Speakers
Major General (Ret.) Dr. Paul Friedrichs, Director, Office of Pandemic Preparedness and Response, The White House
Rachel Glennerster, President, CGD
Dr. Javier Guzman, Director, Global Health Policy Program and Senior Policy Fellow, CGD
Dr. Charles Kenny, Senior Fellow, CGD
Michael Kremer, Economics Nobel Laureate, 2019, University Professor in Economics, University of Chicago and Faculty Director of the Market Shaping Accelerator
Dr. Stephanie Psaki, U.S. Coordinator for Global Health Security, The White House
Nan Ransohoff, Head of Climate, Stripe
Christopher Snyder, Joel Z. and Susan Hyatt Professor of Economics, Dartmouth, Faculty Director, UChicago Market Shaping Accelerator
Co-hosted by CGD and the University of Chicago's Market Shaping Accelerator
In-person attendance to this event is on an invite-only basis. If you are interested in attending in person in Washington, DC, please email [email protected].
Threats to the global community—such as climate change and pandemics—demand urgent innovation and action at scale. But when commercial incentives for innovation trail behind the social value, market shaping instruments can credibly signal demand and spur the development and adoption of new innovations. CGD and MSA are excited to launch their joint initiative to design and scale market-shaping mechanisms to address the world's most pressing problems.
This event also marks the culmination of MSA’s year-long open innovation competition. Teams from around the world competed to develop promising applications of market shaping pull mechanisms to reduce harm from pandemics and improve global health. In the afternoon, the three finalist teams will present their proposals to a panel of expert judges with up to $600,000 in prizes to be distributed on the day.
Schedule
9:15am ET | Welcome and Announcement of Joint Initiative, by Rachel Glennerster, President, CGD
9:30am ET | The Economics of Innovation by Michael Kremer, Economics Nobel Laureate, 2019, University Professor in Economics, University of Chicago and Faculty Director of the Market Shaping Accelerator
9:55am ET | Market Shaping for Innovation in Pandemic Preparedness
- Major General (Ret.) Dr. Paul Friedrichs, Director, Office of Pandemic Preparedness and Response, The White House
- Javier Guzman, Director, Global Health Policy Program and Senior Policy Fellow, CGD
10:40am ET | Break
11:10am ET | Market Shaping for Innovation in Climate Change
- Rachel Glennerster, President, CGD
- Nan Ransohoff, Head of Climate, Stripe
- Charles Kenny, Senior Fellow, CGD (moderator)
12pm ET | Lunch break
1:30pm ET | Innovation in Global Health Security and Biodefense by Dr. Stephanie Psaki, U.S. Coordinator for Global Health Security, The White House
1:50pm ET | Introducing the Innovation Challenge by Chris Snyder, Joel Z. and Susan Hyatt Professor of Economics, Dartmouth, Faculty Director, UChicago Market Shaping Accelerator
2:00pm ET | Market Shaping Innovation Challenge Pitch 1
- Jano Costard, SPRIND: An AMC to accelerate development of broad-spectrum antivirals that could halt the next pandemics
2:30pm ET | Break
3:00pm ET | Market Shaping Innovation Challenge Pitch 2 & 3
- Akhil Bansal, AMR Funding Circle: An AMC for diagnostics to reduce deaths from neonatal sepsis and combat antimicrobial resistance
- Beth Boyer, Duke Margolis: Finding life-saving new uses of generic drugs
Judges
Norma Altshuler, Senior Program Officer, Open Philanthropy
Elizabeth Cameron, Professor of the Practice of Health Services, Policy and Practice, Brown University
Alex Cohen, Principal Researcher, GiveWell
Kumar Garg, President, Renaissance Philanthropy
Sandeep Patel, CEO, Betting Big on Human Health
Claire Qureshi, CEO, Sentinel Bio
Nan Ransohoff, Head of Climate, Stripe
Transcripts
RACHEL GLENNERSTER:
Hello, everyone. So I'm Rachel Glennerster, and I am president of the Center for Global Development. And I'm delighted to welcome you all here today for the launch of the joint initiative between the Center for Global Development and the Market Shaping Accelerator at the University of Chicago. So you are welcome to live tweet using the #cgdtalks and tagging @cgdev. You can participate, those of you in the room, in various Q&A sessions that we have coming up. And if you do, please stand up and tell us your name. And for those of you online, you can ask questions in the chat, or you can email [email protected]. So Robert Lucas, the famous Chicago economist, said that once you start thinking about growth it's hard to think about anything else because of the tremendous impact that growth has on human development. I think the same way about innovation because innovation is the key driver of economic growth. But left to their own devices, markets will not deliver the innovation that we need.
They'll deliver too little innovation because while we all benefit from the idea when ideas are spread, the innovator themselves will only capture a small percentage of the benefits to society. This is especially true when there are large externalities from innovations, which is true of all the innovations that we need for climate change and pandemic preparedness. Now one approach to promoting more innovation is to provide grants to particular individual innovators who have promising ideas, or who we think have promising ideas. Now market shaping is a very different but complementary approach to this. And it harnesses the power of markets to deliver the kind of innovation that we need by tweaking the incentives that markets provide. And so it delivers innovations that markets won't provide on their own or at a scale and speed that markets won't provide if left to their own devices. It's particularly useful for tackling challenges like climate change and pandemics. Because it allows us to incentivize action by anyone who has a good idea, not just the people that we know of and can think of.
It reveals private information that innovators have about the likely success of their idea. And it allocates resources to those who are most likely to succeed. One market-shaping approach is advanced market commitments. Under an AMC, a donor or a government commits in advance to subsidize the purchase of a particular product if it's invented. This allows us to reward innovation where there's a big gap between the social returns to an innovation and the private market benefits from the innovation. It ensures that innovators are rewarded while keeping prices low and promotes large-scale mass production of the innovation. CGD was there at the beginning of the market-shaping journey working on the advanced market commitment for pneumococcal. So in 2005, a CGD working group published the making markets for vaccines ideas. And then CGD was there throughout the process as and the AMC proposal for originally the idea was looked at malaria and rotavirus and pneumococcal and then the working group decided to focus on pneumococcal and brought that AMC all the way to fruition with a 1.5 billion dollar AMC for the pneumococcal vaccine.
Now Michael Kremer is going to say a little bit more about that later this morning. From our experience at the Market Shaping Accelerator with pneumococcal and the work that I and others did trying to advance covered 19 vaccines. We've learned that design details really matter and that the design that you need to promote a particular innovation is going to be different for when you face different needs and different innovations that you need. We also need a wide variety of expertise to do this kind of market shaping. We need domain experts in for example climate change and pandemics health experts. We need economists who are with expertise in industrial organization. We need lawyers to draft careful contracts. We need policy entrepreneurs to persuade and work through the details of the policy designed to take these to fruition. And this joint initiative that we're launching today is designed to bring that group of different skills together to take the ideas that you will hear throughout the day to final implementation.
We have an exciting agenda lined up for you today. This morning you'll hear from Michael Kremer on the economics of innovation followed by Javier Guzman who runs the health program here at CGD, Dr Friedrichs on pandemics. We're very lucky to have him speaking and also in the audience to hear other people's viewpoints. Dr Friedrichs joined the White House and is director of the Office of Pandemic Preparedness and Response. Then Charles Kenny will talk to Nan Ransohoff and myself. Nan is a driving force between the Frontier advanced market commitment for climate removal for carbon removal, excuse me. And I will talk about some of our ideas that we've been working on developing climate-resilient crops for those most in need across sub-Saharan Africa. This afternoon we'll hear from Dr Stephanie Psaki, US coordinator for global health from the White House who will talk about innovation in global health for security and biodefense. And then the MSA faculty director, Chris Snyder, will introduce our innovation challenge.
Now we have been working for the last year and more on competition of the best ideas in market shaping and the teams from who are, you know, brought those ideas to life and have been working hard on them in the last, the finalists from this competition are here to present their ideas this afternoon. So they have been working on incentives for broad-spectrum antivirals, a new diagnostic that would help tackle neonatal sepsis and as a result antimicrobial resistance. And the third idea is repurposing of generic drugs, which is again an idea that's been around for a while, but this is really figuring out the details of how you would incentivize that. A total of $600,000 in prize money will be awarded today and allocated by the judges and the judges are all sitting in the room and I hope you'll get to meet them. Chris will introduce them later today. So I hope you enjoy the day and I'll now turn to Michael Kremer, university professor at the University of Chicago, to discuss the economics of innovation.
AUDIENCE:
(APPLAUSE)
MICHAEL KREMER:
I'd like to start with two historical examples that I think illustrate Rachel's point about the importance of innovation. In Italy in 1900, 300 out of 1,000 children died before their fifth birthday. In contemporary Kenya, less than 50 do. That means that 250 of those children who are dying out of every 1,000 are not dying. And one question might be, well, maybe this is because incomes are growing. But in fact, Kenya right now is slightly poorer than Italy was in 1900. So it's not an increase in income that's driving this, it's technological change. Perhaps technological change construed broadly, a key element was the biomedical innovation saw things like vaccines, antibiotics, oral rehydration therapy, but there's also social innovations like regular provision of antenatal care that were important in that as well. But again, if you think about that, a situation where if we were living with the technology of Italy in 1900, parents would have to assume there's a one in four risk of their children dying that they don't have to have right now.
They still have some risk, but not this one-in-four risk. What could be more important than that? And that came from technology. If we think about another example, going back not quite as far, since 1961, the world population has grown 2.5fold. Now, arable land obviously hasn't increased anything nearly as much. But hunger has dropped dramatically, and that's in large part because over this period when populations have grown 2.5-fold, crop yields have grown more than threefold. And again, that's largely due to improvements in agricultural technology. So innovation is really critical, and in fact, as Rachel pointed out, it's arguably the most important question in economics from a long-run perspective. But one paradox, in a way, is that most of economics, the standard models in economics of why textbook competitive markets work so well, also indicate... obviously, these are textbook competitive markets aren't what we see in the real world. They depart from that. But the textbook competitive markets that work so well for ordinary goods and services wouldn't produce any innovation, at least in the theoretical extreme of that textbook context.
Why? Because if it takes resources to invest in innovation, well, competition would emerge once the innovation is developed, and the firms that invested in developing the innovation would never be able to make any profit from that. We don't see that extreme result in the real world because typically there isn't perfect competition going on. But I think that just shows why we need... it's still useful to go through that thought exercise because it indicates that we'll get much less innovation than optimal. And in fact, when people and economists have looked at the social rate of return to innovation, they find very, very high social rates of return to innovation, suggesting that in general, with some important exceptions I'll discuss later, it makes sense to produce more innovation. And if we look historically, a number of different institutions have been set up to try to stimulate innovation. Some of those institutions are what could be characterized as push. They fund innovation upfront.
They don't necessarily link this or they don't link this to success. They say we'll give you the funds to start financing the R&D process. If you succeed, fantastic, but we realize you may not. Others, which I'll term pull, are things that... rewards that are only for successful innovations. So a historical example of a push incentive would be royal patronage. The king says, I'm going to give money to an artist or to a scientist, and you go work on developing things, and if you get results, great. Pull would be, say, the patent system. If you develop a product, we'll give you a temporary monopoly on it, and that allows you to... gives you the incentive to do the investment in the first place. Now, before getting into differences between push and pull, let me note some things about the historical development of all of these systems. First, you know, these systems developed a lot over time, and they're still developing. You know, we're not going to get any perfect system. We know that the market system, you know, a standard result from economics is indeed that the market system doesn't do a good job of rewarding innovation, so we need institutions to supplement that.
And so if you... so these institutions, there's a lot of trial and error in them, because you're trading... you're not going to get the perfect system. You're weighing off various factors. And also, humans don't get institutional design right the first time. So if you think about universities, you know, what were they initially set up for? Not primarily for research and development at all. They were set up primarily for theological purposes. Over time, and there's still departments of theology there but they've added on additional roles, and including research. And a whole set of institutions have developed to try to improve that, things like, for example, system of journal publication and the rankings of journals and tenure based on that, so that faculty are chosen in part by their research... by their ability to generate research and by their revealed, you know, preferences for doing that. That system doesn't work perfectly by any means, as those of us who work inside universities are well aware.
But it does seem to produce some benefits. Then there's the question of research funding. You know, some... the US pays overhead rates to universities that get research awards, for say, from the NIH or NSF. In the UK, they've been trying a system where they explicitly allocate research fundings to departments based on a review that assesses the quality of their research. We're constantly innovating and tweaking these systems. If you think about patents, you know, it's similar. They were initially set up in large parts, sometimes they were rewarding innovation or discovery, but often they were just granting monopolies to friends of the king. So over time, the system probably improved, but we probably still don't have it right. There's still lots of debates. Students are constantly thinking about how should we define the rules of the patent system. There's legislation on that. But this mix that we have of push institutions, like research funding from NIH. If we think about medicine, for example research funding from the NIH and others, and pull, the prospect of a market, that is producing... for all its faults, it's producing a lot of innovations.
One issue, however, is that there are some areas where—there are many issues, but one issue is there are some areas where the pull is not very strong. And economics can tell you something about what those areas are. But a big focus of the Market Shaping Accelerator is, on the one hand, pandemics, and on the other hand...
MICHAEL:
The environment and global warming. Both of these involve substantial externalities. The person who purchases the product, let's say, purchases a vaccine or, you know, they're often given away for free for this reason. But or the person who, let's say a farmer who buys green fertilizer, for example. They're generating benefits for the rest of the world, they don't get all those benefits themselves. They won't, therefore, pay enough for it, therefore, there's not an incentive to develop these products that matches the social need. OK. Another this another problem is that there's often not enough incentive to produce products where the main purchasers is the government. Because if there's a monopsony purchaser, who's the exclusive purchaser, they can use their bargaining power to get a fairly low price. So, the patent is not as valuable. And if you think about, you know, the extreme case of this would be if you think about I'll take an example outside the environment or outside pandemics.
If you think about producing a new way of teaching, reading to third graders thinks that's something that's going to be hard for a company to make a lot of money. It could be very socially valuable, but they probably won't get that because the government could just, you know, buy that elsewhere and not protect the patent on that. OK. So, let me speed up a little bit. I think there are one of the let me say a little bit about the idea of that (UNKNOWN) referred to of one particular market shaping approach, which is advanced market commitments. So, these can be useful in trying to create a reward where there's not an existing strong pull from the market. They can also be useful in addressing a number of other problems that arise with the patent system. And again, when I say their problems, that's not to say patents are bad, patents are great, but they have some problems. First by giving a monopoly that tends to restrict access. OK. Second, that or maybe even relatedly, that problem is compounded when there's a patent thicket, when multiple patents are needed to produce a product, then you can get very severe restrictions in access.
They can also lead to error to inefficiently excessive incentives to develop innovations. For example me too drugs. That's a drug might already exist, but there might be an effort to create a very close duplicate, firms might spend resources on that, and that might not be efficient from a social point of view. So, you know, I advance market commitment is let me say what it is. Those are legal commitments by governments or other donors to pay a fixed bonus per unit to companies that develop and produce the needed quantity of the goods. So, that could be, for example, a vaccine meeting certain technical specifications. In exchange, the firms agree to a long term price cap and a large corresponding quantity. So, the idea is to substitute a large quantity at a lower price for smaller quantity at a higher price. And the idea is to increase the total reward to the firm, and one way to do that is to make this voluntary for the firm. So, you're never weakening research incentives. That helps address the access problem, because you're getting a large quantity it avoids can help avoid the double marginalization problem to help avoid incentives for me too drugs.
Now, a little over ten years ago, a group of donors committed $1.5 billion to a pilot advance market commitment for Pneumococcus. Pneumococcus was killing millions of people every year, but there weren't strains of the vaccine available that targeted the, sorry, there wasn't a vaccine available that targeted the strains that were common in lower income countries. So, the advance market commitment, set a base price and then a top up price that they would pay per dose sold. Let me skip over some other details of the contract. But three vaccines were developed against the strains common in developing countries, the vaccines have now reached hundreds of millions of users. An estimated 700,000 lives have been saved thanks to these vaccines. We did some work comparing the speed of rollout, the access issue where there was an advance market commitment to other vaccines, where there wasn't like rotavirus. And we found that there was much faster rollout consistent with the aims of the AMC.
Now, what are some lessons from that we might take away for future AMCs and also for the environment? Well, you know, one set of, you know, first the mechanics basically worked the, you know, the contract was established, the money was the products were developed, the money was paid out, the vaccines got in arms. The second, you know, one thing we can take away is that the by linking to the approval to the regulatory process that seems to have worked well also, there wasn't a lot of controversy over what qualified. What are some critiques? Well, some people argue that this that too much was paid for this. So, Oxfam would take that that point of view. There's I think the part of the that critique is also these were products that were pretty far along already. And some people say, well, it was already so far along, maybe you overpaid for this and not so much was required. You can debate that, but I think one thing to take away from that this experience is that the political economy of what targets to pick.
So, when (UNKNOWN) and I had done work on this originally, we focused on malaria, a distant target. And I think there are a lot of advantages of targeting advanced market commitments at distant products. A key feature of an advance market commitment is you don't pay unless the product is actually developed. So the, you know, you pay something to set up the process. But that's very small relative to the benefit. So, you can afford to set these up for quite distant technological targets. If you're doing that, then you're not taking the risk of overpaying one specific company. What you're perhaps taking the risk of is over incentivizing research on this target. Let me discuss a way you could address that. You could address that by simply saying, choose an ambitious target that's very socially valuable and then choose the payout that's going to be, you know, maybe ideally it would be pretty large, but realistically you're probably not going to be able to get that much money anyway. So, set the payout to be something like, you know, one tenth or even one fifteenth of the social value.
Then, there's very if you compare that to the current situation, there's very little risk that you're going to overpay. If we had green concrete, if we had methane vaccines to reduce livestock emissions, those would be very socially valuable. It's hard if we set a you could easily imagine setting something that would improve the incentives relative to where they are now. OK. I think you'll hear this afternoon about some of the specifics. I'm out of time, so I won't go through them, but I think there are a lot of really exciting targets out there, both on the climate change side and on the pandemic side. And I think we could, solving these problems is really important, and I think putting out some reward to attract new talent and commercial firms to this could be very valuable. The downside if it doesn't work is very limited. So, I think on the specifics, there's lots of reasons to do this. But let me go back to the early theme of my remarks. If we think about this in a broader historical context, we know we need multiple types of tools.
Innovation is not going to happen automatically by itself, particularly as innovation gets more and more expensive over time. We need a set of tools to create them. We think about all the good that's been done by the patent system, by the peer review system. You know, we had to try these things out. We had to learn about how they worked in practice. We had to adjust them based on what we learned, you know, if we can not only help address climate change, not only help address pandemic risk, but if we can also start to add another tool to our toolkit for accelerating innovation and shaping it to match human needs, then that's something that we can use to address human challenges going forward in a wide variety of different areas. Thanks very much (APPLAUSES).
LEAH ROSENZWEIG:
Great. Hi everyone, I'm Leah Rosenzweig, director of the Market Shaping Accelerator. We have time for a couple of questions with Michael. So, if you're in the room, please feel free to raise your hand. And if you're online, please type it into the chat or email to the email Rachel mentioned. Yes.
