Advance Market Commitment

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Making Markets for Vaccines Book CoverMarch 2003 – April 2005

Background and Purpose

Malaria, tuberculosis, and HIV kill more than 5 million people each year. However, private-sector research and development on these and other diseases that primarily affect developing countries is limited, in large part because the commercial value of the market for vaccines and drugs against these diseases is small relative to the benefit these products would bring to the world. Amid the calls for increased up-front financing for research on these diseases, there is an increasing recognition that direct R&D funding and public-private partnerships must be complemented with efforts to build a market that provides acceptable commercial returns. The creation of such a market would move R&D on neglected diseases out of the domain of philanthropy and into the business model that is likely to lead to broader innovation and sustained manufacture. To examine the real-world feasibility of one type of market-based incentive, an advance commitment for a future vaccine product, the GHPRN convened the Advance Market Commitment Working Group. The Working Group brought together experts from academic, policy, industry and legal backgrounds to analyze the potential value and implementation of such an advance commitment.

Approach

The Working Group was formed to assess whether a mechanism to increase incentives could be designed, and how it might work in practice.

The Working Group considered issues such as:

  • The scale of incentives needed to change private sector investment behavior;
  • The legal framework needed for a purchase commitment, in particular to ensure that it is credible
  • The budgetary implications for donors of making a commitment
  • The relationship between a purchase commitment and existing partnerships and funding
  • Practical implications of making a commitment.

The Working Group undertook analytic work and consultations to better understand how technical specifications and price for a future vaccine could be determined, the cost-effectiveness of an advance commitment, potential response by large pharmaceutical companies and the biotech sector, and other key elements.

The Working Group's conclusions are set out in their report, Making Markets for Vaccines: Ideas to Action, which includes a specific proposal about how incentives could be improved, together with a discussion of the rationale for the proposal and draft contract term sheets, to illustrate how the commitment might be translated into legally binding contracts. The report is summarized in a CGD policy brief; an updated Vaccines for Development brief discusses AMCs in the broader context of immunization initiatives.

Since its launch in April 2005, the report has generated widespread interest in the policy and public health community. In June 2005, G7 Finance Ministers agreed that advance market commitments were potentially a powerful mechanism to incentivize research, development and the production of vaccines for HIV, malaria and other diseases, and asked Italian Finance Minister Domenico Siniscalco to consult the relevant institutions, governments and industry in conjunction with the World Bank and GAVI. The Working Group's recommendations were the point of departure for this analysis, and CGD continued to provide an independent perspective and expert advice throughout the deliberations and design process. On February 9, 2007, Canada, Italy, Norway, Russia, the UK, and the Bill & Melinda Gates Foundation committed a total of $1.5 billion towards a pilot for pneumocococcal disease, which is expected to prevent more than 500,000 child deaths over the 10-year contract period and over 5 million deaths by 2030.

For more details, see the official GAVI/World Bank AMC website.

Working Group Members

The Advance Market Commitment Working Group was co-chaired by Michael Kremer of Harvard University, Ruth Levine of the Center for Global Development and Alice Albright of GAVI/ Vaccine Fund. Members included individuals (participating in their individual capacity) from the World Bank, the Brookings Institution, the biotech industry, life sciences venture capital, academia and the Bill & Melinda Gates Foundation. The group’s work was complemented by the pro bono assistance of experts in contract and life sciences law from Covington & Burling.

Working Group chairs

  • Alice Albright, The Vaccine Fund
  • Michael Kremer, Harvard University and Brookings Institution
  • Ruth Levine, Center for Global Development

Working Group members

  • Abhijit Banerjee, Massachusetts Institute of Technology
  • Amie Batson, World Bank
  • Ernst Berndt, Sloan School of Management, Massachusetts Institute of Technology
  • Lael Brainard, The Brookings Institution
  • David Cutler, Harvard University
  • David Gold, Global Health Strategies
  • Peter Hutt, Covington & Burling
  • Randall Kroszner, University of Chicago
  • Tom McGuire, Harvard University Medical School
  • Tomas Philipson, University of Chicago
  • Leighton Read, Alloy Ventures
  • Tom Scholar, U.K. Executive Director of International Monetary Fund & World Bank
  • Raj Shah, Bill & Melinda Gates Foundation
  • David Stephens, Emory University
  • Wendy Taylor, BIO Ventures for Global Health
  • Adrian Towse, Office of Health Economics
  • Sean Tunis, U.S. Department of Health and Human Services
  • Sharon White, U.K. Department for International Development
  • Victor Zonana, Global Health Strategies

Members of the Working Group were invited to join in a personal capacity and on a voluntary basis. The report of the Working Group reflects a consensus among the members listed above. This report does not necessarily represent the views of the organizations with which the Working Group members are affiliated, the Center for Global Development’s funders or its Board of Directors.