19. APAs are used to reduce demand uncertainty for product developers and manufacturers; to hedge against R&D and manufacturing risks; and to secure availability of products in the face of spiking demand. Evidence on the use of APAs to buy vaccines, medicines, diagnostics, and personal protective equipment during recent pandemics illustrates how these contracts can achieve their intended objectives for buyers. But, transferring risk from suppliers to buyers - as APAs do - can have consequences, including overbuying and overpaying. Furthermore, the widespread use of APAs by high-income countries has contributed to the striking inequities that have characterized the Swine flu and COVID-19 responses, delaying access to vaccines and other supplies for low- and middle-income countries (L&MICs).We identify seven ways to address some of the risks and disadvantages of APAs, including adoption of a global framework governing how countries enter into APAs and share any resulting supplies; voluntary pooling through joint or coordinated APAs; a concessional-capital-backed facility to allow international buyers and L&MICs to place options on products as an alternative to full purchase commitments; greater collection and sharing of market information to help buyers place smarter APAs; support for a resale market; building in mechanisms for donation from the outset; and transitioning away from APAs as markets mature. While a binding global framework could in theory prevent the competitive buying and hoarding that have characterized country/state responses to pandemics, it will be very challenging to put in place. The other solutions, while less sweeping, can nonetheless mitigate both the inequities associated with the current uncoordinated use of APAs and also some of the risks to individual buyers.Analysis of recent experiences can provide useful lessons on APAs for the next pandemic. It will be important to keep in mind, however, that these contractual instruments work by transferring risk to the buyer, and that buyers must therefore accept the consequences. In the spirit of “no regrets” purchasing, having bought what hindsight suggests was too much is generally preferable to having bought not enough.

Predicaments during a period of health emergency: Waiving patent protections or innovative public procurement? The example of advance purchase agreements (APA) for COVID-19 vaccines.

The health emergency provoked by the worldwide pandemic requires immediate action to achieve the immunization of the population and to stop further contagion. The systems of public procurement needed to adapt in a very short time to reach agreements with the pharmaceutical industry. Proposing options between the waiving of patent protections and innovative public procurement, principally the European Advance Purchase Agreements (APA). A description of the actual situation and the necessary regulatory reforms. The sources are scientific articles, legislative compendiums and opinion pieces and the current press. The debate over the waiving of patent protections at this time is both misleading and ineffective due to the economic and legal problems involved. The path of the APA has proven to be very effective, although some deficits should be corrected, principally regarding questions of transparency and confidentiality. Among the possible options for the acquisition of the COVID-19 vaccine and its universal access, agreements and cooperation between States and innovative industry are desirable. One successful path is that of the advance purchase agreements utilized by the European Union, another could be that of voluntary licensing. We propose following these routes as opposed to the waiving of patent protections.

Distributionally Robust Inventory Management with Advance Purchase Contracts

Distributionally Robust Inventory Management with Advance Purchase Contracts

Advance Purchase Discounts for Supply Chain Finance System Coordination

The purpose of this paper is to study how advanced information about customer needs obtained through an Advance Purchase Discount (APD) contract can be exploited to coordinate the capital flow and enhance the efficiency of a two-stage supply chain (SC) under decentralized control in cases of stochastic customer demand. We developed an APD model in the form of an option contract, where the model and evaluation include the flexibility for the upstream firm to decide whether to provide a discount for an advance purchase at its own discretion. Applying the model to a Fortune 100 company, a leader in the Fast Mover Consumer Goods (FMCG) industry, showed that under certain conditions, and with suitably chosen contract parameters, management of decentralized control via APD contracts can lead to system-wide efficiency, and the individual decision makers pursue their own best interests, ensuring a win-win condition.

Legal agreements: barriers and enablers to global equitable COVID-19 vaccine access

Law can serve as both an enabler and a barrier to global health, equity, and justice.1 The impact of legal determinants of health on the COVID-19 pandemic is evident where law is being used as a mechanism to enable or prevent global equitable access to COVID-19 vaccines. Barriers to equitable access are partly driven by vaccine nationalism2 with governments seeking to use law to secure priority access to future vaccines through Advance Purchase Agreements (APAs) with vaccine manufacturers. These bilateral legal agreements can be in a nation's interest, but given the uncertain success of individual COVID-19 vaccine candidates and the global spread of SARS-CoV-2, APAs are a gamble and erode collaboration between countries. Importantly, such bilateral legal agreements are likely to contribute to inequities and potentially extend the pandemic's time frame. By contrast, multilateral legal agreements could be the path back to global health security and justice by re-establishing norms of international solidarity, committing to global equitable vaccine access initiatives, and laying a foundation for a post-pandemic era built on multilateralism and cooperation.