TULIKA NARAYAN:
(UNKNOWN) Hi, Michael. Thank you so much. It was a great talk. I'm Tulika Narayan, I lead climate change at Mathematica, We do research and evaluation. And also was the research director. So, I had a question about the effort and whether it's focused specifically on AMC for climate change and the pandemic, or is it a broader set of pull mechanisms. And if you could speak a little bit about we spoke about innovation and the extent to which the innovation is unidentified versus it will be towards taking an innovation that we have a conception of to market, which is very different. Right? I mean, you can have a sense that, hey, you know, we have to solve a problem, I don't know how and I want to give you a prize and I want to give you the incentives to solve it, or I have a sense of what it is, and I want to make sure that it goes to market, and I have a sense of the product. So, just if you can give a sense of that, that'll be helpful. Thank you.
MICHAEL:
Yeah. Wonderful. Wonderful. Thanks. So first, to be very on the first part of the question, to be very clear, you know, the Market Shaping Accelerator looks at a much broader range of market shaping approaches than just advance market commitments. I was, you know, reflecting on that based on my experience working on that. Let me give you one example. You know, if we think about environmental regulation and technology, you know, the typical pattern we see is that regulation follows the development of the technology. Regulators don't require a particular approach to be used before it's even developed. Now that creates some uncertainty for potential developers. Will there be a market for my product, particularly if it's something that generates positive environmental externalities? So, if you're thinking about developing green concrete and the investment, there could be $1 billion. If you're thinking about developing a methane vaccine to pick those two for livestock, you know, that's something that has to the regulatory uncertainty has to be an issue.
But at the same time, you know, the government purchases about 50% of concrete. So, I think it's a pretty safe bet that if somebody developed sorry, I don't want to say it's a pretty safe bet. I wouldn't say this if I were putting my own money into it. I wouldn't consider it that safe, but if somebody developed a, you know, there are alternative processes that you could use with, you know, potentially if it's worked out alternative rocks that would not create, you know, cement creates about 7% of global emissions. If you had an alternative process that could cut that by 50% by using a different rock. Well, you know, my guess is that at least some jurisdictions would create regulatory rules. So, if you could just announce in advance that we're going to change our procurement system to say, you know, do some work for the government, the procurement rules say, if you're buying software for the government, I'm sure there are real procurement experts here. And I'm greatly oversimplifying, but if you're buying software for the for the government, you have to buy the most technologically, the best software for people with disabilities.
And I'm sure there's lawyers get into what that is. But that means that if you're developing software and you develop something good for people with disabilities, you think there's going to be a market there. You could imagine something saying a procurement rule, saying you either have to use the best, the most environmentally friendly, practical cement possible or buy credit for it. You know, that would not be a purchase commitment, but I think it would have many of the same effects. And you can think about how that should be designed. So yes, there are many different approaches that I think could be used. And then you ask their second question was and so if the government announced that in advance, it would help create the incentives for the R&D. You know, do you need to know exactly what it is or do you need to or is it OK to have a general idea? Well, you do need to be able to specify the goal. So, but you don't necessarily need to specify the way to get there. Now I should emphasize there are many reasons.
I think our current system has both push and pull, and that works, you know, not perfectly, but it's producing innovations I don't think you could eliminate, I think eliminating the pulse side is a problem. And that's why for certain areas, we need to create simple where it's not there. I don't think you can eliminate the push side because some innovations, you don't know that you need them until they're developed. The Post-it note is the classic example. Nobody would have created an advance market commitment for a Post-it note. You just know you're funding researchers, and they came up with this idea. So, you do need to specify the concept, not the exact mechanism.
LEAH ROSENZWEIG:
Other questions? Yes, (UNKNOWN).
SPEAKER:
Thank you for your talk. My name is (UNKNOWN), I'm with the German Federal Agency for Disruptive Innovation. My question is, what considerations should we take into account when we think about the mix of push and pull, and especially the optimal, or at least a good mix between push and pull?
MICHAEL KREMER:
Yeah. Well. Thanks. I you know, as I've indicated, I think we need both. I think that economic theory and data suggests there are certain areas where there's a particular imbalance. We know that the patent system, for example, in some industries it's relatively it provides some some real protection. Other industries patents are hardly used. We know I gave the example of externalities or goods that are purchased by the government. In cases where we think that current incentives through markets, through patents and markets are way too weak to generate social to generate research commensurate with the social importance of the problem. And I think pandemics would be one of them. Then that's an area where we need more pull, and we need to supplement the patent system by adding on additional elements. So, that's not a complete answer to the question, but I think I think without knowing the optimal mix, we can identify some areas where we know where we have inadequate pull or inadequate push right now.
LEAH ROSENZWEIG:
One final question, yes.
SARA HOLOUBEK:
Sara Holoubek, Luminary Labs. Can you think of a pull mechanism that was, or could be so successful that it incentivizes pushes later on as we stimulate the market to develop new technologies, positive externalities, and then you have a virtuous cycle?
MICHAEL KREMER:
Absolutely I think, you know, many researchers in... Some researchers like to think of themselves as, you know, we are in an ivory tower. We're just following the, you know, pure intellectual leads. But of course... They do care about, you know, are there innovations going to affect things in the real world? And research funders care about that as well. And so if there's an area of innovation where there's no prospect that's ever going to affect things in the real world then, because you know that it's going to cost $1 billion to build the factory, then as a research funder or as an individual scientist, are you going to put... how much effort are you going to put into developing that green cement? Well, if there was if there was a regulatory pull to try and induce green cement, then I think that would attract a lot of push effort by individual scientists and would attract research funding as well from regulatory agencies, from philanthropy to say, hey, you know, it's now worth investing in developing the whole new technology for producing cement because there's a prospect that it'll get used.
So I think these are push and pull I think should work together. And I think that would be an example of how they could.
SPEAKER:
Great. Well please join me in thanking Michael.
RACHEL GLENNERSTER:
So in this next session. We're going to cover market shaping for innovation in pandemic preparedness with Javier Guzman and Dr Paul Friedrichs. So speaking first is Javier Guzman, who is the Director of Global Health Policy and a senior Policy Fellow at the Center for Global Development. Javier has worked as a physician, researcher, analyst and policymaker in the US, United Kingdom, Australia and his native Colombia. Over to you, Javier.
JAVIER GUZMAN:
Thank you very much, Rachel. And let's get into pandemic preparedness and Response. And you may remember that in May June 2021, in the middle of the pandemic, we had, you know, we were scrambling to basically think about a system to better prepare for outbreaks like COVID. And two seminal reports came out. The first one, the high level panel convened by the G20, where we CGD played a big role. And the second one, the Independent Panel for Pandemic Preparedness convened by WHO, and both had similar recommendations in relation to how you finance pandemic preparedness and response and how you access medical countermeasures. Unfortunately, if you look at the slide in 2024, so three years after, the progress has not been great, and I'm not going to get into the specifics of the problems with governance or the problems with political leadership. I'm just going to focus on two key elements that are associated with market shaping. The first one is new financing, and the second one is access to medical countermeasures.
So if we think about the continuum, you know, where we have the peace period, we don't have outbreaks. We're preparing. Then we get, you know, a potential outbreak, and then we declare a public health emergency of international concern. Then you've got the pandemic phase, the transition phase. And these are cycle, right? If you look at the whole cycle, we think that there are few key challenges that will actually change how market shaping and how markets react to developing and scaling up the rollout of medical countermeasures. So the first one is the trigger. So the trigger is when WHO basically says there is a public health emergency of international concern. We saw that with Mpox a few weeks ago. And interestingly enough, it's not only WHO now. We also saw Africa Centers for Disease Control declaring a public health emergency of continental concern. But the interesting thing about the trigger is that now we have a black and white trigger. Basically, you do have the possibility of affecting international travel, international trade or you don't.
So it's either you switch on or switch off. And that is problematic because if you think about how firms, how researchers, how developers respond to this pandemic preparedness space is much better to have some sort of a continuum where you say early warning system, this is coming up, and that will basically provide the right signals to the developers. So we don't have that. We don't have that in the international health regulations, and that is work that we need to be doing on how to design it. The second point is day zero financing. Some people call it surge financing, some people call it at risk financing. But the whole point is about Mpox basically was declared a public health emergency of international concern, and we didn't have the money to procure countermeasures to do additional research on fractional doses, fractional dosing or childhood vaccinations for kids so that day zero financing is an essential element of the of the response and how much is it? So some estimates Ruchir Agarwal, who is a nonresident fellow with CGD, estimates that the minimum level is 20 billion, but it could go up to 50 billion, you know, is to procure medical countermeasures.
But then we talk about surge manufacturing. We also talk about signaling the market, about what are the key essential R&D priorities within a public health emergency. That is also a very important area of research, and it's a big challenge. Linking it with the next one, which is more about once that pandemic is declared, public health emergencies declared the transition phase and we get into peace period, we talk about the pandemic fund, which is actually one of the key successes of the preparation in the past couple of years. And the pandemic fund was established with support from the US government. It has now funds of 2.7 million committed, but is far from the amount of money that we thought was needed. So if you look at the reports that I was talking about at the beginning, we said $10 billion per year over five years now, the pandemic fund got 2.7 million, 2.7 billion. Sorry, and that is the first problem, the problem of how much money. The second problem is where the money is coming from.
So the money is only coming from voluntary contributions from governments. We do not have innovative financing. We do not have private philanthropic funding. And that is a key question mark. How can you actually get the fund to get a more diversified, funding base. But the second issue with the pandemic fund is scope. So the scope at the moment is mainly pandemic preparedness. One could argue at the national level, how could we get the fund to basically support regional public goods? Global public goods? How can we actually link it with the day zero financing, the surge, financing, the surge manufacturing that is needed. All those are questions that are that will need to be answered, especially as the new replenishment is coming up in the next few weeks. The US government has announced, one third of the 2 billion that is basically, demanded by the fund, with two additional billion coming from non-traditional sources. So we'll see how that development of the pandemic fund evolves. But clearly a key challenge, a key pending question.
Then we talk about access to medical countermeasures. And I want to talk a bit about here. We all agree that we had a problem with very concentrated base of suppliers. We didn't have enough suppliers. The suppliers were concentrated in a few countries, didn't have the capacity. So question is how you diversify manufacturing base, how you increase resilience of the supply chain. And the answer has been supply, supply, supply money money money. So 29 initiatives basically US, Europe DFIs all building factories in Africa in a lot of and a lot of other low and middle income countries. But there hasn't been a question about the demand side. There hasn't been a question about what is the right level of manufacturing that will need to keep warm, what is the right platforms that we need to have to be able to respond quickly in the event of an outbreak. So it is important to basically think about the trade offs between diversified manufacturing and access, diversified manufacturing and price. And that all has to do with how you design the procurement rules are how you design, you know, the supply mechanisms to basically get this money to, to be as effective as possible.
So last but not least, I just wanted to talk a bit about another pandemic, which is normally called the silent pandemic and is antimicrobial resistance. And here we've done very interesting work on market shaping possibilities. We basically called for a new bargain to improve the antimicrobial market for human health, basically balancing access, stewardship and innovation. And the question there is sometimes, you know, high income countries think of innovation as their solution to antimicrobial resistance and stewardship as the prerequisite to actually get access in place in low and middle income countries. On the flip side, low and middle income countries think of innovation as something that is not really needed because we don't have access to it anyway. And high income countries actually are forcing us to put measures in place to reduce consumption, even though we're not consuming that much. So that grand bargain is very important in terms of access and responsibility. So how could you actually have this, this sustainable way of securing access, improving innovation and improving stewardship?
And we've got two specific proposals. The first one is the Sustainable Access Hub, which is basically, if you think of it, how you can actually set up and is not from scratch. How could we how could we actually build from the existing architecture to have a facility either at the regional level or at the global level, who could actually have five main functions? So the first one is a pooled procurement function, clearly important in terms of measuring demand in terms of aggregating demand. Importantly, you know, the hub will also help in terms of getting data, consumption data from countries, getting data on access to medications, antimicrobials and diagnostics from countries. It will also have a very important market shaping role in terms of paying not for the lowest possible price, but paying for sustainable manufacturing, paying for environmental appropriate manufacturing for resilient supply chains. And clearly this is something that is a proposal on the table. The window of opportunity is coming up.
The high-level meeting on AMR is coming up in New York in a few in a few weeks, and we'll see whether funders and low and middle income country governments step up to the plate and think about how you actually can make this happen. The second proposal has to do with EU subscription model for the subscription model for the European Union. You've got a new European Commission in place. Clearly, the European Commission has been thinking about ways to incentivize innovation. They thought about transferable intellectual property rights. We think that there are better ways to incentivize innovation, and we are coming up with this. The linkage between innovation and volumes, which is very important in antimicrobial resistance. We should not pay for innovation on the back of high volumes, because high volumes basically mean increased likelihood of resistance. So what we're saying is why don't we have a reward and we're talking about a price, single pot of money that will be disbursed over ten years to pay for that innovation delinked from the volume of sales and then the volume of sales or the yearly payments will actually be covered by the member States.
Importantly, and I just want to talk about what Michael was mentioning, the provisions are everything. So if you don't include provisions for suitability for low and middle income countries, if you don't include provisions for products that are covering or bridging the gap in low and middle income countries. That will likely not be the case in terms of the design. The return on investment on any incentive is very high for antimicrobial resistance. We've done some work here and the return on investment, depending on whether you measure it in the first five years or in the following, you know, over overall, 30 years is between 28 to $200 for each dollar invested. So you might actually think it's a no brainer. But the problem there is, you know, it's not only about making the case, it's also about making sure that policymakers take responsibility, see the value, and see a way forward. And that's what we do here at CGD. And that's why we are very excited to partner with the Market Shaping Accelerator to continue this work.
Thank you very much. Now it is it is my pleasure to introduce Major General, retired Dr Paul Friedrichs, who is the director of the Office of Pandemic Preparedness and Response at the White House. Paul, welcome to CGD.
PAUL FRIEDRICHS:
Good morning, and thank you very much for the opportunity to be here. Thank you, Javier, and to everyone involved in putting this on. And congratulations to the three teams that are here that have made it to this point in the journey. Seeking the $600,000 or 600, is it $600,000 prizes that will be announced this afternoon? That's pretty exciting to have something tangible to be working towards. And I think it ties into the discussion that Doctor Kremer and Javier just laid out a moment ago. But let me offer a little bit of context. And Doctor Kremer, you gave me a heart attack when you started with your Italian historical anecdote. Because that's where I'm going to start my talk. But mine's a little older than yours, so come with me, if you will, to Padua. Come with me to Padua. At the end of the Black Death, when large swaths of society had been killed, the economy had been disrupted, educational systems had been disrupted, families had been decimated. The typical family structure had been destroyed.
A small group of innovative educators came together in Padua, and they said, what is the best that exists today? And they went back to the Greeks and the Socratic method. And they said, this is good. We should have a little bit of Greek in our salad. And then they went to the Arabic world and they said, you know, there's some really incredible knowledge still present in the Arabic world that we've lost. And they brought in this knowledge from the Arabic centers, and they melded that with the Socratic teaching methodology. And with 100 years, they had developed what we refer to today as evidence based medicine. They were the first center to try a heretical approach that was originally condemned by the church because it focused on outcomes, not on orthodoxy. It actually focused on what happened to the patient as a result of an intervention, not just on what the right intervention should be. That became the foundation for extending both the quality and the quantity of life throughout the Renaissance.
It provided the foundation for a reform in education. It is, in my opinion, the sort of innovation that you should aspire to as you think about what you will do over the next 5 to 10 years, because you stand much to my envy at an inflection point. For those of you near the beginning of your careers, I envy you because you have the opportunity to leverage an incredible confluence of events. We've come out of a pandemic that killed millions, that disrupted educational systems, that disrupted economic systems, that stressed nation states to a point that some struggled to maintain basic services. But we've not learned, unfortunately, some of the key lessons that we should have from those four years. You have the opportunity to show us, as policy makers, what can be done with the confluence of our shared experiences over the past four years and the confluence of rapid improvements in biotechnology, continued rapid improvements in compute, and rapid improvements in AI. That confluence of those technologies I submit to you is rewriting what is possible.
PAUL FRIEDRICHS:
And what we can't even imagine. I was at the University of Washington about a year ago, talking to the head of the, one of the centers there. And he made the comment that the work that his medical, that his undergraduate students were doing in 2023, fall of 2023, was the work that he was doing two years before. Because the technology has changed so rapidly, they're able to bump that level of innovative research down to an undergraduate level, with appropriate guardrails in place, so that he and his peers can focus on even more innovative, cutting-edge solutions. The three proposals that you brought forward today are exciting because they, I think, from what I understand of them, begin to leverage some of these opportunities. But what I would challenge you to do is let these be the starting point. Javier did a great job of outlining reports, which have described in detail, the myriad changes that need to happen for us to be better prepared for future pandemics. I'll offer to you two really specific things that I'd ask for you to consider focusing on as you describe the work that you do in the future.
The first is trust. If you look at the 1920s, there was a profound antipathy toward science and a backlash against the medical profession in particular. Much as we are seeing today, families that lost loved ones were furious. How could the profession that they trusted have failed them so profoundly? Business owners were furious because they'd lost their businesses. We're at a point now in which, depending on which survey you look at, more than 30% of people in the United States and Europe and in other countries question the validity of the work that you do. They question your truthfulness. They question your integrity. They question your commitment to their benefit. You can't ignore that and hope that somehow the brilliance of your work will overcome those concerns. You must recognize the environment in which we live today, much as our country and the world lived in the 1920s. And describe the merits of what you're doing, not only from their scientific or economic basis, but also in a way that helps people understand the value of these continued investments.
Because if you do not, we will see the consequences and the sort of things that are being discussed literally this week, that we should cut funding for research, because research is part of the problem. That we should restrain what researchers are allowed to do so that they don't find cutting edge things that could create risk. You must understand the world in which you live today, and it's a unique moment, much as the 1920s were, in which we owe not only innovation, which is incredibly exciting, but also the rationale for that innovation and the reasonableness of it. And the measures that you take to gain the trust of those who will benefit from it, so that they can understand that innovation and how it will help them, whether they're in a lower middle income country or here in the United States or in Europe. And the second thing that you have to be able to do is to explain very clearly why innovation is necessary. Both speakers this morning laid out parts of that. But I'll tell you that as we look across the portfolio today, as we look across the two reports that Javier mentioned, the National Biodefense Strategy, and you can pick any number of publications that are out there, all of them lay out ambitious goals.
And people are trying to jump to the quick and easy solutions, build more mRNA production facilities, build more of this factory and you'll solve the problems around the world. That's a, I think, a dangerous narrative because it will divert funding to solutions that are not sustainable, as Javier so rightly pointed out. In reality, what the three proposals bring forward and what to me is personally very exciting are incremental innovations. Not that I believe we should take incremental approaches because we can't be more bold or audacious, but because what each of you are proposing are things that are feasible and sustainable, and that must be part of what you continue to work on. As Dr Cramer laid out, it is wonderful to have a great solution. But if no one pays for it and you can't sustain it, it's not a solution. It becomes yet another paper that sits on a shelf and occasionally gets referenced in other people's papers. We have a real opportunity and a real challenge, particularly here in the United States and in Europe, to more clearly articulate the value of research and how we are building towards sustainable solutions.
