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September 09, 2024 9:00—4:00 PM EST | 2:00-9:00 PM BSTAt the end of a year-long competition, three teams took the stage last week to pitch their visionary ideas to promote innovation for addressing climate change, pandemics, and public health. Each team was grilled by expert judges in a “Shark Tank for innovation” co-hosted by the Center for Global Development and the University of Chicago Market Shaping Accelerator (MSA) on September 9. From an initial pool of 183 entries, these three teams emerged to reach the finals, and each walked away with substantial winnings to help finance the next step in making their idea a reality.
The German Federal Agency for Disruptive Innovation (SPRIND) took home the MSA Innovation Challenge Grand Prize of $290,000 for their proposal to develop and stockpile broad-spectrum antivirals. Dr. Akhil Bansal won $155,000 for his proposal to create an advance market commitment (AMC) to accelerate the development of diagnostics for neonatal sepsis. The Duke-Margolis Institute for Health Policy also won $155,000 for their proposal to use pull mechanisms to incentivize firms to repurpose generic drugs.
This event also marked the launch of a new joint initiative between CGD and MSA focused on harnessing market-shaping strategies to drive future innovation.
Leading figures across economics, government, public health, and climate joined us to talk about market shaping and its potential, including Nobel Laureate Michael Kremer, University Professor of Economics at the University of Chicago and Distinguished Non-Resident Fellow at CGD; Major General (ret.) Dr. Paul Friedrichs, Director of Office of Pandemic Preparedness and Response at the White House; Dr. Stephanie Psaki, U.S. Coordinator for Global Health Security at the White House; Nan Ransohoff, Head of Climate at Stripe; and Javier Guzman, Director of Global Health Policy at CGD.
Setting the stakes of the competition, Michael Kremer spotlighted how commercial incentives often lag behind social value, particularly in critical areas like climate change, pandemic preparedness, and public health. He championed market-shaping interventions, such as pull mechanisms that pay for outcomes, to bridge this gap. Major General (ret.) Dr. Paul Friedrichs and Stephanie Psaki emphasized that while innovation is vital, it must be accompanied by trust, infrastructure, and long-term investments to ensure new solutions reach the people who need them.
Three takeaways on market shaping
1. Commercial markets fail to sufficiently incentivize innovation
The theme of the day was innovation—specifically, how to accelerate innovations that have large social value but incommensurate private commercial incentives to invest. Michael Kremer explained that commercial incentives can trail social value when the benefits of a product, such as a vaccine or green fertilizer, extend beyond the buyer to society as a whole, creating what economists call externalities. The challenge becomes more pronounced when governments are the sole buyer of the good, as their purchasing power can push prices down, further discouraging private investment in much-needed breakthroughs. When innovators aren’t compensated for the full societal benefits of their products, their motivation to innovate diminishes.
2. Market shaping can spur innovation to help address pressing challenges
Enter market-shaping tools. Market-shaping tools like AMCs and prizes offer a powerful solution by aligning private sector incentives with the public good through guaranteed financial rewards.
Kremer highlighted the success of the pneumococcal vaccine AMC, which catalyzed the creation of life-saving vaccines for low- and middle-income countries (LMICs).
Rachel Glennerster of CGD and Nan Ransohoff of Stripe explored how similar strategies could be applied to climate innovations, such as greenhouse gas removal and climate-resilient crops. They underscored the importance of flexible funding for diverse technologies, as experts cannot always predict the most effective solution. Pull mechanisms, which reward outcomes, provide this necessary flexibility. Glennerster further emphasized that AMCs, which base payments on the adoption of innovations, are particularly valuable for ensuring solutions meet end-user needs.
3. Public trust and sustainable solutions are key
Major General (ret.) Dr. Paul Friedrichs of the White House Office of Pandemic Preparedness and Response emphasized that innovation alone is not enough to solve issues like pandemic preparedness, public health, and climate change—public trust and sustainable solutions are also critical. Without public confidence in scientific breakthroughs and sustained investment in infrastructure, even the most groundbreaking market-shaping strategies could falter.
Stephanie Psaki of the White House reinforced this perspective, stressing the importance of systems that allow innovations to reach the people who need them at scale. Experiences from combatting measles, Ebola, and mpox have demonstrated that manufacturing capacity, regulatory barriers, and global distribution systems of medical countermeasures are crucial to enabling an innovation to address the problem it is designed to solve.
Three new ideas: pitches from the MSA Innovation Challenge
The three finalists in the MSA Innovation Challenge pitched their ideas for pull mechanisms to address pandemics and other global health challenges to a panel of expert judges across the health, development, and market-shaping worlds.
Jano Costard of SPRIND shared his vision for an AMC for platform-based broad-spectrum antivirals, which could target a wide range of coronaviruses. While these antivirals could greatly mitigate future pandemics, the unpredictable nature of pandemics makes pharmaceutical companies hesitant to invest. Costard’s proposed AMC would commit to stockpiling successful antivirals, reducing the financial risk for companies and ensuring global preparedness for future outbreak. Read more about this proposal here.
Akhil Bansal of the AMR Funding Circle laid out the case for an AMC for neonatal sepsis diagnostics, which could significantly reduce infant mortality in LMICs. In LMICs, neonatal sepsis is a major cause of infant mortality, and the difficulty in distinguishing it from other conditions can lead to both missed cases and the overuse of antibiotics. Bansal’s AMC proposal would incentivize the development of rapid diagnostic tools that allow for early diagnosis and more targeted antibiotic use. Akhil Bansal’s unique perspective as a clinician enabled him to spot the diagnostic opportunities in neonatal sepsis. Read more about this proposal here.
Beth Boyer of the Duke-Margolis Institute for Health Policy discussed the opportunity to use market shaping for repurposing generic drugs. Given the limited commercial returns, pharmaceutical companies rarely invest in efforts to discover new clinical uses for off-patent drugs. Boyer’s proposal uses pull funding in the US and in LMICs to reward firms that successfully repurpose existing drugs for new uses. Because these drugs have already undergone safety trials, the repurposing process can bypass early stages of drug development, allowing for faster, cheaper access to treatments. Read more about these proposals here (US proposal) and here (neglected tropical disease proposal).
The event delivered a powerful message: with the right tools and strategies, we can rise to meet the critical challenges of our time. Market shaping can spur innovation to tackle climate change, pandemic preparedness, and public health. From Michael Kremer’s insights into how AMCs and prizes correct market failures to Paul Friedrichs’ call for public trust and sustainability, the event underscored the immense potential of these mechanisms to address urgent societal needs—as well as the urgency for policymakers to act now and unlock that full potential.
Each of the three proposals was a concrete illustration of that potential, proposing a way to harmonize private sector incentives with urgent societal needs. We’re incredibly excited by all three of them, and we’re looking forward to continuing working with the three teams as they bring their ideas closer to reality.
Sarrin Chethik is a senior policy analyst at the Market Shaping Accelerator at the University of Chicago.
Claire McMahon is a policy analyst at the Market Shaping Accelerator at the University of Chicago.
William Arnesen is a policy manager at the Market Shaping Accelerator at the University of Chicago.
Disclaimer
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.