Simultaneous Optimization of Contingent and Advance Purchase Orders with Fixed Ordering Costs

We analyze a finite horizon periodic-review inventory model in the presence of advance purchase discount (APD). In addition to the opportunity to place a contingent order when required, the buyer can also commit to advance orders and receive discounts. Thus the buyer faces the following tradeoff: Contingent orders provide operational flexibility to respond to uncertain demands at a high purchase cost, whereas advance orders incur low purchase cost while sacrificing operational flexibility. We consider a simple and easy-to-implement APD scheme in which the buyer enjoys price discounts by committing at the outset to a fixed size of advanced order for each period along with contingent orders when required. We first show that for any given advance order size, an advance-order dependent (s, S) policy is optimal. We then find the advance order size together with the corresponding (s, S) policy that minimizes the buyer’s total cost.

Advance purchase behaviors of air tickets

The advance purchase behaviors of air passengers are essential to develop revenue management strategies of airlines, which should be carefully studied. Based on this, this study aims to empirically investigate the advance purchase behaviors for airline tickets based on the airline transaction data of Taipei-Macau (TPEMFM) route in 2011. In order to model the advance purchase behaviors, multinomial logit models are used. To facilitate model development, the advance purchase horizon is divided into five time periods by three segmentation methods, including equal time periods, time periods with equal number of purchases and time periods according to professional judgment. Several factors contributing to advance purchase behaviors are examined, including price, flight schedule (time of day, day of week, and months of year) and fare class preferences. The estimation results show that the model with segmentation of equal time periods performs best in terms of adjusted rho-square and AIC indices. It is also found that air passengers tend to purchase tickets earlier for the flights in the morning and in hot season, suggesting the fare and seat inventory control should be varied for different flights.

Advance purchase behaviors of air passengers: A continuous logit model

Modeling the advance purchase behaviors of air passengers is essential when airlines develop revenue management strategies. Therefore, this study empirically investigates advance purchase behaviors based on the air ticket transaction data by using a continuous logit model. The estimation results show that advance purchase behaviors are significantly affected by price, price uncertainty, time of day (morning, afternoon and evening flight), days of week (flight on Friday), months of year (peak or off-peak seasons), and consecutive holiday. Accordingly, different pricing strategies should be used for different flights to maximize revenue.

Vaccine procurement during an influenza pandemic and the role of Advance Purchase Agreements: Lessons from 2009-H1N1

Vaccines are hugely important tools in minimising the effect pandemic influenza could have on a population. The reforms introduced by the Pandemic Influenza Preparedness Framework are ill-suited to providing sufficient levels of access to vaccines to meet the needs of developing states, and as such developing states will continue to be reliant upon the traditional methods of vaccine procurement to procure the majority of the vaccines they required. Using procurement during 2009-H1N1 as a case study, this paper examines the methods of procurement utilised by states in order to determine if the procurement tools available to developing states are sufficient to procure adequate levels of pandemic influenza vaccines. Particular focus is given to the role Advance Purchase Agreements (APAs) play in the procurement process. By exploring this case study it is possible to argue that these procurement methods are ineffective for developing states, and when the next influenza pandemic occurs, demand will once again outstrip supply globally, due to supply of vaccines being dominated by the developed states with APAs in place.

A model of advance selling with consumer heterogeneity and limited capacity

We study advance selling in a model with a capacity constraint for the seller and in the presence of both consumer heterogeneity and demand uncertainty. Buyers face different levels of uncertainty about their valuations in the advance selling period: one group of buyers (called informed buyers) know their individual valuations while the other group (called uninformed buyers) only know the distribution of their valuations. We find that the seller’s optimal pricing strategy depends on his capacity size as well as the size of informed buyers. For a small capacity size, the Constant Price strategy with the highest possible price is adopted. For sufficiently large capacity sizes, both Advance Purchase Discount and Advance Purchase Premium strategies may be optimal. In general, the larger the size of informed buyers the more likely an Advance Purchase Premium strategy is adopted.

