G8 Summit and Advance Market Commitments

The leaders of the eight most industrialized countries (the 'G8') meet on July 15-17. Development has not been at the top of the agenda for the Russian Presidency, and President Putin is likely to shift the emphasis away from Africa, which took top billing at the 2005 Summit hosted by Prime Minister Blair in Gleneagles.One issue that hangs in the balance is whether the G8 countries will stimulate commercial investment in vaccines for neglected diseases, such as malaria, HIV and tuberculosis, by promising to buy vaccines if they are developed. The G8 Finance Ministers concluded in April:

Having endorsed the concept of a pilot Advance Market Commitments for vaccines, we call for the additional work necessary to make its launch possible in 2006.

But according to Reuters progress on this among G8 members has been tied up by political horse-trading and domestic funding questions.In the last few days, there has been some interesting media coverage and commentary about this issue.Former senior staffers to ex-Presidents Clinton and Bush, Tom Kalil and Bruce Mehlman, wrote in the San Francisco Chronicle (2 July):

This proposal would marshal the brilliance of America's scientists and the creativity of our private-sector entrepreneurs. The time to move forward on this proposal is now. The lives of millions of poor children depend on it.

This article was also picked up in Boing Boing, one of the most popular and influential blogs.In a separate article in the Financial Times (subscription required), Dr. Christopher Earl, the President and CEO of BIO Ventures for Global Health, and Dr. Harvey E. Bale, Jr., the Director-General of the International Federation of Pharmaceutical Manufacturers and Associations, said this:

...But innovative vaccines to prevent major diseases – such as malaria and pneumococcal disease – are developed mainly by private industry. When it comes to creating new vaccines primarily for poorer populations, limited markets in the poorest developing countries have slowed the substantial investment required. Now momentum is building behind a plan that could change the equation by creating vaccine markets for the developing world that are sufficiently robust to inspire industry to develop the vaccines needed.The finance ministers of the Group of Seven in April called for the launch before the end of this year of a pilot Advance Market Commitment. This is a novel mechanism they believe can, by substituting for the inadequate effective demand in poor countries, unleash the resources of pharmaceutical and biotechnology companies against neglected diseases. Under an AMC, sponsoring governments and foundations would guarantee purchase of a specified number of treatments for a disease, at a pre-set price, for which all companies supplying an effective vaccine would be eligible. The rationale is straightforward: industry responds to real market opportunities and there is an un-met public health need here.Having first asked for an evaluation of the AMC concept only a year ago from Italy, the G7 finance ministers are currently assessing a list of six candidates for the proposed leading project. This involves three vaccines in the later stages of development – against rotavirus, pneumococcal disease and human papilloma virus – and three early-stage vaccines for malaria, HIV/AIDS and tuberculosis.The World Bank and the Global Alliance for Vaccines and Immunization have fine-tuned the details of the proposal. Gordon Brown, the chancellor, has already declared the British government ready to commit.Many companies in the biopharmaceutical sector have expressed excitement about the concept’s potential. This, combined with a desire that the terms of any AMCs accurately reflect market realities, should lead industry to seek a role in programme design.From the industry’s perspective, the numbers tell the story. Annual sales of vaccines represent less than 2 per cent of the worldwide pharmaceutical market. With average per capita spending of $17 to $36 (£9 to £19) on health – and in some cases much less – the world's low-income countries lack market pull....Because it can take 10 to 15 years to bring an early-stage vaccine to market, donors will have to offer a legally binding commitment and one whose longevity market entrants can count on. Getting the market size right will be critical as well: the larger the commitment, the more players are likely to engage. The key for donors will be striking a balance between maximising the social value of their investment and ensuring broad participation in the programme.Such a balance can be reached, but all involved must recognise that the creation of new markets through AMCs will require extensive effort and trust-building among donor governments, the global health community and industry. The AMC cannot be expected to dissolve all the barriers that limit investment in global health product development. Still, industry considers it the most promising market mechanism for health to come along in some time. We urge the G8 to use the summit to launch this important initiative.

In the July 2006 Scientific American (subscription required), JR Minkel traces the origin of the idea to work by CGD non-resident Fellow, Professor Michael Kremer:

It's a gray, drizzly March day at Harvard University. Economist Michael Kremer is recalling his postcollegiate year, 1985, spent teaching high school in Kenya, contracting malaria, recovering and watching sick Kenyans fare worse than he. Melancholy enters his voice. "The burden of disease is just very clear," he nearly sighs. "This is a terrible crisis. It seems vital to put the same sorts of entrepreneurial spirit and effort, and creativity, unleashed by the market sector"--he laughs dryly, as if in disbelief--"to work on these diseases as is being done for the diseases in rich countries."Poor nations labor under the weight of malaria, AIDS, tuberculosis and a score of diseases lesser known in rich countries, but they cannot afford to pay the prices companies want for drugs. Whereas some might denounce the pharmaceutical industry's profit seeking, Kremer wants to harness it. He has championed the idea that governments and other donors should try to make a malaria or tuberculosis vaccine as attractive to industry as the average drug market is. "I want them to do the same thing for malaria they would do for breast cancer," he says.

This article was also picked up by Mark Thoma, in his blog The Economist's View.Owen comments: This groundswell of support may increase the chances that the G8 leaders will use the St. Petersburg summit to move forward on making a commitment to purchase vaccines if they are developed. This would harness the power of competition and private investment in the service of one of mankind's most pressing problems: how to prevent diseases such as malaria which mainly affect the world's poorest people.