And it starts with that demand that Javier talked about at the end of his comments. It is crucial that we continue to invest in innovations that address basic public health, basic primary care. We can't get to those market changing global solutions that bridge the gap between the four billion capacity to produce vaccines that exist today, and the 16 billion demand for vaccines that we would need in a pandemic, unless we continue to incrementally build that primary care and public health infrastructure and build the demand over time for more and more routine, vaccines being produced routine, therapeutics routine, diagnostics that are used on a daily basis so that the infrastructure is in place to surge to exigent circumstances as we go forward. I'll end where I begin. Thank you for the work that you are doing because we desperately need innovative solutions. I envy you for the opportunity to do the work that you're doing. And I challenge you, address trust and address sustainability as you go forward with your solutions.
Thank you very much. (CLAPPING)
SPEAKER:
Thanks. Thank you very much, Paul. Now, we are open for a few questions before our coffee break. Please raise your hand. Yes, please.
ANUPAMA:
Thank you. Thank you for being here today and sharing those remarks. I'm Anupama. I'm with Merck or MSD as we're known outside the US, and so a lot of the comments here have really resonated in the development of innovative products and how to bring them to both low income countries, but also globally. You touched on something and as well as the previous speakers as well, about sort of breaking down this concept of demand. We talk about demand as if it's just one dimension. And I think, you know, the points that you really raised about trust, it's obviously unmet need. It is the infrastructure there and ready to then adopt these new technologies. But it was also wondering if you could speak a little bit to political will, because I think we see a lot of that also sort of shaping, whether that's the political will to invest in a pandemic fund, whether that's the political will to continue to sustain warm Manufacturing, as Javier mentioned. Or again, how does that really link to the concept of trust as well?
And I think we see that a lot, especially here in the US in our climate today. And just would welcome any thoughts for how do we navigate that dimension, I think, as well of all of this. So, thank you.
PAUL FRIEDRICHS:
Yeah. So, that's an incredibly important question to ask in a democracy like ours or in Europe or in other countries in which elected leaders make the final decision about where the next dollar will go. We can have all the deep thoughts that we want about where it should go, but we should be honest with ourselves that those decisions are going to be made down the street, not in a room like this. And one of the challenges that we face today is that we lack a coherent and consistent message about what problems we're trying to solve. As I've had the chance in this role and in previous roles to go and meet with elected leaders, one striking thing is the change in the complexion of who's in our Congress right now. The number of people with background in biology with background in R&D, with background in academia or economics even is very different today than what was there 20 years ago. And so, many people walk in and they want to drop a 400 page document on Congressman X's table and then have some deep, thoughtful discussions about some niche technology.
What you've successfully done is wasted both your and her time, because she has no idea what you're talking about and is less interested than ever. If you gave her a 400 page document that she has to read before, she can understand what you're talking about. But as one senator told me about a year ago when I first sat down with him and asked for their advice on how we could influence the decisions that are being made, he said, you know what the problem is in this space. He says, "You all have perfected the art of white noise, because I have 40 people who come in and talk to me about bio preparedness, pandemic preparedness, biosecurity. You can't even agree on what you want to call it. And every one of you has a different solution and a different problem statement." He says that's the definition of white noise in the political space. He said, if you want to be successful, and actually he held up the climate narrative as a more successful, not successful, but more successful narrative, there was consistency of message, consistency of outcomes and consistency of asks.
If every person walking in the door has a different problem statement, a different outcome they're trying to achieve, and a different ask, you essentially cancel each other out, and we wind up appearing as if we don't know what the real problem is or what we're trying to accomplish. And in the space where you may, if you're lucky, get ten minutes of real attention with a senior legislator, if you spend that ten minutes having to do a vocabulary lesson to get to the point that you can describe whatever it is that you want them to support, I would respectfully submit, you've missed the point. What you really, and we collectively need to do is more effectively articulate those shared high level goals. In the United States, for example, every year, there's something called October. At least in the last 59 years, it's been a pretty reliable event. And right around October comes this thing called respiratory syncytial virus. And right after October, there's November. And then there's this thing called flu.
And somewhere after RSV and flu, there's a COVID wave, at least for the last four years. And by March, tens of thousands of Americans are dead of a nearly completely preventable confluence of infectious diseases. And we shrug our shoulders and we say, well, that's what happens every year. That's right. It is a real world opportunity to make investments that could target those losses and understand why we continue to lose tens of thousands of lives every year for things that can be prevented. But it gets back to the political space of then being able to describe why those are the right investments to make, and how making investments in reducing the loss of life from a very predictable annual biological event helps us improve our preparedness for the inevitable, but unpredictable next biological event. Thanks for that question.
SPEAKER:
Maybe I just say a few words about demand. One very interesting conversation we have about increasing the resilience of supply chains and increasing local, regional manufacturing is that we assume that policymakers, you know, are ready to pay for locally manufactured products simply because they are in the region without having any provisions that, you know, the access will be there or that the price will be, you know, how high the price will be. So, I will ask whether, you know, Colombia, where I come from, will be happy to pay for, you know, a vaccine manufactured in Brazil, with a small premium over the vaccine manufactured in India? And why would that country do so? And it's the same conversation if you have, you know, the Kenyan policymakers saying, you know, yes, you want local manufacturing in Africa, are you happy to pay for a premium for this product that is manufactured in Ethiopia? And that hasn't been, you know, clearly articulated. And of course, the commitments are not there.
So, it's very easy to say, yes, we want more local manufacturing. Yes, we want more regional manufacturing and to support those efforts, but unless, you know, the flip side of the coin is there, then it will not be sustainable. Any other question? Yes, please, Eeshani.
EESHANI KANDPAL:
Thank you. I'm Eeshani Kandpal, I'm a senior fellow here at CGD. As a development economist, you know, I've been sort of struck by the lack of something I've heard or the something that I haven't heard, which is a lot about equity. And meeting unmet demand, going back to the first question, but in low and middle income countries. Now, I understand that you work at the White House here, but even, you know, if we're only talking about American lives, obviously it's a national security concern when, you know, Mpox or COVID circulating at high levels, even despite the presence of some of the most effective vaccines known to humanity and very low levels of vaccination coverage in low and middle income countries. You know, that obviously does have impact on our lives here as well. So, whether it's sort of a global concern or a more domestic outlook, I'd just love to hear your thoughts on the role that high income countries play, not only in spurring innovation, but also in securing access to it around the world.
PAUL FRIEDRICHS:
Yeah. I think that has been an underpinning of this administration's approach to bio-preparedness. If you look at the executive orders that President Biden signed in the first 48 hours that he was in office, I believe two or three of them explicitly focused on bio-preparedness. And in each of them, the premise was everyone should have access to the measures that minimize risk or mitigate risk. And that everyone was not everyone just in urban areas in the United States or just in the United States, it was a global commitment. And you heard the discussion that Javier laid out about the pandemic fund, that was part of our commitment to try and energize additional resources to move towards that. If you look at what the US Agency for International Development has done for decades, trying to build that broader capacity so that there is broader access to healthcare. And it is premised on the point that I made earlier, if there is no running water in a healthcare delivery facility, it really doesn't matter if you build an mRNA factory, because you're going to have more fundamental problems to address in that market.
And you're going to have to continue to address those really fundamental problems while that factory sits idle. There has to be a collective approach across the spectrum of interventions that include things like the very ambitious, but I think often laudable SDG goals that we've all agreed to of making sure that there's running water in healthcare facilities, that there's access to appropriate medications, that there's someone available to administer vaccines. And as you grow those capacity and capabilities in countries, you grow the demand that stimulates our industry partners to produce more of the diagnostics, therapeutics and vaccines that can help protect that community. So, it's a yes. And all of the above need to be addressed. And that's why I'll end, you know, since I just got the one minute warning here, by going back to Padua, think about how exciting that must have been to sit there and say, "What is the best in the world? And how do we bring it into one place to inform what we do?" That must have been a phenomenal moment in history to sit there and say, "Let's take all of these best practices and actually put them into execution, and then watch over the course of literally just two or three generations, a transformation in what happened in education and health care delivery and in the outcomes that resulted from that." Of course, equity is the foundation for that.
It's not about how you do that for just some, it's how you do it for all. The opportunity that you face is to embrace that opportunity to bring the best of pull and push mechanisms, bring the best of evolving technology, bring the reality that that best will face skepticism. And we need our best minds helping us communicate what we're doing and why we're doing it. Because we truly are at an inflection point that would allow us to reshape how we care for people, not just in Washington, but all over the world with the technologies that we're developing and deploying right now. Congratulations again to those of you who are here, and thank you for the opportunity to share a few thoughts.
SPEAKER:
Well, thank you very much, Paul. A round of applause, please. Yes. (CLAPPING) So, we have a coffee break for half an hour. We want you all back here at 11:00 for session two, market shaping for innovation in climate change. Thank you.
CHARLES KENNY:
Hi, I'm Charles Kenny from the Center for Global Development. I am delighted to be moderating this session. You may recognize one of the panelists already - my new boss, who I intend to be very, very harsh with Rachel, and Nan Ransohoff, head of climate at Stripe who will be talking more about what that entails in a minute. You are welcome to live tweet using the #CGDTalks and tagging @cgdev. And do join the conversation online, if you'd like to, by using that hashtag and asking us questions if that comes up or CGD events at cgdev.org. Let's get straight into it. We're talking about market shaping for innovation in climate change. And as was laid out this morning by Rachel and by Michael, we know that innovation is vital to climate mitigation and adaptation to reduce the costs of getting to net zero and to give people the tools they need to survive in a warming world. But mitigation technologies in particular are a global public good, twice over, if you will. They're a technology, but also they are a technology to deal with a global public bad of greenhouse gas emissions.
And adaptation technologies are most urgently needed in the world's poorest countries by some of the poorest people in those countries. And those are the markets where unaided, you don't see much innovation advance. So we really need a lot of innovation in this space, and we're not going to get it from the market alone. So what can we do to fix that problem? So Rachel, the Market Shaping Accelerator and Frontier both use pull mechanisms. You talked a bit about the difference between pull mechanisms and push mechanisms this morning. But why do you think particularly in the climate finance space pull mechanisms matter?
RACHEL GLENNERSTER:
Great. So thanks for the question. So because climate is, as you say, particularly neglected, we need a lot of pull and push because the social benefit is much much bigger than the private benefit to innovation in this space. We need a lot of incentives both on the push and pull side. But precisely because the social benefit is so much bigger than the private benefit, it's not just a question of generating the innovation, it's a question of getting it to scale up rapidly. This is particularly important for climate because what the climate reacts to is the stock of greenhouse gases. So if we delay in innovation for five years, we get a lot of build up of greenhouse gases during those five years. So this means that speed and scale are particularly important in innovation. Pull is particularly good at not just generating an innovation but at getting speed and scale. So Michael talked about the pneumococcal example earlier, there's a paper by Chris and Michael and others that shows that the pneumococcal vaccine was sped up by about five years compared to other approaches, other vaccines that were also supported by GAVI.
So you can design pull in a way that you only get the reward if you get it used by a lot of people, and therefore innovators want to get the product out there quickly. That's particular ways you can design it to really give them a boost to go fast, because someone else might grab the reward if they're slow. So that's one of the main reasons. There's another reason why climate is particularly good for pull mechanisms, which is there are many areas, including the area where Nan works, where there are multiple different technologies that could solve the problem that we want solved. And in this case, carbon removal. And we don't really know what going to be the best technology. And that's where pull is a really good approach because it allows everyone to compete for the reward. And you as a funder don't have to specify at the beginning I'm only going to do a climate fund for this particular technology, you can do it for any carbon removal. And that's true across a lot of different climate areas.
CHARLES KENNY:
Well, and thanks for introducing a little bit of what Nan is up to. Nan, thanks very much for joining us. And can you tell us a little bit about Frontier and about the AMC for accelerating carbon removal?
NAN RANSOHOFF:
Yes. Frontier is an AMC that is now over $1 billion to buy permanent carbon removal by 2030. And this is really grounded in the climate science. We know that in order to get to net zero, we're going to have to do two things - stop emitting in the first place. And that is the bulk of what we have to do. But we're also going to have to suck CO2 out of the air for legacy emissions. And on the path to net zero, we will be emitting more. So the problem with carbon removal is that until quite recently, it's had this chicken and egg problem where there have been no customers and as a result, there have been very few innovators. The problem with carbon removal is there is no natural customer, when you are pulling CO2 out of the air and you are storing it somewhere permanently, there is nobody obvious to buy that thing like there is with energy or cement, et cetera. And as a result, if you are an entrepreneur, why would you start a company in this space if you have no prospective revenue? And if you are an investor in this space, why would you invest in a company that has no prospect of revenue?
So really what we were trying to do with Frontier was to send a really loud demand signal to entrepreneurs and investors that there is at least a start of a market to buy tonnes of carbon removal. And we are very agnostic as to where that comes from. As Rachel said, we don't know what technology is going to be able to do this at ultimately gigatons, like cumulatively, we're going to need probably around 3 trillion tons total of removal, but on an annual basis by 2050, that needs to be around 10 billion tons a year. It could be direct air capture, those big fans that you've seen pulling CO2 out of the air. Rocks actually do a pretty good job of this, but you have to make them go faster, called enhanced rock weathering. Biomass carbon removal and storage, you can take waste biomass and parallelize it. There's tons of different ways to actually do this, and we don't know what's going to be the cheapest and the biggest. So we wanted to design a mechanism that allowed us to send a technology-agnostic signal that there's going to be a market and how do we invite many innovators to actually build and scale their technologies.
CHARLES KENNY:
That's cool. So how far along have you gotten a process? I mean, have you got lessons learned? Have you got things that seem to be dropping by the wayside? Have you got...?
NAN RANSOHOFF:
We're two years into Frontier. We are four years into our work, this was an outgrowth of some work that we did at Stripe, so four years in the carbon removal space. And I would say generally, most of the world didn't realize we were going to need to do as much carbon removal as we do until the 2018 IPCC report came out. So I'll just contextualize this all to say, the whole field is very young and this is hard tech, and that takes a long time to build. But two years in, we have raised over $1 billion from Stripe, Alphabet, Shopify, McKinsey, JPMorgan, et cetera. We continue to raise money on the demand side. On the supply side, we have contracted over 320 million of those dollars so far across 34 companies. And we have some good leading indicators that I think that Frontier is doing the job that we designed it to do, including things like we ran an anonymous survey last year and 71% of our portfolio companies, as an anonymous survey said, that we played a critical role in them starting a company, and 94% of them said we greatly accelerated their progress, and they don't have to tell us that.
We didn't ask them who they were. So again, those are good leading indicators. It will take time for that to play out but I think that we've done a reasonably good job in that context. We've also seen a lot more push-and-pull funding emerge as a result or at least partially as a result of Frontier. There's many other buyers who are increasingly getting into the space. Governments are increasingly interested. And that's not to attribute that at all entirely to Frontier but just to say that I think more signal on the demand side that there is interest in buying these technologies helped catalyze a broader ecosystem of funders and builders.
CHARLES KENNY:
Cool. $1 billion is a lot of money and I don't mean to be rude about it. But BCG, Boston Consulting Group, came up with this estimate that, if you were to do carbon capture at scale, it was a $200 billion thing. To get scale, does $1 billion really move the needle here?
NAN RANSOHOFF:
I would say it's actually much larger than $200 billion. So $1 billion was... So if you contextualize this in what has to be true for carbon removal generally, if by 2050 we need to be removing 10 billion tons a year, call it $100 a ton and that could be much lower or higher depending on which knobs that you turn. Well, call it five 5 billion tons, that's maybe a little bit more in line with estimates. That's $500 billion per year in demand for carbon removal. Global GDP is $100 trillion. So that's a very large number. And in that context, $1 billion over eight years is a very small number. But at the time $1 billion when we launched, compared to at the end of 2021, $30 million cumulative had been spent buying permanent carbon removal. So it is through one lens, a very tiny number, and through one lens, a very big number. And I think that one of the things, a lesson that I continue to learn through all of this is, you just got to start somewhere and it's an imperfect solution. And $1 billion was like the smallest big number we thought we could feasibly raise.
There's amazing cost-benefit analysis that all of these teams are coming up with. This was like the biggest we thought we could do essentially, and it is imperfect but I think has opened other doors for us to continue to raise the demand piece of the carbon removal puzzle and has bought some time for these companies to actually get started to get out of the lab and start trying their solutions and the learning process takes time in order for them to ultimately get down the cost curve to scale up.
CHARLES KENNY:
And how far have we moved down the cost curve in the last two or three years?
NAN RANSOHOFF:
It varies by company. So again, these are really early-stage companies. But Charm, for example, will come down at least 37% over the course of the contract and could come down by as much as 65% from 2023 to 2030 which is not trivial. So that's one example. But all of these technologies have some of their cost curves look more like step functions, some of them are like a bit smoother just depending on the nature of how almost modular the technology actually is.
CHARLES KENNY:
Cool. Rachel, over to you. What is the Market Shaping Accelerator looking at in adaptation in particular in climate in general?
RACHEL GLENNERSTER:
Yeah. So on adaptation, we heard a lot about mitigation. On adaptation one of the key issues is that food security with the changing climate is going to be a huge problem. And if you look at sub-Saharan Africa, crop yields have already stagnated and there's some evidence that they're actually declining already. And with climate models, it's predicted that if farmers don't change their behavior at all, yields would fall by 45% in sub-Saharan Africa. And even if they adapt their behavior to other crops that are around, still have yields fall of 28%. So one of the things we've been looking at is how do you stimulate innovation for crops that are climate resilient in countries where... And for crops where we're seeing remarkably little innovation at the moment. So in the US and the EU there's a lot of work to to bring out higher-yielding varieties all the time. Already companies are looking at how do you make things more drought-resilient, heat-resilient. But there's just remarkably little work happening in many crops in sub-Saharan Africa.
And that's for two reasons, one is that mainly farmers in sub-Saharan Africa reuse seeds. So if I come up with a new seed variety that's climate resilient, I can sell it to the first farmer but they will then sell their seed to the next farmer, and the original developer gets very little benefit unless they can charge a huge amount which is not going to happen, partly because climate resilience is what's called a hidden trait. So it's quite hard for someone to see the benefit of it because maybe it wasn't a particularly hot year that year and they don't realise. So behavioral economics is pretty clearly shown that people are very bad at paying for these things that you can't see, obviously. So that's part of the reason why we see so few of these new technologies come out. So just to give an example, there's been, between 2000 and 2013, only five new releases for sorghum in West Africa. And the average age of a variety is 14 years old. So everywhere else in the world, people are updating quickly.
So we've been working on an advance market commitment for developing these new seeds that would be resilient to these climate shocks that we're expecting.
CHARLES KENNY:
I mean, you mentioned sorghum. Do you want to talk a little bit more about that in particular?