Using Advance Purchase Discount Contracts: Operational Cost, Cost Opacity, and Timing

Advance purchase discount (APD) contracts can incentivize a retailer to share demand information with a dual-sourcing wholesaler. We analyze such contracts in terms of three practical considerations that have previously been overlooked: the retailer’s operational cost of adopting an APD scheme, the wholesaler’s limited information about it, and the contract’s timing. The wholesaler’s limited knowledge of the retailer’s cost leads to a departure — from the normal “full observability” APD design — that is asymmetric and depends on the extent of unobservability; thus, if the uncertainty is small (resp., large) then the optimal discount is higher (resp., lower) than in the case of full observability. Finally, a wholesaler can adjust the contract’s timing to synchronize the supply chain to his benefit. An APD contract that ignores the retailer’s cost or the wholesaler’s uncertainty about it, or is implemented in a suboptimal sequence, will yield fewer benefits for the wholesaler and the supply chain. We offer a numerical illustration (calibrated on real industry data) establishing that, for a representative product, an APD contract can improve the wholesaler’s profit margin by as much as 3.5%.

Efeito da antecedência de compra nas variações de preço das passagens aéreas: o caso da região metropolitana de São Paulo

O objetivo deste artigo concentra-se em avaliar se existem variações na prática de descontos das passagens aéreas compradas com antecedência entre os voos regionais e ponte aérea e entre voos na alta e na baixa estação. Com o auxílio de um modelo econométrico e com a coleta de dados em um período de três anos (2008, 2009 e 2010) de voos com origem nos aeroportos de Guarulhos e Congonhas, foi observado que a antecedência de compra para voos de ponte aérea reflete em desconto médio de 37%, enquanto para os voos regionais o desconto observado é de 24.3%. Na alta estação os voos passam a ter maiores descontos, em relação à baixa, a partir de compras com antecedência de 30 dias da data do voo. A principal explicação para os resultados pode ser embasada na segmentação entre os passageiros que viajam a negócio e a lazer.

Advance Purchase Discounts Versus Clearance Sales

This article considers advance selling problems. It explains why some goods (e.g. airline tickets) are sold cheap to early buyers, while others (e.g. theatre tickets) offer discounts to those who buy late. We derive the profit maximising selling strategy for a monopolist when aggregate demand is certain but buyers face uncertainty about their individual demands. When aggregate demand exceeds capacity, both Advance Purchase Discounts as well as Clearance Sales might be optimal. We determine how the comparison of these price discrimination strategies depends on the rationing rule, capacity costs and the availability of temporal capacity limits, price commitment and resale.

Synchronizing Global Supply Chains: Advance Purchase Discounts

We study the economics of sharing demand information between a dual sourcing firm and its network of retailers. Our analysis demonstrates that employing Advance Purchase Discount (APD) contracts in these supply chains removes significant impediments to information sharing. Essentially, these contracts synchronize the timeline of the dual sourcing firm's decisions with the actions of its network of retailers. This enables accurate, timely, and self-enforcing information sharing, which reduces the demand - supply mismatches, and improves the profitability of each of the agents in the supply chain. We provide prescriptions on the appropriate design of contracts that enable this Pareto-improving information sharing. Next, we extend this analysis to incorporate realistic constraints on the dual sourcing firm's limited knowledge of its retailers' operational costs and information quality. We characterize “certainty-equivalent” values of the unknown retailer parameters, which facilitate analogous prescriptions for the design of APD contracts in these realistic settings. It is interesting that the unobservability of retailer parameters leads to an asymmetric and “degree-of-unobservability dependent” departure from the full-observability design of the APD contract. If the uncertainty in the unobserved parameter is small, then the optimal discount is higher compared to the case of full observability; conversely, when the uncertainty is large, the optimal discount is lower. It is significant that, despite the departure in the design of the APD contract, this analysis reiterates that the benefits of APDs persist even under this practical constraint. Finally, we report on the application of our prescription to a U.S.-based apparel wholesaler. Using data derived from the operations of this firm, we estimate that APD-enabled improved information sharing can increase net profits by about 17%.