RACHEL GLENNERSTER:
Yeah. So we've been looking at both sorghum and maize as two of the key targets, why those? Because there are a lot of people who rely on those crops. There's been very little adaptation already, and they're going to hit tipping points. So for the non-agriculturalists in the room, as temperatures rise, the yield tends to go up and then it hits a point where it plateaus and then it suddenly like just goes off a cliff. The yield just suddenly collapses if temperatures go above. So some colleagues at Tufts, Kyle Emerick, Anne Krahn did an analysis of how much the yield increase would be if we could just change that tipping point by one-degree centigrade. So just move up the point at which yields collapse by just one degree. And you see these big increases in yields. So they came up with... And then the team at MSA did some modeling of the costs of how much you would have to pay for these. But you get something like several billion dollars worth of economic benefit from either in the maize case or the sorghum case if you could change those tipping points by one degree.
And this is under quite conservative assumptions. So even if only 10% of the area that's currently grown with maize or sorghum grows this climate-resilient crop, you would still get several billion dollars worth of benefits.
CHARLES KENNY:
That sounds great but I have to say, it feels to me like you've chosen a really tough area there. And part of that is the nature of an advance market commitment is you need a contract at some point and something that's contracted to be delivered at scale. Now, that's hardly a unique problem. CGD contracts for papers it hasn't written and delivers them at scale. We see it in lots of places but you don't always know what you're going to get out of a CGD paper. And the same applies with crops, and weird things can really matter. I mean, crops have failed because they were the wrong color or because traditional gender roles meant one person did this and the other person did that, and this crop mucked with those roles. And so there weren't (INAUDIBLE). There are just so many unknown elements in what makes for a successful crop, beyond it works better at one-degree centigrade warmer. How do you contract for that?
RACHEL GLENNERSTER:
So I agree this is a really big problem. Actually working on some of these problems is exactly why I'm passionate about. I'm trying to make an advance market commitment work for crops. So let me explain a little bit. So it's true that for a pull mechanism you have to be able to define the basic product that you want, so in this case a crop that has a high yield or a crop that has a high yield at a certain temperature. But you don't have to define everything, and that's the benefit. Why? Because you have a market test, or at least you can design a pull mechanism so that you have a market test. And that's the advantage of an advance market commitment over a price, is that it builds in that you only get the reward if farmers use it at scale. So that builds into the incentives of the developer at the beginning that they develop something that the farmers are going to find easy to use and has the right taste. Now think about how we currently do innovation for agriculture and low and middle-income countries.
Particularly for low-income countries, it's almost entirely public push funding. So we pay people to work on designing better crops. And the return to that investment has been extraordinary and really important. But sometimes, and some might say more than sometimes, they end up developing something that isn't particularly useful for farmers. So I did a lot of work on NERICA, stands for New Rice for Africa. And it was a huge technological breakthrough. Yields are much higher. We did a study that showed that if farmers grew NERICA and they had the right training, malnutrition in those communities went down significantly. So a big breakthrough. But it turned out that it was quite difficult for farmers to use. So unless there was intensive training, they actually had lower yields. And now that is exactly the point that you're worrying about. But the moment you're a public sector company and you're trying to make it work on your research plot, and that works really well, you don't have the incredibly intense process that a private company has of iterating and market testing and talking to consumers.
I mean, yes, that does happen in these research, but not to the intensity that you get in normal consumer development innovation. And so with the pull mechanism, brings that into the process because you only get paid based on the number of farmers who use it. Now that adds to the complication of that you then have to do a survey. And that is built into our cost-effectiveness work that we've been doing of doing a survey of testing how many farmers are actually using it with going and taking a little bit of a crop and seeing if the key gene is in there.
CHARLES KENNY:
I guess, one, it adds a little bit to the complexity of designing the AMC. It does also add to the risk of the innovator, they have to not only develop something that is one degree higher, but also happens to be the right color, happens to tick all of these boxes that they may not know in advance. I guess you respond to that by making a bigger commitment and everybody's happy.
RACHEL GLENNERSTER:
Yes, basically. I mean, the idea that we would do innovation without building in the incentive for the innovator to innovate something that is useful. At the moment, we tend to do push, create an innovation, and then spend a lot of time trying to persuade people to use it. No, you need the incentive to think about the consumer built-in right from the beginning.
CHARLES KENNY:
Fair enough. This is a question for both of you, but I'm going to start with Nan, and then we are going to go to audience questions. I'm running on time, it's good. Then we're going to go to audience questions so do start thinking. But Nan, starting with you, we've seen climate pull mechanisms piloted by private actors like Frontier, where else do you think that there's a role for the private sector, in particular, to be creating these mechanisms, and then where is it you just really need to have governments do it?
NAN RANSOHOFF:
So if we think about climate generally, there are a lot of technologies that have a long-term market but have a green premium that exists today and somebody needs to subsidize that in order for them to reach parity with the existing market. Clean cement, clean steel, clean firm power, these are all good candidates, in theory, for an AMC. The first choice funder for many of these, especially because the subsidy is so large to get these technologies down to market parity is the government. And I think that AMCs are compelling policy tool for governments for a couple of reasons. The first is that they are lower risk because the buyer only pays upon delivery. And so in that sense, it's a relatively good use of taxpayer funds. The other reason it's good for governments is because it is high leverage, it crowds in funding from other philanthropies, the private sector, et cetera. So I think for climate, the first choice funder for many of these AMCs is the government. The private sector can play a role and has some advantages relative to the government, such as speed.
Sometimes the private sector can fund and move more quickly than the public sector. Additionally, sometimes is more flexibility in terms of how those funds get spent. But oftentimes, and this is very much the case with Frontier, we are nowhere near big enough to get carbon removal to climate-relevant scale. It buys us time to have those conversations and to get the rest of the market mechanisms in motion from the public sector. And I think there are probably cases where the private sector could fund the entirety of the AMC. That probably does exist in some cases. But for the really big ticket items in climate that we've talked about, probably government funding is ultimately going to be a big part of it, but the private sector can front run and help get the wheels in motion for that to ultimately happen.
CHARLES KENNY:
There's a problem with governments too that many of the things, especially in mitigation we talked about, they really are a global public good. If I was the US government, I might go, well, why should I pay the entire costs of an AMC for green cement? Everybody's going to benefit. Does that get us to an international institution?
NAN RANSOHOFF:
I mean, that's what GAVI was, was like pulling money from many different countries. And climate in all sense, there's canonical problem, tragedy of the commons problem, public goods problem, you are ultimately going to need many governments to solve that at large. But, yes, I think that is true on the one hand and then on the other hand to what we were talking about earlier, just getting going and like starting to put the wheels in motion. I think one private sector AMC, one government AMC, those are all helpful steps to make the whole thing eventually work.
CHARLES KENNY:
Rachel.
RACHEL GLENNERSTER:
Yeah, I think that I just want to pick up on government and how government can do this. I think one of the issues that we have is that governments just automatically default to push. I mean, you saw this with the Inflation Reduction Act and the climate elements of that. It's just automatically, well, we need this thing. So they are putting in a lot of money, but a lot of it was in portion and that's great. As we talked about earlier this morning, you want complementarity between these two things. And there's a couple of examples of that. I mean some money went into direct air capture but maybe that doesn't turn out to be the best technology for carbon removal. There's also a hydrogen money went into big subsidies to produce hydrogen and now we're starting to find that there's natural deposits of hydrogen so maybe we don't need to be doing better electrolysis to create it, maybe we just pump it out of the ground. So this is the thing where you want to be agnostic. And so I guess one of the big messages that I'd like to give to government is you are putting money in, you're doing push, that's great, but you need to supplement it with some pull because otherwise, you're not dealing with this uncertainty that we have around so many climate issues.
CHARLES KENNY:
And even though I've just been warned about time, I am still going to ask very quick, governments have trouble with making commitments they don't know when they're going to have to deliver on so budgeting this is a little hard?
RACHEL GLENNERSTER:
Yes. So when I talked about all the different skills that we need at the beginning of the day, one of them is policy entrepreneurs who can work out these mechanisms. I mean, governments did pull off the pneumococcal AMC so it is possible governments buy things with very long time horizons. And when we were working on the pneumococcal AMC, I remember Larry Summers had figured out a way to put it into the Clinton tax bill. So there's kind of the UK is using promissory notes at the Bank of England. So there are ways to work on it but I agree we need more innovation on the financing side of these things too.
CHARLES KENNY:
I have monopolized long enough. Just said start Q&A, thank you. Right there, and then we'll go over there, and then we'll go there. Thanks.
NEIL HACKER:
Neil Hacker from a carbon registry called Isometric. So my question is, the first AMC in pneumococcal was a global health one. All of the finalists were going to hear from today are global health AMC despite a number of climate projects submitting. So what should that tell us about the challenges of doing AMCs in the climate space? And is it maybe a lesson that it's more about capacity building than funding, or should we generally be bearish on the likelihood of them being more adopted in that space?
RACHEL GLENNERSTER:
Shall I start? So it's true that we did this big call for both climate and pandemic ideas for market shaping. And the three finalists you're going to hear this afternoon are all in the health space. However, we have been working on a number of climate things. So I've just told you about the crop, Nan's important work, obviously. There are a couple of other ideas that we're working on vaccine to reduce methane emissions from cows, I think is very promising. One of the other ideas that was very close was green cooling, but the team wasn't quite in the same time frame to be ready for now. So we've thought an awful lot in the last year about the economics of when something works for a pull mechanism, different kinds of pull mechanisms are needed for different problems. And it is true one of the issues that we're facing is, for vaccines, at least you often have one company take it from relatively early stage all the way through, and therefore they can keep all the benefits within themselves for the innovation.
And sometimes in climate, there's a lot of different people along the chain, and that can make it harder to do a pull mechanism. So I think that is... But not all health things are like that. I do think that one of the lessons I draw from that is in the climate space we should not be locking out some of the big energy investors who could play the role that large pharmaceutical companies currently play in the health sector of spotting the ideas, evaluating them, picking them and backing them with significant funding to take them through to the final and know a lot about the customer, et cetera. And at the moment, a lot of climate is a lot of startups who then don't have the financing to take it all the way through. And sometimes there's a role for a big player who has capital but also has expertise in picking good projects and financing them. So that's tentatively one of the conclusions from what we've been seeing between the health and climate ideas.
CHARLES KENNY:
We'll go over there and then we're going to come there.
SPEAKER:
So this is a question for Rachel. So the crop yield AMC is super interesting. The question I have is, do you see the role of the AMC to bring like the three or four most technologically proximate products that meet your one degree criteria into the market? Or do you see the goal of the AMC to reduce that product cycle from 14 years down to one year? Or you made that comparison? I asked this because one of the things about AMCs that still mysterious to me is how do you deal with the fact that there may be unintended consequences of trying to get the near term technologies into market, but that may limit the next wave of innovation to get there. So how do you think about that?
RACHEL GLENNERSTER:
So there's remarkably few people working on some of these crops. So now maize is a bit different. There are people working on on maize, but it's just such a big and important crop that you need a lot more innovation. But sorghum virtually no one's working on it, on the types of sorghum we see in sub-Saharan Africa, virtually no. Compared to the size of the problem, we see very little innovation. So a lot of it is the innovation itself. And Michael was talking earlier about that's really where we get the most benefit if we're pushing things that just wouldn't have happened otherwise, rather than just speeding them up. So I think in terms of worrying about are you pushing other things out of the market, you can do this crop stuff with conventional breeding, or you can do it by bringing in new technologies like CRISPR which are just hardly being applied to the crops that we need now. I'm most excited about that, frankly. And I think if you got that coming in, then stimulating new actors to work in this space would generate new crops.
But they would then start generating a cycle of new crops because they're in the space that have made the investment. So that might prevent the trade-off that you're worrying about.
CHARLES KENNY:
Can I ask you the same question about carbon capture, though? I mean, are you worried that you might be helping to lock in the next technology not the best technology?
NAN RANSOHOFF:
We, with our initial billion dollars, are trying to build a risk adjusted portfolio. Definitional and the fact that we only have $1 billion is that we're not going to get to that final endpoint. We can't pull it all the way through so we're trying to be as conscious as we can of not ruling out promising technologies. And one of the mechanisms that we use to do that is we are paying different prices to different firms for their technology, and we are doing a lot of diligence trying to forward evaluate them on their potential to be low cost and high volume in the future, even if they're not there today. If we had a fixed price every year that declined, I think that would probably accidentally cut out companies that are expensive today, but have an especially steep cost curve that could be beneficial in the future. That we probably make some mistakes in that and we certainly can't fund every promising technology that we see. But we are very sensitive to those dynamics and are trying to be cognizant of building that risk adjusted portfolio.
CHARLES KENNY:
Cool. Michelle, you(INAUDIBLE).
MICHELE DE NEVERS:
Hi, I'm Michele de Nevers. I'm the executive director for sustainability at the Haas School of Business at UC Berkeley and a CGD alumni. A question for Nan, couple of questions - in the carbon removal technologies that you're looking at, are you looking at nature based solutions like reducing deforestation or algae or that thing? And the second question is, why is Stripe doing this?
NAN RANSOHOFF:
On the first question, we have our TPP outlines permanence as one of our criteria. So we're looking at solutions that are more than a thousand years of permanence in practice. We're basically looking them for them to be tens of thousands of years. So a ton of emissions is permanent, we want to take it out permanently as well. That is not because we don't think that there is an important role for nature-based solutions like trees and soil carbon sequestration, but rather we will run out of arable land before we can get to the scale that we need for permanent carbon removal. And there are already other players that are working to address that space. So our perspective here was what is the biggest gap relative to the attention that had been paid to that so far, and how can we focus our energy on filling that gap? And our goal with our TPP was really to characterize the gap that we see and try to channel money into that specifically. In terms of why Stripe, it is a little odd, we build economic infrastructure for the internet, we do things like process payments, help businesses scale and grow.
And this started a bit for us as a small experiment. In 2019, we published a blog post. This was $1 million to buy permanent carbon removal at any available price. And the field had a weirdly positive reaction which to us just said that this field has been so starved for customers that anybody cared about $1 million. That led to phase two which we call it Stripe Climate, that's still operating today. And we built a software product that made it easy for any Stripe business to direct a fraction of their revenue into carbon removal, we then pull it together and use it to buy even more carbon removal down the cost curve. That was phase two and got us from $1 million in phase one to tens of millions of dollars in phase two. And then we said, well, that's a good step in the right direction but what else can we do and came up with a bunch of ideas, killed a bunch of ideas, and an AMC for carbon removal was one of the ideas that we couldn't kill. And that led us to Frontier. So I think it's a little bit of a combination of in the long run, Stripe is in the business of growth and economic growth and climate change is one of the biggest threats to that.
In the more short-term perspective, we ran an experiment and just kept building on it as we grew, and it became what is Frontier. I think, in many ways we just wanted to do something and it has turned into what it is today.
WILLIE SHERMAN:
Willie Sherman from Institute for Progress in Manhattan Institute. Question for Rachel - how much do regulatory constraints reduce the adoption of GMOs for climate resilience? So I think the EU, and I think also Mexico, there's been some trade disputes over this around importing GMO crops. Do you think about this a lot?
RACHEL GLENNERSTER:
Yeah. So it's definitely an issue that GMO regulations have prevented innovation of certain kinds spreading. And countries in sub-Saharan Africa are very nervous that if they use a GMO crop then there'll be export bans to the EU in particular. Now, I want to be really clear that what I'm talking about is not GMO partly because of these potential issues. So you can get these improved crops just by conventional breeding techniques, picking the variety that is currently most heat tolerant and then breeding it with others. However, the really high return thing is gene editing which is not GMO, as I understand this because what you're doing, you're not bringing a gene from somewhere else into a crop, you're basically just speeding up what you would get from conventional breeding. And there's some regulatory discussion about this, but most people are concluding that this is not GMO and it's not so scary 'cause it's just speeding this up. Now when we did all the kind of how big the value should be of the pull mechanism that would be needed, we very much took into account the fact that the innovator is going to have to take this through regulatory approval and all these different countries.
So the size of the pull that you need has to offset all of those costs of taking it through regulatory approval. And we calculated that for something that is more innovative that is going to require a bit more regulation. But we're optimistic that it would not count as GMO and therefore wouldn't face these bans. But there are these regulatory hurdles even with more conventional approaches.
CHARLES KENNY:
You remember order of magnitude. I mean, what percentage of the costs were you thinking were getting through the regulatory hurdles? Do you remember? Sorry, doesn't matter.
RACHEL GLENNERSTER:
I can ask Sarin or Siddh if you want to answer that question off the top of your head. It's not huge. Go ahead, Bilal.
BILAL SIDDIQI:
Bilal Siddiqi, I'm a senior economist at IDinsight and a nonresident fellow here. I guess I want to just step back a little bit, and it touches a lot on what people have already said. But it seems to me that with vaccine development and pandemic preparedness, you have essentially a homogenous product that is typically delivered through a relatively effective centralized delivery system which is used delivering vaccines. And so the real binding constraint would be developing the technology and getting it into the hands of the delivery system. Whereas with, for example, climate resilient agriculture, you end up with a pretty heterogeneous product that has to be delivered through a very contingent, heterogeneous, localized, decentralized policy, conditional delivery system where the binding constraints may be all of that and much less the tech part and the supply part. So the question I guess is, what do you think this would say for the effectiveness of a pull mechanism that seems to me globally driven as opposed to a localized series of pull mechanisms that are extremely hybrid.
And as a result, is the pull mechanism really the right way to think about this, and how would you think about changing the model that you're working on?
CHARLES KENNY:
I'm going to throw in one bonus question, and I'm afraid that really is the last one. And then you are going to wrap up after you've answered, OK?
SPEAKER:
(INAUDIBLE) it's very closely related to Bilal. So (INAUDIBLE), senior fellow here. For Rachel, if you could just touch upon extension services and how they feature in particular existing capacity. So with the Green Revolution, there is a lot of existing capacity on both the development and dissemination of new seeds, so the entire CG system is predicated on this. And so what you're describing is that in addition, in parallel working in conjunction with, we just love to hear about that. Thank you.
RACHEL GLENNERSTER:
Yeah. So there's no doubt that crops is... We've been looking at a range of market-shaping designs for different problems. And you really do need to design it differently for different problems. And I think you're right that vaccines is at one end of the spectrum. And crops is it's quite far in the other end of very decentralized. But I don't think that means the pull is less useful. If anything, I would say that it's more important because it's so important that you take into account all of those constraints when you're designing the innovation to begin with. I talked about NERICA but another example is cook stoves, where we funded a lot of people to design cookstoves that were less polluting and people breathed in less harmful air pollutants. But they were designed in a lab and not the way that people who design consumer-facing products normally do it with constant iteration backwards and forwards with the consumer. And so you design cookstoves that were very good at reducing indoor air pollution but nobody actually wanted to use.
So, I think it's exactly the complexity and mess, frankly, that means it's really important to tie the reward to the innovation to actual use. And in terms of the... But yes, it makes it more complicated to monitor the use, it's very easy to monitor how many vaccines have been sold to a country through GAVI 'cause GAVI already has a system for doing this. But that's like you and I do surveys of farmers all the time. Like, we know how to do it. It's not a difficult process to do, and you do a random sample. And you have to do your power calculations. But this is not unsolvable problem. In terms of the extension process, yes, there is, and the CG process. So I think the challenge in crops is there are many different actors down the chain from the labs at Berkeley who are doing some really cool stuff with crops and CRISPR down all the way through the people who multiply the seed to the people who market it and sell it to farmers, and the extension agents who encourage that. It's not that pipeline isn't working incredibly well, as they say, the CG system has incredible returns but people are using seed that's 14 years out of date.
And the main point is the speed of innovation that we need with climate change, it's just so much bigger. Like we're failing at the moment and we've got to speed it up like ten times. And so we can't just rely on the existing people doing innovation in this space. We need so many more people coming in to speed up the innovation on crops because we are just going to be hit with crop after crop collapsing in these environments. And we can't just rely on existing extension agents, there are huge market failures and government failures in how extension systems work. So we need rewards based on whether people actually use the product. And, yes, it will require the CG system working with the labs and working with the marketers and working with the multipliers. And you're putting a big reward out there to get their act, together to all work together on this. I was meant to close.
CHARLES KENNY:
Can we do a quick round of applause, (APPLAUSE), and then you may close. Thank you.
RACHEL GLENNERSTER:
Sorry. As you can see, I get quite passionate about this. So I hope you enjoyed the morning session, we're adjourning for lunch. And I should say this group of people were all invited so it's a part of the point of bringing you all together, is to talk to each other. So lunch will be served at the back and we will rejoin at 1:30. The judges will go to a separate lunch, and we will brief you on the judging process. Then in the afternoon session, we'll hear from Stephanie Psaki, US Coordinator of Global Health Security. And then we will have the innovation challenge portion of the day followed by a reception at 4:00pm, during which the judges will go away and share notes. And then we'll do the prize ceremony. So looking forward to this afternoon.
CHARLES KENNY:
Thanks very much.
LEAH ROSENZWEIG:
Hello everyone. I'm Leah Rosenzweig, director of the Market Shaping Accelerator. Thank you for joining us and sticking around for the afternoon session. It is my distinct pleasure to introduce Dr. Stephanie Psaki, the US coordinator for global health security at the White House and a recognized leader in public health. She brings extensive expertise in national security and global health. Prior to her current role, she held senior policy positions across the US government, including as Deputy Senior Director for Global Health, Security and Biodefense on the National Security Council. In addition to her government service Dr Psaki has held leadership roles at non-governmental organizations and research institutions. We'll have a quick Q&A after her remarks. Thank you.
AUDIENCE:
(APPLAUSE)
STEPHANIE PSAKI:
Hi everyone. I'm sorry that I missed the morning, but I know that my colleague, Dr Paul Friedrichs was here and I got already a quick readout from him. So hopefully, what we share will be complementary. I'm going to have a sip of water because I just ran here from the White House. So thank you, Leah, thank you CGD. Some of my, I see Javier in the audience, some of my favorite people and researchers are at CGD and have been for a long time, really appreciate the policy-relevant research that is always happening here, and appreciate this exciting partnership with the University of Chicago. Congratulations to those who advanced to this final round in the Innovation Challenge. Are those in the audience here? OK. Congratulations. So I want to share a little bit about my perspective and experience going back and forth between the research and policy worlds, and thinking about where and how innovation is most valuable in this moment in global health. President Biden and Vice President Harris came into office dedicated to ending the COVID crisis in the United States, and ensuring that the United States and countries around the world are better, able to prevent and respond to the next pandemic.
US national security and prosperity depend on stopping outbreaks before they threaten American lives, and that means that my job at the National Security Council and at the White House is to make sure that we are working with countries around the world to prevent outbreaks when possible and to rapidly detect and respond to emerging biological threats when they occur. So I came from the research world, I actually collaborated with some CGD researchers in my past life. And when I was working in the research world, I was focused on what we like to call policy-relevant research, and at one point, I was having a conversation with a colleague and friend who worked for the UN, and she said, if you are going to try to inform policymakers with your research, maybe you should have an understanding of how policy is actually made, which was very direct, tough but fair feedback from someone who was much more immersed in the policy world than I was at the time. So now, for the last few years, I have been in global health roles in the US government, and I've had a front-row seat to how decisions are made.
And for the last year, I've overseen the global health security work from the White House. So now, I am here as a policymaker, I suppose. I still identify myself as a researcher but someone who has some policy experience, and I have a completely different perspective on how evidence and science can be used and should be used to inform policy. So before you pitch your ideas, I want to just take a few minutes to share that perspective and then tell you what we are doing in the Biden-Harris administration to try to bridge these two worlds. So first, and I often say this to advocates, it probably doesn't need to be said as much in this room, but no one really wants another experience like the COVID pandemic to happen. Regardless of what their perspective, where they're coming from, it's pretty much agreed that that's not something anyone wants or worse. We also pretty collectively want to mitigate the threats posed by existing infectious diseases. So influenza, measles, malaria, cholera, and many others.
The problem is usually not a lack of understanding of the challenge or a lack of interest in solving it. The problems that I've seen time and again, at least in the last few years as a policy maker, are lack of technical capacity, lack of resources, lack of speed, and sometimes small p politics. So I want to just walk through a few examples of how this has played out pretty recently in our work at the White House. So as you know, measles is one of the world's most contagious diseases. It's airborne, it can cause severe complications and death, but a highly effective vaccine against measles exists. It costs less than a dollar per child, and after two doses, it's 97% effective. So that is a triumph for innovation. Yet, in 2022, 136,000 people died of measles around the world, mostly children under the age of five who were unvaccinated or under-vaccinated. Why?
So measles vaccination levels actually declined in recent years after increasing for a while in part due to COVID-related disruptions—in some countries, I should say, in other countries, a focus on COVID vaccination actually led to an increase in broader vaccination rates—but in some settings, vaccination campaigns were suspended and resources like health workers and money were diverted to focus on the immediate emergency in ways that undermined routine health services. The COVID crisis was so devastating economically, that even once the acute phase had passed, many countries were forced to make trade-offs in their health budgets. But even in peacetime, even before the COVID pandemic, only 86% of children were vaccinated against measles in 2019. So even with a great countermeasure with the ideal from an innovation perspective, and it's affordable, it's accessible, barriers like distance and education exist and stop people from accessing those innovations. So the second example I want to give is a near miss with a new Ebola outbreak that we had a few weeks ago. A few weeks ago, CDC colleagues alerted us to suspected viral hemorrhagic fever cases in northern Democratic Republic of the Congo.
This was concerning for a few reasons that are probably evident to many of you. The cases were in the area of DRC where the last outbreak in DRC, Ebola outbreak in DRC had emerged, which is also why the health workers in those communities were paying very close attention and were trained to identify concerning cases. DRC is also facing multiple ongoing outbreaks and pox, measles, cholera, as well as ongoing conflict and instability. Even in the midst of all that, health workers in Northern DRC identified these suspected cases, and they had tests in hand to test for Ebola Zaire, which is the strain that emerged in DRC during the last outbreak, because the US government has been working in DRC for a long time, and made sure that these tests were pre-positioned for exactly these circumstances. So they used those tests and the tests were negative, and then we were stuck. We didn't have other tests, so we weren't sure what to do. Those first days of a possible Ebola outbreak when we were all holding our breath, including the Ministry of Health and DRC, are critical to contain an outbreak like this before it spreads.
But we had to wait for new test kits to be delivered in hand of a CDC worker from Atlanta on an airplane to DRC, who then arrived in Kinshasa. They had to collect the samples, fly to a different part of the country with the samples, get a health worker who was trained to actually conduct the test, and then wait for the results. So it was over a week before we had the results of those tests, and that time period wondering if Ebola was spreading amidst these other outbreaks. It turned out to be a combination of dengue and malaria. So luckily, it was not Ebola, but it would have been important days that we had lost if it had been. It also means that this health clinic that has been trained and given the resources to test for Ebola Zaire does not have the training and resources to test for malaria and dengue, which are much more common and much more likely to kill people in the short term. So let me give one more example, and then I promise I will bring this all together. The ongoing mpox outbreak in DRC and surrounding countries, which is consuming a lot of our time and part of the reason I just ran here from the White House.
mpox has been around for a long time, as many of you know, but in recent years, it has changed to make human-to-human transmission easier, especially sexual transmission. That is what happened in 2022 with the outbreak that affected many countries around the world including the United States, and that outbreak which is ongoing is caused by clade 2 mpox. More recently, clade 1 mpox has been spreading in DRC and to neighboring countries, as well as a handful of cases outside of the Africa region. You might have heard that WHO declared a public health emergency of international concern due to this outbreak recently. For both clades of mpox, we have vaccines and tests that work. More vaccines and tests are in development. There's more to do on the innovation front, but the innovation is largely there more so than it would be in other circumstances. But in some ways, that's the easy part. We also need manufacturing capacity to make enough vaccines and tests to respond to a rapidly evolving emergency, funding to pay for them quickly, regulatory approval to use them, and skilled health workers to implement them.
That's just a few of the barriers that we're grappling with right now. Right now, for the mpox outbreak, vaccine supply is not the main challenge. High-income countries have pledged to donate more than four million doses of mpox vaccines. There's hundreds of millions if not billions of funding available that can be leveraged to procure additional vaccines. Same goes for tests in the short-term. But the first tranche of vaccines just arrived in DRC last week after months of delays due to regulatory approval challenges, and that's a process that needs to be streamlined for us to respond quickly to emergencies. As the crisis evolves, we need to make sure that we continue to have sufficient supply, money, approval, and resources to roll out the countermeasures that already exist. Work is also needed and underway to make sure we have effective therapeutics. So for all of these countermeasures, and frankly for many of these outbreaks over and over again, we face the same problems. Before a crisis happens, demand is very low, so manufacturing capacity is low.
Then an emergency happens, demand skyrockets, and there's a push to expand manufacturing capacity. Once the emergency is under control, we no longer need that expanded capacity, but someone invested in it and potentially lost money, governments, the private sector, others, and that creates a disincentive to invest in scaling up that manufacturing capacity next time there's an emergency, and then we risk losing that capacity during peacetime. If you have an innovation to solve this problem, that's one we really need. So let me just wrap up by bringing these pieces together. For innovation to be effective to really drive change sustainably, it needs to fit into a system, or it needs to fundamentally change the system. Innovation is essential, but it doesn't achieve public health goals on its own. If we have broken systems where millions of children are not receiving life-saving low-cost vaccines when things are good, then it will be very difficult to use those systems for a new innovation in an emergency.
And while we focus on innovations to avoid the worst outcomes, like an Ebola outbreak, we can't do it at the expense of the ongoing crises that are taking lives right now, malaria, dengue, measles, and many others. Last, the innovation itself is almost the easy part. The hard part is getting the innovation to the people who need it at scale, when they need it, and making sure they have the information they need to make informed choices for their health and their family's health. So let me just tell you for a minute what the Biden-Harris administration is doing to tackle some of these challenges, and then I will turn it over to hear the very exciting culmination of this event. So earlier this year, the Biden-Harris administration launched a new global health security strategy, and it sets the roadmap for addressing some of these really difficult challenges. It has three goals. First, to strengthen global health security capacities through bilateral partnerships with countries around the world.
We're now working with more than 60 countries around the world. This partnership ranges from building the capacity of health workers to collect and test samples to figure out whether illnesses are caused by malaria, dengue, or Ebola, to building the capacity for clear risk communication to affected populations. Second goal is to catalyze political commitment, financing, and leadership to achieve global health security. The administration pushed to launch the pandemic fund, the investments from which will now be used to support mpox preparedness in countries in the Africa region. We have also worked through the Development Finance Corporation with the G7 DFIs, and with GAVI to establish new financing facilities to ensure Day Zero financing is available to procure medical countermeasures during emergencies, facilities that can now be accessed in the context of the mpox outbreak to get vaccines and tests and treatments to people quickly. We're using our political leadership globally to drive progress more quickly, including through G20 discussions between health and finance ministries happening today in Brazil.
The third goal of our strategy is to increase linkages between health security and complementary programs to maximize impact. So the investments the US government has made in global health, last year alone, we made $2.65 billion of investments in global health in the Central and Eastern Africa region. From malaria to HIV AIDS, we're leveraged during the COVID pandemic. They are being leveraged now in the context of mpox pandemic. But we also need to make sure that we don't disrupt those essential services when we respond to emergencies because both are important and life-saving. So we are working on it. We have made a lot of progress in the last few years, but there is certainly more work to be done. I want to just conclude where I started, which is to thank CGD and the University of Chicago for this exciting innovation challenge. I'm looking forward to hearing about the projects presented today. And I am certain that they are important to the mission that we are trying to achieve from the White House to support global health security and biodefense.
And as you pitch your innovations, I would encourage you to think about how you will navigate some of the barriers that I've laid out today to get this innovation to the many people and the many countries around the world who stand to benefit from your work. Thank you.
AUDIENCE:
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LEAH ROSENZWEIG:
Thank you. Thank you so much, Stephanie. We have time for a few questions. So please raise your hand if you're in the room. And put it in here on the chat. Yeah.
SPEAKER:
I would love to hear more about the regulatory issues that have held up the mpox test distribution in the DRC. Is it on the US side or is it in the DRC side or other places?
STEPHANIE PSAKI:
One at a time. Yeah. So not on the US side, but I would not say it's exclusively on the DRC side. I would say that it's a global challenge that we need to resolve together. So for many countries who don't have their own what we call stringent regulatory authority, like FDA in the United States, they have their own regulatory authority. They either rely on their expertise or they rely on WHO or other partners for regulatory approval. The challenge that we have faced with the mpox vaccines is that WHO has a pre-qualification process that they go through, it takes about a year, to provide regulatory approval for new products and they have a prioritized list of products. As the emergency of the 2022 mpox outbreak waned, there were other products that were higher priority and I think that probably was the right call in 2023 and before we ended up where we are now.
So WHO did not have this product in the pipeline and the regulatory authorities in DRC were reviewing the evidence and wanted to make sure that there was clear guidance provided to them. So it took longer until there was a PHEIC declared for WHO to provide a signal, I think, to the regulatory authority in DRC. These are systems that can be strengthened and streamlined, FDA has approved this product for approval in the US and it's been approved in Europe as well. So I think our hope is that we can eliminate some of those barriers going forward because they take too long when we're in the middle of an emergency.
LEAH ROSENZWEIG:
One last question. It's coming. Hold on.
SPEAKER:
I think one provocation of today is that most R&D that we, that governments support is through push funding, grants, contracts and that more of it should be through market shaping approaches or pull funding. What in your view are some of the barriers to that being the case and what can be done to bring some of them down?
STEPHANIE PSAKI:
So I think we're doing some of that and I don't know if anyone has talked about it yet but PEPFAR has signaled at the Africa Leaders Summit a couple years ago made a commitment to procure a certain percentage of the products from African manufacturers if they meet quality standards within a few years. The challenge there, so I think that is, the goal was very much to help shape the market and I think between PEPFAR and Global Fund there's a lot of money that could be powerful enough to do that. I think one of the challenges and a very mundane challenge is that we can't commit to future funding on behalf of the US government. So it's very difficult to say if you build up a new capacity that's going to take five to 10 years to build that capacity we will procure the products because it's different decision making as you know. So I think that's one of the challenges but there are ways to get around it. So PEPFAR and you can share this but it's on the White House website from the Africa Leaders Summit.
PEPFAR came up with a way to do it by committing to procuring a certain number of products that they felt was a reasonable procurement but they have not yet been able to procure from African manufacturers to my knowledge. So it hasn't worked yet but maybe it will.
LEAH ROSENZWEIG:
Great, thank you so much. Please join me in thanking Dr Psaki.
AUDIENCE:
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LEAH ROSENZWEIG:
At this time I would like to invite Christopher Snyder and our panel of esteemed judges to the stage.
CHRISTOPHER SNYDER:
It's my distinct pleasure to introduce the Market Shaping Accelerators Innovation Challenge and describe that process that's culminating in today's Pitch Day. So I'll talk a little bit about the idea behind the challenge, how we came to that, and also about the logistics, about how the competition will work today. But you see I'm joined by this distinguished panel of judges so let me introduce them so that they're not strangers to you. In a way you can think about Pitch Day as the nonprofit version of Shark Tank. So I think these are sharks. And we're not being televised on ABC, we're being televised on C-SPAN. But other than that, it's the same as Shark Tank. So first we have Claire Qureshi, the CEO of Sentinel Bio. Her work focuses on pandemic prevention and pandemic preparedness. Next, oh I'm sorry, I got the order on there. So over to her right is Nan Ransohoff whom you met this morning on the climate panel. She's the head of climate policy at Stripe. Her work focuses on new tech for carbon dioxide removal.
Then we have Alex Cohen. He's a principal researcher at GiveWell. His work focuses on promoting development in low-income countries. Then we have on the next row Elizabeth Cameron. She's a professor of practice of health services policy and practice at Brown University. Her work focuses on health security and biodefense. Then we have Kumar Garg. He's the president of Renaissance Philanthropy. His work focuses on promoting science and technology through policy and philanthropy. Next, Sandeep Patel. He's the CEO of Betting Big on human health. And his work focuses on biomedical research funding. And finally we have Norma Altshuler. She's a senior program officer at Open Philanthropy and her work focuses on global health aid policy. So as I said, I'm going to talk about the idea behind the innovation challenge and some of the logistics. So how did the market shipping accelerator come to the idea of this innovation challenge? So we're concerned with the biggest problems facing society, what I think of in some cases existential challenges.
So these are climate change and public health and pandemic preparedness. And so there are different ways to, different policies and different levers you might take to approach these challenges. Our approach is looking at innovation, innovative solutions to solve these problems. Why? We've discussed this this morning in the talks by Michael Kremer and Rachel Glennerster. With innovation, there's the prospect of spending a dollar and getting a multiplier. You might get five or $20 of social benefit. In fact, in these areas we're talking about here, climate and pandemics and public health, the multiplier could be as much as $100 or more. You know, why is this useful? Well, it may not be, we have the huge purse to try to approach these. It might be they're actually practical sources of funding that we can tap that we could actually get solutions to these problems. So, you know, when you talk about great social needs in a sense, commercial markets are very good at solving these problems. We get innovations all the time that serve consumer needs.
But the trouble is that sometimes there's going to be a big gap between social needs and commercial incentives, especially in the areas that we're talking about here. There's the typical problem that an innovator may not capture all the innovations, other innovators, the ideas may spill over to them and produce me-too products or might just be this broad spillover. There could be ripple effects, what economists call externalities, where the consumers don't fully internalize the benefits that their consumption provides to others. So for example, you get vaccinated, it prevents transmission, that helps other people, but you don't necessarily internalize all of that benefit. You won't pay for it, and so the firms don't earn the return from that. You think about using green energy, again, that produces this large environmental benefit that the consumer doesn't necessarily internalize. And so that leads to, the firm doesn't capture the returns to that. And so there's under, the commercial market doesn't provide full incentives for research and development.