Refundable Advance Purchase Tickets and Advance Purchase Restrictions under Aggregate Demand Uncertainty

This paper rationalizes the use of discounted refundable advance purchase tickets and advance purchase restrictions in context of models with costly capacity and aggregate demand uncertainty. We show how a monopolist on such markets can improve upon pricing mechanisms, previously proposed in the related literature for markets for perishable products, characterized by uncertain demand and costly capacity (which include but are not limited to such important industries as airlines, hotels, restaurants, car rentals, and live performances). Our model provides a simple link between two strains of literature (one modeling non-refundable discounted tickets with demand uncertainty specified through states of demand, and the other analyzing fully or partially refundable contracts while treating demand uncertainty at the customer level).

Report of the Commission on Intellectual Property Rights: an industry perspective

The report issued by WHO's Commission on Intellectual Property, Innovation, and Public Health (1) (CIPIH) makes a number of positive recommendations for improving health in developing countries. However, the report understates the value of intellectual property rights for promoting public health and overstates the importance of intellectual property in affecting access to health care. Indeed, the report favours compulsory licensing as a method for improving access to medicines, which is not justified by the evidence available. The mixed recommendations of the report reflect the fact that there was no consensus among the Commissioners regarding intellectual property issues. Constructive proposals The report recognizes the important contributions of the research and development (R&D)-based pharmaceutical industry to the health needs of developing countries, including those made by public-private partnerships focusing on tropical diseases. One constructive recommendation made in the report is the elimination of tariffs and taxes on health-care products (Recommendation 4.12). Several studies, including one commissioned by the CIPIH, show that tariffs and taxes on medicines and other health-care products raise costs for consumers, (2-4) yet the revenues raised are not spent on health care. Thus, countries that are serious about improving affordability of medicines should eliminate tariffs and reduce taxes. The report also supports advance purchase schemes as a market-based incentive for promoting R&D (Recommendation 3.5). Advance purchase schemes are a way of creating markets for products which would otherwise be too uncertain to attract sufficient investment. This kind of market-based incentive has proven to be effective in the Global Alliance for Vaccines and Immunization and other purchasing funds. On untested alternatives, such as the proposal for a global medical R&D treaty, the CIPIH report says ... it is unclear to many people how the proposal would work in practice. Many comments emphasized that the proposal was set out in a broad-brush fashion, making it difficult to assess, without further information and analysis, how various legal, financial, technical and institutional issues could be addressed, as well as genuine concerns about political and practical feasibility. The report usefully highlights the importance of drug quality and the fight against counterfeit drugs (Recommendation 4.4). Effective regulation and enforcement of quality standards play a vital role in protecting public health. The R&D-based pharmaceutical industry is active in this fight and the International Federation of Pharmaceutical Manufacturers & Associations is working with WHO to put the fight against counterfeit drugs higher on governments' policy agendas. (5) However, the report's discussion of broader quality issues would have benefited from a more in-depth discussion of the importance of bioequivalency--how the product works in the human body--with regard to generic copies. Another useful recommendation made by the CIPIH report is to stop the brain drain of trained health-care workers from developing to developed countries (Recommendations 4.2 and 4.3). Trained health-care workers are vital to ensure that treatments are used effectively and appropriately. Yet many developing countries face shortages of such workers due to emigration. Counterproductive messages Throughout the report there is too much emphasis placed on the use of compulsory licensing, the benefits of which are not justified by evidence. For example, the report states that Mozambique, Zambia and Zimbabwe have issued compulsory licences for some antiretrovirals, but neglects to give the full picture: the multinational versions of the drugs in question were not covered by active patents in Zambia and Mozambique. Another example of the high profile given to compulsory licensing is where the report states that compulsory licensing could be an incentive for R&D (Recommendation 2. …

A Deterministic Model for a Manufacture System with an Advance Purchase Discount

Most production planning models assume that the backorder or advance purchase price is the same as the regular purchase price. In practice, since most advance purchase customers may expect to purchase items at discount prices, the purchasing behavior of these customers may differ from the regular purchase customers. In the present paper, we developed a production planning model for dealing with a manufacturing system with an advance purchase discount. The objective of the paper is to maximize the unit time profit by jointly determining the advance purchase discount rate and the size of a production run.