There also might be a holdup problem if you have, say, government and public funders providing these services, especially if you're talking about things that are going to help in crisis response, it's exactly in the crises that charging a high price that might make this a lucrative intervention might be exactly the times that it's frowned upon, the charges, no profiting in a pandemic. So all these reasons might lead to a gap between commercial and social incentives. And so there might be a role for public funding to try to bridge that gap. Public funding policies can come in different forms, and this has been talked about today. Push funding, grant funding to innovators, versus pull funding. Our market shaping accelerator has been focusing on pull funding, not that we don't think that push funding is important, but the pull funding is more of a neglected area, we think, and so we're trying to popularize that idea to extend possible. And so that's where this innovation challenge comes in.
And so the idea is there to try to leverage market-based incentives that pay for results, that pay for either creation of successful idea via a prize or pay for output in the form of, say, an advanced market commitment that buys the innovative output at scale. So we're interested in promoting these pull funding mechanisms for innovations in these areas of pandemic preparedness, public health, and climate. And so that led us to launch this innovation challenge. We have a very esteemed group of people in the team. You heard from Michael Kremer, you heard from Rachel Glennerster. We have a team of policy analysts. So very smart people sitting in the room, like what are the areas that would be best to launch a pull funding mechanism? And so we were brainstorming, and we thought, well, wait a minute. There's a larger world out there that has a lot of wisdom. Maybe we can leverage the wisdom of public more generally. And so that's, in a sense, this is our attempt to crowdsource or use basically a pull funding mechanism to pull in ideas that are the best ideas for pull funding mechanisms.
So very meta. You can imagine like a mirror reflecting against the mirror. So that's the idea here, leverage the wisdom of the crowd. So this is a program that was launched over a year ago using funding, it's $2 million in total of both milestone and prize payments. And it's offered through generous funding from Schmidt Futures and from Griffin Catalyst. And we thank those funders for catalyzing this innovation challenge. So thanks to them. So up to $2 million in total prizes. Today, we're going to allocate $600,000 of the prizes. Pretty exciting. And so get your FanDuel accounts ready to predict which of the three pitches is going to win. And this innovation challenge, it was organized in two phases. We had phase one, in a sense, we're trying to look for the ideas, in a sense, look for the problems that might potentially be solved by pull funding. And then in phase two, we funneled those ideas to a smaller number. We provided some assistance from our market shaping accelerator to refine those ideas and turn them into more of a funding proposal, a more full-fledged organized proposal.
And that was launched in October 2023. In phase one, I think it was just a remarkable success beyond what I would have imagined. We had over 180 applications from entrepreneurs, government agencies, and nonprofits from over 16 countries in the world. And then, through a judging process with at least six referees from inside and outside of the MSA, we identified 39 winning ideas that received a milestone payment. And then we moved to phase two, phase two winnowed or funneled the field down from the 39 to seven, now to the three finalists that you see here. And I'm going to leave it to our director, Leah Rosenzweig, to introduce these teams. But just the ideas, just to start them germinating your mind, broad-spectrum manner of virals, neonatal sepsis diagnostics, and then repurposing generic drugs. I introduced the expert judges, and we just thank you so much for your time and talent. And so the expert judges are going to allocate, again, today, we'll hear about their decisions for allocating $100,000 of the prize money.
So here's how the challenge is going to work for the rest of today's pitch, pitch day. We're going to have the three presentations from the three finalists. They're going to be half an hour sessions. Each will have a break there so that we can stretch our legs. So during each session, we're going to have 10 minutes where the team leader is going to present the pitch. And then we're going to have a five-minute period where one of the judges will have a discussion of it and ask some potentially probing questions. And then we're going to have 15 minutes allocated for further questions from the judges and also from the audience. And then afterwards at four o'clock or thereabouts, we'll have a reception where, again, we can mingle and talk to each other. We can congratulate the pitches. But during that time, the judges are going to convene to make a decision on the allocation of the $100,000 according to their opinion for the best pitch today. And $500,000 is going to be allocated by the Market Shaping Accelerator team.
And we're going to announce a grand prize winner and finalists. And so that's what I have for you. So without further ado, we'll bring Leah Rosenzweig back to introduce the pitch teams. Thank you.
LEAH ROSENZWEIG:
Thank you so much, Chris.
AUDIENCE:
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LEAH ROSENZWEIG:
It's my pleasure to welcome our first Innovation Challenge team to the stage for their pitch on broad-spectrum antivirals. After the pitch, Elizabeth Cameron will offer a few remarks and then as Chris said, we'll open up for Q&A. So Jano is the head of challenges at Germany's Federal Agency for Disruptive Innovation, SPRIND, which funds potential breakthrough technologies in Europe and beyond, similar to the US ARPA-E or ARPA-H. In his international innovation competitions, he funds and supports breakthrough technologies in biotech, energy, climate tech, computing autonomous systems, and more. As an economist, he cares about eliminating market failures that prevent innovation from solving the grand challenges of our time. The SPRIND team also includes Eric Schaffner, who I believe is in the audience, and Elizabeth Hofmeister, who was also advised by Chris Avery from Harvard Kennedy School. Over to Jano.
JANO COSTARD:
Thank you so much, Leah. I have to say, I really feel judged. Which is great because the topic I'm going to talk about really matters, so it's good that it has many eyes and brains on that. So what I particularly want to talk about today is broad-spectrum antivirals and how that could be supported by an advanced market commitment. And we've talked about pandemics and the costs earlier today and I think with 27 million deaths due to COVID, as well as 14 trillion US dollars lost in multi-economic output, the short-term consequences of COVID just show how costly those can be. And we are learning more and more about how long-term costs add to that. In fact, they add trillions more due to, for example, long COVID or losses in future productivity due to school closures. And we've heard about ongoing outbreaks, like Mpox, or the current H5N1 situation. So we know that future outbreaks will happen. Now, not all of these outbreaks will turn into full-blown pandemics. But researchers have estimated that the probability that we have another COVID-like event might be about one, two, or 3% every year.
Just to give you a sense of what that means, a 2% annual probability of having events like COVID-19 or worse, actually, is 33% over 20 years. I think that's far too high given the catastrophic consequences. Therefore, we need to change it. And that's what we try to do with our proposal. At the core of our proposal is the idea that if we would be able to have antiviral drugs readily available after the start of an outbreak, we could really halt the pandemic very early. Now, the difficulty is how can we develop a drug before we know the actual virus or the actual target? I think a combination of two characteristics could actually do it. The one is the fact that that drug should be able to target multiple different viruses at the same time and combine that with the ability to quickly adapt that drug to new viruses and new targets. So either we are ready straight out of the gate with a drug to target that new outbreak, or at least we can quickly adapt the drug, similar to, in fact, how we do it with mRNA vaccines currently, when we adapt those to new strains of SARS-CoV-2.
And that could really be a game changer. Such technologies actually do exist. We fund them with Germany's federal agency in very early stages of development. So I'm confident that we can bring about this change. A big part of our work in MSA has been to try to evaluate how important and what the effect would have been if we would have had these drugs available for COVID, to get a better sense of that effect. And what I show you here is a result of our modeling exercise based on epidemiological modeling. What you see here are infection numbers over time. The black curve is the COVID-19 scenario. And when you look at the red curve, you see how that pandemic would have changed if we would have had these drugs available one year after the outbreak. What you see is that we would have ended the pandemic far earlier and avoided many, many cases. But more importantly, if you look at the other two scenarios what would have happened if we would have had these drugs available right after the outbreak, or at least 100 days later?
These lines are barely visible on screen because we actually would have been able to reduce infection numbers to less than 1% of what we've seen in COVID. I think that would be a major achievement. We followed the methodology by Rachel Glennerster and co-authors to try to evaluate the economic benefit of that. And we estimated the economic benefit of that effect to be 28 trillion US dollars. This is more than the annual GDP of the United States. And I think that speaks to the fact of how beneficial such an intervention could be. Now I told you basically there are technologies out there that could do it. And it's hugely beneficial if that would happen. Question is, why don't we have these drugs then? And to address that, let's look at how drugs are developed. It all starts with early stages of research and development. And afterwards there are different stages of clinical trials, after which hopefully drugs get market admission and are able to enter the market. Those early phases of R&D are oftentimes funded by government grants.
And if those approaches show merit, we see the further development in biotech startups often funded by investors. After a certain stage, these pharma companies get in, invest themselves, fund late stages of clinical trials, and bring a drug to market. However, in our case, the market would be a pandemic. And the problem is, no one knows when the next pandemic's going to happen. Therefore also pharma companies do not know whether they will actually have a market to sell their drugs on. So they don't know whether they will make a profit of that. And that really prevents them from investing in the first place. But if pharma companies will not invest, investors do not have an exit option, so they cannot justify their investments as well. That leaves us with those technologies in very early stages of development. But in that way, we are not able to have these drugs early in a pandemic, because we need to run through the whole development once the outbreak hit. The good news is, if we can't solve that market failure at the end of that chain, we would enable pharma companies and investors to play their role and invest in the development of these drugs.
And that's exactly what we tried to do with our proposal for an advanced market commitment for broad-spectrum antiviral drugs. With that, we would uncouple the occurrence of a pandemic from the actual market case for investing in these new drugs. We've heard earlier today that something similar, an advanced market commitment from pneumococcal conjugate vaccines, has been established by the faculty directors of the market shipping accelerator and that we've been able to learn how great the benefits have been. So in principle, what we try to do is order a drug that does not exist yet, and guarantee that we will buy it once it's successfully developed and gets market admission. Now, when we buy it, we will pay a price. That price will have different components. The biggest part of that price will be paid out directly after successful development. But there will be additional parts of that price that will be paid out later in time. For example, when production capacity has been installed, when doses are delivered to a stockpile, and when production capacity remains maintained.
That way, we ensure that we not only have a drug with market authorization but actually have doses at hand when we quickly need to react. Now, another big part of our work at the market shipping accelerator has been to work on how much money would these drugs need to receive to actually create the incentive for pharma companies' investors to invest. So we looked at different data from industry about success rates, so the difficulty of that development, as well as its cost, and came up with our core estimate that our advanced market commitment for broad-spectrum antivirals should put out a total price of 3.5 billion US dollars. That clearly is a lot of money, but I think it's really worth it. I told you about the benefits we have seen in the COVID-19 scenario. Now, the next COVID-like event will not happen next week, or at least I hope so. So we need to take into account that that will be future benefits that only occur with a certain probability. So as economists, we want to look at expected discounted values, and the expected discounted benefit of our proposed intervention is calculated at 3.7 trillion US dollars.
But that means that we have a benefit-cost ratio of 1,000 to one, which is enormous. I think what's really crucial here also, despite the magnitude of how beneficial that will be, is that it's really clear that in our case, we really only pay for success. Those 3.5 billion dollars would only be paid out if we have successful drug development. That in combination with the very large benefit-cost ratio really make that a proposal we should pursue further, and that's exactly what we're going to do. We will follow on with our work on that topic in a new organization that we will found that will work on further parts of that concept and move that towards implementation. That work will be further supported by the Federal Agency for Disruptive Innovation in Germany, and we're currently engaging with private and public institutions around the globe to also join that initiative. So that's an invite to all of you to also join us in our effort here. Lastly, I want to thank the whole team at MSA for really incredible support.
We couldn't have done all that work that we did here without that, so thank you all so much, and thank you to the team at SPRIND for making that possible. Thank you.
AUDIENCE:
(APPLAUSE)
ELIZABETH CAMERON:
Thank you, Jano. That was excellent, and I'm just going to start by saying first, I'm delighted to see a proposal focused on advanced market commitments for antivirals. There's been a lot of work coming out of the COVID pandemic on vaccines, a lot less on tests, treatments, than personal protective equipment, and as you outlined in your proposal, we need these things earlier in a pandemic to save lives. So thank you. There's also, I think it's important, and you say it in your proposal, you didn't say it in your presentation, so I think it's worth noting that as we see increases in vaccine hesitancy, having additional ways that people can be treated, especially if they're high risk, is increasingly important. I like a lot that this proposal could reward, the idea of a new organization, that it could reward collaboration between organizations, like BARDA, like HERA, that are working to develop antivirals, and I like the way that this addresses, in your written proposal, you address the regulatory challenges here, which are many.
And ideally this proposal could be helpful, I hope, in getting stringent regulatory authorities, like FDA and WHO, together, earlier, to try to figure out some of these tough challenges. It's bold, it's focused, but I have a few questions, so I'm going to dive into those. First, and I'll just hit a few of them, and then turn to you, and then I'm sure there'll be more, but just to open up the beginning. I'm interested in why you focused on coronaviruses, and you say in the proposal that it was coronaviruses or potentially influenza, and I'm just interested in your thinking about that, I'll just leave that one there. You proposed developing a new organization, I do think there's benefits, and I outlined a couple of those, but I also wonder if there were other proposals, and it would be interesting to know how this organization would work, how it would come to being, how it would work, how you would mobilize resources, as someone who is trying regularly, daily, right now, with a pandemic fund, and other issues that I work on, to try to get more funding into the pot.
It's really hard, and I do think it's worth it, just putting that up front, but I think it's going to be really hard to get this funding, so I'm interested in your thinking about resource mobilization. And then the last point, I think, is on equity. So as you look at how donors would buy-in, and get doses into their stockpile, and then how they would get more doses in the event of a potential pandemic into their stores, when the scale-up happens, I'm interested if you've thought about how this would work with international organizations, like UNICEF, and others that might potentially need to buy in in order to make this successful and equitable. I worry a little bit that we'll see more antivirals for high-income countries, but we won't see access through this proposal, and I'm interested in how you're thinking about that. I'll stop there.
JANO COSTARD:
First of all, the aspect about what would the target be for the Advance Market Commitment, that's part of a big actual list of characteristics that we need to write down, a so-called target product profile, where many things, it's like writing down what kind of drug you order. In our proposal, in the long form, we focus on beta coronaviruses. And as you said, we need to figure out why that is, why not influenza. I think it's a combination of different aspects that go into play here. The one is the question of where do we still have the greatest need. We both have at least some kind of antivirals for both influenza, A and B, as well as SARS-CoV-2 now. But according to our understanding of the area, there is still a greater need if we would look at the beta coronavirus genus than what we have in influenza, where at least we have time-flu and other products, certain candidates at hand. Other factors that play into that are questions of how actually hard or easy would it be to conduct clinical trials.
Because if we really want to have market admission before a new outbreak, we need to have the ability as a study population to run those clinical trials. We talked to several experts on that, and those were kind of undecided. What is harder, influenza or beta coronaviruses? But that is a subject of ongoing research on how to actually do clinical trials such that we can enable also clinical development as far as possible before an outbreak. In terms of that new institution, I think it is important that that is an institution that can be innovative itself. Because the full-fledged proposal is complex. It has several different dimensions. You mentioned a regulatory question. There are many others. And so there are many different dimensions in which that institution would need to come up with innovative solutions. And I think, therefore, the institution in this form needs to be geared towards enabling that. And I think, therefore, it needs to be different than what we otherwise have in the existing institutions for global health.
In terms of funding, I would separate the different dimensions. For one, the funding for the full-fledged AMC, so the billions of dollars from the funding for that institution. The funding for that institution will be far less. It will be in the millions. We have the support from SPRIND. SPRIND is committed to further support that work. If we receive prize money here, that will go into that institution. And I hope that there are private or public institutions out there that are willing to commit to that as well. Getting the three and a half billion will be a challenge. But I think there are several avenues where we can actually make sure that we achieve that goal. For one, it really is immensely beneficial. And therefore, governments really better take that approach. For another, even though this is a public question, there are private institutions around the world that are equally heavily affected by pandemics. So in my view, we should really aim for a public-private partnership to make that AMC a possibility.
LEAH ROSENZWEIG:
Great. Thank you, Jano. Thank you, Elizabeth. Yes, Kumar, Norma and then Claire.
KUMAR KARG:
So one question I have is, how much do you think the regulatory piece is a huge part of the value proposition? So this focuses on, OK, if we can estimate the total value of the innovation, maybe people will enter. But let's say you had an alternate world in which FDA, WHO, and everyone else sat around the table and said, we're going to create a mechanism by which we do fast approval of a platform where if you bring the following data, we can build the trials, and we can get you an answer in y amount of time. How much then does that change the 3.5 billion? As in, how much of this is the fact that we just don't know? Is it about getting the target right, or is it about the platform, the ability to, how long it's going to take you to get approvals? Like we just, the story we got from Dr Psaki about, hey, it's like crisis to get really bad for you to jump ahead in line to actually get on the WHO schedule. How much of all of that uncertainty? So like, imagine if you were an alternate world where you said, hey, we're like the German government.
We could also like, also work on the regulatory side on trying to get a bunch of the key players sitting at the same table. How much do you think that shaves off the uncertainty?
JANO COSTARD:
I think, unfortunately, a lot of other dimensions of uncertainty are left. Therefore, the remaining budget required for the AMC would probably still be in the billions. Because what we need to do is incentivize key players, pharma companies, investors, to invest in a space, and it's a space where they mostly have left. And making them move into that field, in contrast to doing other things. They could invest in other fields that are much more lucrative. Oncology, for example. That really needs to have significant economic incentives. It's important that we address that regulatory challenge. But it alone in itself will not solve the problem. Because what investors really don't like is if you stack different dimensions of risk on one another. In our case here, that is what in the AMC world is called a technologically distant target. So there's large technological risk. Through that comes the regulatory risk and the market risk. And that's something that investors really don't want to deal with if you add all these.
LEAH ROSENZWEIG:
We only have five minutes left, so I'm going to suggest you take both Norma and Claire's questions and reminders to the audience, please raise your hand if you have a question.
NORMA ALTSHULER:
Thanks for this. Can you tell me more about the key characteristics you'd be looking for in the leadership team for the new institution and what gives you optimism about recruiting amazing people?
JANO COSTARD:
So the leadership team, what we need to have, really, is a person that understands the industry side of developing these kinds of drugs, as well as being able to do the advocacy at a very high level for raising the funds and getting the awareness with the governments of this world, like G-7. At the same time, that person needs to be able to create a team and an institution that can continue to be innovative and evolve, because we will learn a lot along the way. And that needs to happen. The organization needs to be led by that person.
CLAIRE QURESHI:
So just two other things that you haven't touched on in great depth. First of all, congratulations on getting it this far. It's a huge lift already, but two things. One is, a lot of the value here relies on getting the target product profile correct and making sure that, in fact, it'll be the right one to solve for the worst case that comes with pandemic. For example, we now see with mpox, the new clade is highly concerning, and how do we make sure that the TPP would cover, but you're not aiming at mpox, but you get my point. The second is around, there's a lot of discussion here on actually the manufacturer or the company producing and incentivizing them. As we know in the pharmaceutical world, it's not just the company, it's a whole ecosystem of manufacturers and CROs and people supplying reagents, etc, that are critical to actually getting, you want sort of dependable manufacturing that can surge during a pandemic. How do you think about solving for that in terms of the incentives to keep that whole ecosystem growing as well?
JANO COSTARD:
It's a very important question that we not only have a list of criteria, but also no prioritization of those criteria. And for us, the three high-level main components are broad spectrum, platform-based approach, giving us the ability not only to quickly adapt, but also have other characteristics that come into play here, and the transmission-blocking. And especially that platform-based approach would give us the ability not only to quickly adapt after an outbreak, if we need to adapt that to a new target, but it would also enable us to spin out new antiviral drugs for other diseases that we currently have. And that gives us the chance to actually have production capacity up and running during peacetime, because we have current viral infections that we need to treat, and that could lead to the case where we not only have production capacity up and running, we have trained personnel, we have suppliers in place, and we could have all that organized, up and running, and economically so, before we need it for the actual outbreak.
Plus, the ability to quickly react actually means that we need far fewer doses than if we would need to react on the peak of a pandemic. So what we did is look at one alternative indication, which is COPD exacerbations, which are often caused by virus infections. And we looked at how many of those drugs are currently prescribed in the United States, and it's roughly the same magnitude of doses that we would have required in our model to react to the COVID-19 outbreak. So we would have production capacity up and running for just one other indication in the United States to the extent as we need to react to a COVID.
LEAH ROSENZWEIG:
Thank you so much, Jano. We are unfortunately out of time. We now have a 30-minute coffee break, but stick around for our second and third Innovation Challenge pitches.
JANO COSTARD:
Thank you.
AUDIENCE:
(APPLAUSE)
LEAH ROSENZWEIG:
Welcome back. I am delighted to introduce our second pitch of the day for the NeoTest, AMC, led by Dr Akhil Bansal, after which we will hear remarks from Sandeep Patel and then open it up for Q&A. And again, I will take questions from the judges and the audience. So, if you have a question in the audience, please raise your hand and I will get a mic runner to you while we're listening to other questions. Dr Akhil Bansal is a practicing clinical doctor in Global Health Researcher based in London. In addition to his clinical work, Akhil runs the AMR Funding Circle, a grant-making coalition of funders interested in antimicrobial resistance. Akhil is also a research advisor on violence against women and girls for The Life You Can Save, a philanthropic organization. His work on NeoTest has also been supported and advised by Professor David McAdams from Duke University, who is also here today. Over to you, Akhil. (APPLAUSE)
DR AKHIL BANSAL:
Thank you, Leah, for that very kind introduction. I'm honored to be here today to speak to you about (INAUDIBLE) proposed advance market commitment for neonatal sepsis. I wanna start by telling you a story. Imagine a baby has just been born to two young parents in their home countries. (INAUDIBLE) 70,000 in the state of Haryana, India. The pregnancy is uncomplicated, but the doctors have said they want to keep the baby in hospital for activation for 24 hours. (INAUDIBLE). 24 hours (INAUDIBLE). And the doctors think he is unwell but are not sure why. Four days after being born, Aryan looks more unwell and is requiring more support for his breathing and his heart, as you can see in that photo. The doctors guess that it might be sepsis, a bloodstream infection, and start him on antibiotics. Two days into his treatment, doctors say that a blood test that was sent several days prior has just come back and did, in fact, confirm a diagnosis of neonatal sepsis from a bug called Group B streptococcus.
Aryan stays in hospital receiving intravenous antibiotics and other treatments for two weeks. Throughout this time, doctors say that he is quite unwell and there is a good chance that he does not survive. Ultimately, Aryan does make a recovery and a month later his parents take him home. This is not a unique story. Globally, 2 to 4 million babies a year, mostly in low and middle-income countries, face the same fate. Aryan was lucky, very lucky, but many others are not. We can solve that. Today I'm pitching NeoTest an advance market commitment that aims to produce a rapid diagnostic test for neonatal sepsis. If Aryan's doctors had this test in hand, it would have meant that his infection would have been identified much earlier and much more easily. A bit of background. Neonatal sepsis is a bloodstream infection in babies in the first 28 days of life. It's responsible for a quarter of all neonatal deaths. That's over 200,000 deaths a year. If it's not treated, it has a mortality of 30%.
Unfortunately, our ability to diagnose neonatal sepsis is very slow and limited. The main tool that we have right now is clinical judgment and blood cultures, which take 48 to 72 hours and are falsely negative in up to 40% of cases. Physicians, therefore, are very much flying blind in identifying and treating cases of neonatal sepsis. As a consequence, we have a dual and wicked problem. We both miss many cases of neonatal sepsis, but we also overuse antibiotics because we can't be sure if a baby has sepsis or not. The latter contributes to the very high rates of antimicrobial resistance, or AMR, of 30% in neonates. AMR itself, as we heard earlier from Javier, is a huge global health crisis responsible for millions of deaths a year. What is clear is that we have a pressing global health need for timely, decision-relevant, rapid diagnostics that can tell us if a baby has sepsis or not. They would both help identify otherwise missed cases of sepsis but also reduce inappropriate overtreatment with antibiotics by telling us which babies don't.
Demand-wise, there's strong global alignment on the importance of such a diagnostic test. WHO, CARB-X, FIND, (UNKNOWN) and government agencies in many countries have emphasized the need for such a test. Also, this is something that neonatologists and physicians desperately want. Moreover, developing a point-of-care test for neonatal sepsis is technologically feasible. The natural question to then ask is if this is such a big problem, many want a solution. And one is technologically possible, why does it not exist? There are several key barriers preventing this. Firstly, the social benefit and global public good of reducing AMR is very undervalued, especially since these benefits are often more difficult to quantify and measure, and because they may be felt in a different location to where treatment is received. Secondly, although there are some promising technological approaches, there still is a high fixed research and development cost that diagnostic firms have to front. This high fixed innovation cost is compounded by the potential that for any diagnostic test that is ultimately developed, there will be post-production pressures on developers to keep prices low due to the limited purchasing power and pressures from low-middle-income countries, which is where this test would have the most value.
On top of this cost-reward mismatch, there's also some friction due to coordination problems. To date, there has been very little coordination between healthcare systems and diagnostic developers on exactly what type of test is wanted, what the regulatory pathways for its approval would be, and whether and how many tests they would ultimately use. Finally, diagnostic developers might suffer from a fear of market stealing. Whilst the first diagnostic firm has to overcome all of these challenges I've just described, subsequent market entrants, will have a lower cost of entry and an easier time, and may therefore steal some of the market. Because of this, there is an inertia and reticence for any one diagnostic firm to take on that risk of being the first trailblazer. The NeoTest AMC is a financial commitment by donors to subsidize neonatal sepsis point-of-care tests if they meet a specified target product profile or TPP. This product profile includes provisions for affordable pricing. Some specifics on how this would work.
So, firstly, diagnostic companies would sign up to the NeoTest AMC and sell their point-of-care tests if they met the TPP requirements and had clinical trial data supporting this. Then, participating healthcare providers that could be state, national or private would sign up to buy eligible tests, making a co-payment. In addition to this co-payment, there would be a further top-up payment per test that would be made from the advance market commitment POCT until it ran out. This model is based on the GAVI pneumococcal AMC model. Some numbers for this. The total AMC POCT size we've estimated is 100 million USD. This was deeply researched through market analysis considering the cost of R&D, regulatory approval, commercialization, and rollout, and through extensive conversations with diagnostic developers. Specifically, participating healthcare providers would make a co-payment of $3 per point-of-care tests. As in discussion with low and middle-income providers, this was a marginal cost that would likely be affordable in the long term.
On top of this, there would be a co-payment of $5 per test up to the total prize amount. Therefore, this AMC would subsidize 20 million point-of-care tests. Of note, more than one diagnostic developer can take part in the AMC. Moreover, we've chosen to have quite a high concentrated top-up payment to incentivize those market trailblazers like we talked about before, but also to encourage developers to scale up rapidly to capture more of the subsidy. This is an incredibly cost-effective intervention. We calculated cost per disability-adjusted life year relative to current clinical practice, and we found that it was $42 per dally when modelled for India, taking fairly conservative bounds across the board. The benefit of this comes from two places. So, firstly, per million point-of-care tests, 18,000 cases of neonatal sepsis were treated that would otherwise have been missed. And secondly, per million point-of-care tests, we avoid 200,000 unnecessary prescriptions of antibiotics. Our models also suggest a conservative health-saving benefit for healthcare providers.
The benefit of this AMC is that it could be a catalyst for a large, self-sustaining marketplace. Coming back to that underdeveloped market that we spoke about before, we address those market failures by appropriately rewarding the trailblazing first mover. We offer them a considerable return on investment to overcome R&D costs, market uncertainty and those other factors. Then, subsequent movers will benefit from those uncertainties being resolved, reducing their cost of entry and incentivizing more diagnostic firms to jump in and produce tests, hopefully creating a naturally competitive market. And then finally, through the uptake of diagnostic tests through the AMC, it will hopefully demonstrate that such a rapid test is clinically useful and beneficial, the goal of which would be to encourage demand for more healthcare providers and open up a broader global market. In many ways, I think this is quite a rare and unique opportunity, as we can catalyze a market that will continue to generate impact and health benefit on its own.
I think it's important to state that NeoTest has significant traction. With the help of the University of Chicago team, we've designed a credible AMC model. Moreover, I've assembled advisors who are world-leading experts in the space. I'm getting buy-in from participating low and middle-income countries and in building collaborations with organizations like WHO and CARB-X. With appropriate resources, we can build the infrastructure that is needed for NeoTest to become a reality and to deliver a significant positive global health benefit. Our next steps are, firstly, to continue to work with health providers, state and federal and low-middle income countries to secure their interest and commitment in participating in the AMC. Secondly, to formalize the structure and coalition of organizations that would be responsible for administering and overseeing this commitment. And finally, to raise the funds for it, which we envision would be both from private and public funders. We hope that you will join us on this journey.
Thank you. (APPLAUSE)
SANDEEP PATEL:
Thanks, Akhil. First of all, thank you for elevating this issue. I spent the last few years on pandemic preparedness and response and sepsis has always come up as just a major unmet medical need that we constantly undervalue and underinvest in. So, just thank you for working on that. The other part of my perspective on pandemic preparedness and response is that we tend to look for problems that don't exist yet. We look for future pandemics and bio crises. But you pointed out two things that are just routine problems every day, AMR and sepsis. I think it's really important that we find those problems and solve the ones that are a problem today all over the world and our problems during bio crises as well. So, thank you for all that. I have a few questions. So, I'll just maybe run through them and then stop there. I'm curious about the standard of care in this scenario. And how you imagine a test like this to change that if that's what you imagine and how decision-making will actually change on the ground?
You’re a clinician. And so, I just would love to hear your perspective on that. The other thing related to that is that, unlike vaccines, I think diagnostics are a really tough market as you know. And it's very hard to both make money and it's also hard to get new products adopted even if there's a clear demand signal. So, how do you imagine that process working out with the AMC 'cause I think it's going to take time to get that adoption going. Or if that's a problem that you've identified. The other question is curious about how you imagine the actual... If you're writing a contract for an AMC, who's party to the contract? Are you looking at purchasers at hospitals? And so, the target countries you have, how you imagining that coming together 'cause again, diagnostic is a tough market in terms of how products get distributed and sold. And then last question, you talk about a new org. But do you imagine or have you ruled out working with existing orgs? There's plenty of global health organizations that specifically focus on diagnostics or volume guarantees and things like that.
So, is it also feasible to work within those systems and have the thought within that rather than trying to create a new organization?
DR AKHIL BANSAL:
Great questions. I've run them down, so I'll try and go through them. So, the first question was on standard of care and how this test will impact standard of care. Right now, as I outlined in that story, the main way that we diagnose and treat neonatal sepsis is we go by clinical judgment and we empirically prescribe antibiotics. So, we prescribe them without a result. And that's because blood cultures is the only diagnostic modality that we have available now, and that takes two to three days. So, doctors have to trust their clinical judgment there. The issue with that is neonates don't present with a clear set of symptoms that tell you that they are septic. Whereas in an adult they might be a little bit more obvious, in a baby, the signs and symptoms are very, very nonspecific. They might be crying, they might be suckling more, they might have cool peripheries, they may or may not have a raised temperature. So, because of that, physicians are very much flying blind in this area. The second question is how is this going to impact standard care?
I think it's important to flag upfront that we thought about this test and co-designed it with the physicians and neonatologists who would be using it in low and middle-income countries, and we've designed it as an adjuvant to their clinical judgment. Rather than be seen as something that's an opposition to them exercising their clinical judgment, it should be integrated into that. Speaking more specifically of that. So, let's imagine you work in a neonatal unit and you have 40-50 babies, some of which you suspect may have sepsis and some of which you don't. So, we risk stratify babies into four groups, some of which are very clearly septic. In those cases, you're not going to use a diagnostic test, they're clearly septic. They get the antibiotics. Then you've got, on the other end, babies who are very clearly not septic. You're also not going to use a test there because how is it going to change your judgment? You still don't think they have sepsis. But actually, there's a huge middle ground there.
And it's a spectrum of where baby may or may not have sepsis, and clinicians may or may not give antibiotics. And that is where the test would slot in terms of where in the healthcare system it would be used. We imagine this would be used throughout the healthcare value chain from district, local community hospitals up to tertiary hospitals because it's a rapid triage test that we would hope gives results in under 30 minutes. We think that it could be used across a couple of settings. The second question was about diagnostics being a tough market and how are you going to make sure they're adopted. Part of the reason that I think we need an AMC is because it's linked to the adoption and use of a test. So, I like to draw an analogy to two other pool incentives that have been used in the diagnostic AMR space before. They're the Longitude Prize and the NIH Innovation Challenge. They awarded ten and $20 million, respectively, to people who had an innovation for an AMR diagnostic. Whilst those prizes did push the envelope of R&D, all of the tests that have come through there unfortunately are still sitting on the shelf.
So, I think what's really nice about this is that you're linking it to adoption. When it's being linked to the adoption through the AMC, you can also collect more data through your M&A. When you've got a government, let's say, India participates in this AMC and they've got one state, say, Kerala participates in this, we know when they're participating in the AMC, roughly how many diagnostic tests they're using. We can go there and see what impact it's having, what impact it's having on cost and health benefit. And so, we can generate much more rich data that will hopefully also help with adoption. The next question you asked, I'll actually go in a slightly different order was, would you need a new organization to do this? The answer is no. I think that there are credible organizations who could do the various different parts of this. So, my mental model for this is I think there's three things we need for this to be a reality in terms of the AMC. One is we need the health and economic expertise to make sure that AMC mechanism works.
Secondly, I think we need someone who can house and disperse the top-up payments that would be made. And then thirdly, we need someone who's really good at in-country work to help us build those partnerships with low-middle-income countries, and also help with that monitoring and evaluation piece that I've said before. So, I imagine we're going to have a coalition of organizations that fit some or all of those. And I think for each of those organizations exist. And I think now we're at a really critical junction where we can mobilize those organizations and get them now all to sit together and to make this work.
SANDEEP PATEL:
One quick follow-up question. Sorry, I forgot this. What are your ideal technologies? Are they instrument-based? Are they not instruments? And if they're instrument-based, how does that fit within the AMC structure that you've proposed $5 per test? Who pays for the base cost?
DR AKHIL BANSAL:
So, I think it's a really good question. What would the test look like in your hand? I think the model that we have for the test looking in your hand is similar to the COVID rapid antigen test that I'm sure we're all quite familiar with. So, we want something that can be done by someone with relatively little expertise in training that will give... It has to be a two-step process or less and give a result in under 30 minutes. We wouldn't necessarily exclude someone having a white box machine, but we would have to figure out exactly what pricing that would need to have to make sure it stayed under that price. But our preference would be for something that is a standalone little device that you can use because that is really critical for scalability. So, that's the test that we envision. And in terms of where we are in terms of technological readiness level for that, because I think that was an implicit question there. I said in the talk that such a test is technologically feasible, and I don't think I said that flippantly.
We did a mapping of where all the diagnostic companies are now working on this and where they are. We have some that are in universities still developing their tests. Some are starting that clinical validation trial step, and they're using several different technological approaches. So, we know that there are some diagnostic companies that are already in the pipeline. So, we have some assurance that this could be done. And what we hear time and time again from diagnostic developers is, yeah, we could probably do this, but no one's asking for it. There's no demand. And that's a really reassuring thing for me to hear because it tells me that the AMC mechanism is more likely to work.
LEAH ROSENZWEIG:
Thank you Sandeep. Are there questions from judges? Yes.
ALEX COHEN:
So, it sounds like the goal here is to get manufacturers, pharmaceutical companies to shift effort away from something else toward developing this new diagnostic. Do you have a sense of what they might be moving away from? Are we moving folks away from other sepsis treatment and screening? Are we moving away from other, maybe less impactful things?
DR AKHIL BANSAL:
It's a tough question to know exactly the answer to in terms of what they'd be shifting their priorities from and to. The thing I would say firstly on that is that diagnostics in general receive very, very little money. So, I'd imagine that if it was to be shifted from something, it might be from another portfolio entirely. So, not from diagnostics or if it's within diagnostics, if we think about the three or four biggest companies like bioMerieux working on it. They do work on acute respiratory tract infections. They do work on adult sepsis. So, I'd imagine that perhaps they would shift some of their resources from there across.
NAN RANSOHOFF:
A related question to that. Have you talked to these companies and tested that this is the incentive structure? Is it compelling enough to get them to work on this? What have been the early indications there?
DR AKHIL BANSAL:
We've spoken to quite a few about this. They are reserved to say what amount of money it would take for them to shift their priorities. And I also am not sure if they would give a completely frank answer to it. But talking to companies La Roche or like bioMerieux, we've gotten answers on what the cost of R&D, regulatory approval and commercialization would be, and we've plugged those into our model in terms of how large the AMC should be and what the top up payment structure should be. Whether or not they then follow through with that, it's a bit of a chicken-and-egg situation. But we have factored in what the activation energy and cost would be from them into our pricing.
LEAH ROSENZWEIG:
Any questions from the audience? Yes.
ATTENDEE:
Just curious if you have a sense of the technical risk when you brought this up to people who work in diagnostics. I remember working in the ICU. Sometimes there would be patients with pneumonia of unknown origin, and then sometimes you do this.... I think they call it the biofire diagnostic panel. I don't remember the yield on that, but it wasn't 100%. So, do you just have a sense of is there a gold standard that's maybe too slow? That does work but it's just too slow that you think you would match or... Just a bit more there.
DR AKHIL BANSAL:
Standard is blood cultures, which are shocking. They often give you false negatives and they take a long time. In TPP, we've set up sensitivity and specificity minimum parameters of 90% for each of those. But given that right now you have very little other than your clinical judgment to go on, even if a test is 90% sensitive and specific, which is what we've set out, it's far better and gives the clinicians far more information to update their judgment on whether a baby has sepsis or not right now. So, I think even though, hypothetically, there could be some risk of a clinician, ordinarily would have prescribed antibiotics, but they got a negative test and therefore didn't, because of how much we overprescribe right now, I think that risk is relatively lower.
LEAH ROSENZWEIG:
Are there questions?
KUMAR GARG:
I guess maybe Sandeep you can ask your how well do we understand sepsis question 'cause, I guess, what is it that when they think the test... Let's say the test works really well and they're like we don't think it's something that antibiotics would work. What is the alternative path that they're going down which is do we understand it well enough to... 'Cause you could imagine a world in which part of the reason is prescribing antibiotics is bad. That's why they don't wanna do it. Versus, oh, if I don't think it's something that antibiotics work, I'm now going to double down on this other thing. And what is that when it comes to... Maybe you can add to this. But that's one question of what is their mental model for the non...
SANDEEP PATEL:
Well, first of all, what do you imagine the test to be? Actually, maybe that's another question. Are we looking at the presence of a bacterial infection, which I think is the assumption going in or more immune dysfunction that results from an infection? I think there's a lot of debate in the field of what sepsis actually means.
NORMA ALTSHULER:
I think the other part of that is if the definition of sepsis continues to change as it has in the past, should we be doing more basic research? First, is now the right time?
LEAH ROSENZWEIG:
And before you answer, I think Claire had a last question just to pile it on.
DR AKHIL BANSAL:
We've got a Little train going.
CLAIRE QURESHI:
I was going to actually ask you about the... You mentioned bioMerieux and La Roche. A couple of Indian companies emerged during the pandemic. So, are you looking at local lower-cost manufacturing capacity, for example?
DR AKHIL BANSAL:
I'll answer that one first. Yes. We've been talking to diagnostic developers in low-middle-income countries as well because they tend to be working on tests that are cheaper. And there, of course, is a preference for endogenous tests. I think they're also more likely to be rolled out easier. So, we've been talking to them as well. On the whole, they tend to be smaller. But I think that there are some that are showing promise, and I think the pandemic has actually brought to the fore the capacity of some of those diagnostic companies. Going backwards, we were talking about what would this test actually be testing for. And what's the interaction with that with the changing definition of sepsis? So, I think I don't really need to state this, but one of the whole benefits of an AMC is that it's solution agnostic. So, there are a couple of different ways that we could do this. So, the vast majority of cases of neonatal sepsis and by vast majority over 98% are bacterial infections, so we would be telling whether or not a baby has a bacterial infection or not.
And... Sorry, I just lost my train of thought there. So, apologies. What are we talking about?
LEAH ROSENZWEIG:
Changing definitions.
DR AKHIL BANSAL:
Oh, yes. So, what would the test do? So, in terms of the ways it could work, what I see if the companies that currently exist out, some of them are looking for a host immune response. So, they're looking at biomarkers. Sorry, this is a bit technical, like IL-6, MXA, CRP, procalcitonin. Some of them are looking like multiplex PCR or lateral flow immunoassay. They're just doing pathogen ID, but they're doing the eight to ten organisms that are 97% of all cases of neonatal sepsis. Some of them are using completely novel methods like DNA melt analysis or electro-sensor chemical tests. I mean, the potential solution space here is quite broad. In terms of the changing definition of sepsis, I think what is sepsis, a bloodstream infection by a bug has stayed largely the same, as our knowledge of the pathophysiology and the immune cascade that underpins sepsis improves. That's a great thing for this because that just increases the surface area of the solution space. Although we don't understand a lot about how the immune system works in neonates, we probably have enough information out there and enough potential different technological approaches that we could come to a test.
So, I would say that we probably have enough of the theoretical underpinnings. But on a more meta level, like in medicine, we have treatments and work on new diagnostics for therapeutics when we have a very poor understanding of the pathophysiology anyway. So, in my eyes, that should never be a barrier, 'cause otherwise we're probably going to wait forever.
LEAH ROSENZWEIG:
Great. Join me in thanking Akhil. (APPLAUSE) Last but not least, we have our final pitch from Duke-Margolis Institute for Health Policy team led by Dr Mark McClellan on pull mechanisms for repurposing generic drugs, followed by comments by Kumar Garg and then Q&A. Duke-Margolis combines Duke University's capabilities in research, education and engagement to inform policy making and implementation for better health and health care. As part of its interdisciplinary approach, Duke-Margolis frequently collaborates with other departments at Duke and was supported by researchers from the Duke Global Health Institute and Department of Population Health Sciences for this innovation challenge. Leading the team from Duke-Margolis and presenting the pitch today is Policy Research Associate Beth Boyer. With a background in global health, Beth focuses on policy related to biomedical innovation and has been leading work on advancing drug repurposing, in addition to other projects related to drug development and access.
Over to you, Beth.
BETH BOYER:
So, I'm sure that everybody in this room is aware that when new drugs enter the market, they're becoming increasingly more and more expensive. And the high cost of drugs has become a crucial issue for our patients, providers and policymakers. But what if there were low-cost generic drugs already on our pharmacy shelves that could offer affordable, new and life-saving treatments for patients? Well, most drugs have more than one potential use. In fact, the first FDA approval is usually just the tip of the iceberg for a drug. And conducting research on new uses for generic drugs, also referred to as generic drug repurposing, can help unlock the full potential of these drugs. Generic drug repurposing also offers multiple advantages. It requires fewer steps, lower research and development costs, and results in cheaper drugs. It also can help address R&D gaps where there may be commercially unattractive areas for research and development. There are some examples of generic drugs that have found new uses already.
So, one popular example from the COVID-19 pandemic is the drug dexamethasone, which was repurposed as a treatment for hospitalized patients during the early days of the pandemic. Another example is the drug thalidomide, which was originally used as a sedative and later was repurposed as a treatment for leprosy, and then later was again repurposed for multiple myeloma. So, these examples demonstrate the potential in existing drugs. However, most generic drugs are unfortunately never researched once they become a generic for additional uses. And this is a shame because when a drug becomes generic, this is a moment that's ripe with opportunity because it's now more affordable and accessible than ever. So, why aren't firms pursuing this opportunity? There's a few key reasons for this. So, although generic drug repurposing is cheaper than traditional R&D, it still requires upfront costs in clinical trials, which are expensive. And if a firm is going to invest in those upfront costs, they wanna be able to ensure they're going to recoup the cost of that investment and also be able to turn a profit.
So, a firm could technically apply for a patent for a new use. However, these are almost impossible to enforce. So, this means that they are going to be sharing the market with generic competitors, which drives the price of the drug down, and this also results in limited profit margins. This ultimately makes this an unattractive option for firms to invest in. It's also worth mentioning there's regulatory hurdles as well that can create additional disincentives here. So, creating financial incentives has the potential to unlock these new uses in the generic drugs. As we've learned today, there are different types of mechanisms. And there are some push funding mechanisms already available for generic drug repurposing. However, the funding levels are pretty low still. And we also heard today that push funding has its limitations. It picks winners in advance, which means that there may be firms out there with relevant expertise, or maybe private knowledge on new uses of drugs that the funder is not aware of and they're not being picked.
Now, pool funding can be a complementary mechanism here. It wouldn't select the winners in advance and instead would reward the firm that finds the new uses for generic drugs first. This is important because innovation can come from anywhere. Sorry, I just lost my place. And this is important because... Oh, I'm sorry. So, drug repurposing has many potential different applications as we explored in our proposal. So, we determined that depending on which market that we're looking at, there may be different designs of pool mechanisms required. So, today I'm going to be presenting to you two different mechanisms. So, first, we looked at a mechanism that would repurpose generic drugs for common diseases in the US or other high-income countries. And the second one would be for diseases such as neglected diseases that primarily impact low and middle-income countries. So, for the US common disease model, we are proposing a mechanism by rewarding the firm every time that drug is used for the new indication.
So, in other words, every time that that drug is prescribed, the firm would receive x amount of dollars up until a certain amount of money, whatever that reward amount would be. Another key component is that we have to track the data for this as well. So, we have to track prescriptions of the drugs used for that new indication. And this is possible by tracking claims data. So, we also considered a few key design characteristics for this mechanism. So, the first one is that we would require FDA approval for this. Now, this requirement goes a long way to support uptake and reimbursement of the drug. Second, it's important for us to emphasize here that the reward would only go to the firm that is sponsoring the research and development and bringing the drug through the regulatory process. Now, other generic firms on the market that are selling the drug can continue to sell it, and they can sell it for the new use. But that reward would only go to the originator firm that did the research.
And this is important because it ensures continued affordability and access to that generic drug. Third, we want this to remain disease-agnostic so it can be open to any opportunity for any disease. And fourth, we wanna pay more for value. So, higher value discoveries receive a higher payment, and then maybe discoveries that only offer a marginal payment compared to standard of care. Now, for neglected diseases, which... For those of you who maybe aren't aware, neglected diseases are those that disproportionately impact low and middle-income countries. And because of that, they have low ability to pay for drugs, making it an unattractive market for firms. This has left a lot of treatment gaps for patients. And so, drug repurposing could offer another potential pathway for drug development. But the model that I just proposed for you as common diseases may not be feasible for neglected diseases because of that data tracking component. This can be difficult in lower-income settings. So, I'm going to present to you a design that has four key differences.
So, the first difference is the way that we make the payout. Instead of linking it to use, we're going to be offering a one-time lump sum payment upon success. But importantly, our success metric is also different here. So, instead of requiring regulatory approval, we are going to require inclusion on World Health Organization treatment guidelines. And we determined that this is the most impactful way to ensure that it's adopted by impacted countries and included in disease elimination programs. Third, we would also need to set a list of eligible diseases for this program. And there are some pre-existing lists of diseases that are considered neglected that can be drawn on for this. And the fourth key difference is we also wanna make sure there's some component of this that's supporting access. And so, this could be through something like a volume guarantee contract that is in addition to the payout mechanism. Now, I'm sure you're wondering how large a reward are we talking about here. And so, as I mentioned previously, we want to reward for value, and this applies to both mechanisms.
So, we wanna make sure we're incentivizing the highest value discoveries that we can. So, therefore we're going to be scaling the reward amount to the value of the drug up until a certain amount that would be reasonable for a funder to pay. Now, for common diseases, this would be up to $550 million per repurposed generic drug. And for neglected diseases, it would be up to $200 million per repurposed generic drug. We base these maximum amounts based on what we estimate as the necessary amount to incentivize firms, but we also had to set this cap to ensure that we're not excessively rewarding firms. You may imagine if we're scaling to health impact, there could be diseases where there's no current treatment. And so, having a new drug would be a significant health impact, which might become infeasible for a funder to pay. So, now we have an idea of what the reward amount would be. We wanna know is it worth it. Is it worth investing in this pool mechanism? So, on a face value, if we compare generic drug repurposing to traditional drug development, the cost to bring a drug through all the development process to market for new drugs is about $2 billion, according to some estimates.
But we're saying here that the most a funder would have to pay would be $550 million to repurpose one generic drug. But we also decided to take a look closer at the societal returns that could be generated from this as well. So, since we have two different mechanisms here, we decided to take a few examples within each of these to calculate what the societal returns would be. And what we found was that for every $1 invested by the funder, for common diseases, we could find returns from five up to $38. And then for neglected diseases, we found even greater societal returns all the way up to $1,600 for malaria as an example. So, we feel like this really demonstrates the potential here for generic drug repurposing to have high societal impact. So, when we're thinking about next steps, we understand that implementing a pool mechanism has challenges. We would need someone who is going to fully fund and manage the program and take that on and make it sustainable. So, what we're suggesting today is that we create a pilot program that would require a funder to commit to rewarding just one or two generic repurposed drugs up front, and this could hopefully draw in some quick wins of promising lead candidates and be a proof of concept for this idea.
And then that can be used to inform a more sustainable long-term program, and maybe any other additional steps that might be needed, such as legislation. So, in summary, it's our view that a pool mechanism for generic drug repurposing can really do a lot to unlock the potential of these drugs already on our pharmacy shelves to find a cheaper way of doing R&D and also to find more affordable treatments for patients. Thank you so much. I also wanna acknowledge the incredible team that worked with me on this, and I'm happy to take your questions. (APPLAUSE)
KUMAR GARG:
Awesome. Well, I'll kick us off. I think this is really timely. There's a huge amount of conversations about cost of drugs in the United States, and I think drug repurposing often comes up as an area for activity. Just a couple of things I'll just throw out as things I thought were very clever. I thought the payment mechanism, especially for the US side is very clever. This idea that the firm that does the work gets to then make it back irrelevant of the fact that the generics will get produced by lots of other players and they might step in anyway to fill in the extra volume. So, I think that idea is very clever. But I guess a couple of questions, and I'll just list them off that we can go through. One is I was trying to think about the persona of such a firm. When I talk to folks in industry, they'll say, OK, let's say we wanna be acquired by pharma. They'll say, OK, what's the lifetime value of the drug we're working on? Let's say we think that's $10 billion. So, then we say, what are the chances that we make it through all the phase trials?
So, then they'll go to pharma and they'll say, let's come up with some partnership where you cover a bunch of R&D costs while we get through these different steps. And they'll say, OK, this is... And then you, as the pharma, will have a bunch of those bets across a bunch of candidates and you'll say some of them will pay off. So, in a world in which you have the 550 million, is it that you should use that same mental model? It's like an enterprising startup. It's got some idea. And basically what it's going to do is it's similarly going to go out to pharma and say, what we're chasing is the 550 million payoff, or is it that these are actually academic centers or others where this becomes a way for them to almost build a new income stream to say, part of our business model is going to be now doing this early stage validation and testing, which is the right persona, a firm that would want these specialty payments? So, that was one thing that jumped out to me. The second one was - I get the point of you got to start with a pilot - but one question that jumped out to me is, let's say you say, well, we have enough money to do one or two.
I could imagine from a strategic standpoint, unless you know you're in pole position to get that first award, you might not wanna go for it because you don't know everyone else in the market. I get the value of anybody could play, but you're like, maybe there's someone who's sitting on something that's an off-label thing that's actually really valuable. They could rush to show the indication what are the chances that we're going to be the first two? And that means nobody plays. So, you need to have a credible commitment across a bunch of candidates to make the math work because again, you don't know. So, one question I had was do you wanna have a way to signal who else is in play? Let's say you did a milestone payment that you're going to pay to everybody to show some credibility. And then you're like, oh, there's 20 other players. It's worth me continuing versus I don't know how much repurposing potential there is out there and how much I could do. And then the final one was just this question around I don't really know the world of off-label use.
And so, I was trying to figure out in my head this said the trigger is FDA approval. Like the FDA says. I was quizzing Sandeep on this earlier, but this question of, well, do you need FDA approval for a doctor to prescribe and get the reimbursement? It's like, well, they actually look often to the relevant practitioner communities which say this thing has now been treated as safe. So, do you wanna set an FDA approval or is that really about reimbursement and other things? So, those were a couple of things that jumped out to me, and then we'll open it up.
BETH BOYER:
Thank you for those first questions. So, starting with your first one, like who is the target we have for this? I think that's a great question. It's one that we've gone back and forth on a lot. I think in an ideal world, we do want to draw in the pharmaceutical firms and get them interested in this and find this has to be attractive because I think you could imagine that maybe the originator of a drug there, they made it like 50 years ago, but they have all the data already. So, you could see it being easy for them to pick it up and continue the research. But I think we also want this to be open to non-traditional developers as well. There's a lot of non-profits in the space right now. There's a lot of academic research already happening. I think the challenge, though, is... The next part I'll get to the FDA approval requirement, which I think is more suited for firms that have experience with that process. I think that's more of what we're thinking of here. And then as far as the pilot... And you raised a good point here.
I don't think we've really thought through the specifics of it enough. I think there could be a way that... Say just, for example, ARPA-H were to run this pilot program. There could be a way that some firms would reach out to them when they say like, we're going to pursue the pilot. And they would have a few firms that announce or sign on to being part of the program. And that way that you can know how many are in play. I think that's a really good point but something we hadn't really thought of yet. To your next question about FDA approval, and this is one that I was prepared to get 'cause we've gotten this question a lot. So, I have a backup slide. So, there are a lot of reasons why we decided to have FDA approval as a requirement. So, first of all, a lot of the literature we found on drug repurposing has also pointed to the benefits here, but it gives confidence to providers and patients that they can be prescribing this. It helps to address liability issues, data collection issues. I think reimbursement is the big one.
We found that when we looked specifically at CMS and it does not reimburse off-label use, except for in some rare occasions, there's a whole process you have to go through to make that happen and authorization process. So, it becomes a lot more challenging. And so, we really feel that FDA approval it really supports greater uptake and reimbursement. And also it's important to mention that use of the drug is part of the mechanism. So, if you want to be used more, FDA approval is a big step to helping increase the use of that drug. So, that's a great question.
KUMAR GARG:
Thank you.
LEAH ROSENZWEIG:
Are there questions?
ELIZABETH CAMERON:
Yeah, thanks. Great proposal. I wanted to ask about the global piece, the volume guarantee, and it struck me. I like that you have the different model and that you're using the WHO guideline integration. I'm wondering, though, whether that volume guarantee requirement whether the payout is actually enough. Talk me through a little bit how you'll get them to actually do the volume guarantee part and how that works thinking about manufacturing and global availability.
BETH BOYER:
That's a great question. It's something I had to skim over very quickly here. Let me just go... So, here's a slide where I've... It's a little complicated, but this is how I've mapped it out. And so, the idea is that we have the one-time prize payment that would go to successful developer, But then the developer could, in some cases, maybe be an organization like DNDi that maybe doesn't have the manufacturing capacity. And so, we want to make sure that there's some way of still making sure that the drug was being purchased and being used in these countries. And so, the idea with the volume guarantee would be that the funder of the mechanism would also guarantor this contract, but then would also be engaging activities to encourage procurement. So, whether that's through an agency such as Global Fund, maybe it's working with countries, maybe it's working with a group like Med Access who can help to also create some demand for the drug. So, this is the general idea of how we're thinking through that volume guarantee.
It's being an add-on. It's not really any additional funding to the developer, but just another step to make sure that the drug is reaching the countries that need it.
ELIZABETH CAMERON:
So, the donor would handle it working with the developer. Got it. Thanks.
NAN RANSOHOFF:
There's two proposals here. If you had to choose one, which one would you choose? And do you think there's any value in testing them sequentially?
BETH BOYER:
Oh, that's a really tough question. I mean, my background's in global health, so I feel like I was more drawn to the neglected disease mechanism. But I do think there's so much potential in the US one, and it could maybe even feasibly be used to find treatments for neglected diseases. So, I think there is a lot of potential there. I do think there is a possibility to be able to test both of these at the same time because I think they would require completely different funders. So, I think typical global health funding organizations would probably be the most likely funder for the neglected disease mechanism, whereas I think the US common disease mechanism would probably be more likely to be funded by the government. So, I think it is possible to be able to run either a pilot or at the same time, be setting up programs for both of these.
SANDEEP PATEL:
So, on the US side. So, if a participant runs a trial for repurposing and the result is negative and they don't get any label expansion or FDA approval or anything, basically they don't get anything from that. Is that right? How do you think about the risk there 'cause that's an enormous amount of capital risk there on that front? And do you actually imagine people being amenable to participating? And then related to that, I noticed it's open-ended in terms of you're not prescribing any particular areas. I would think that maybe to start off, it would probably make a lot of sense to pick a high-need area and then actually incentivize multiple bets and actually create an infrastructure, like a trial infrastructure or something, where you can actually shave off a lot of those capital costs and reduce that, spread the risk at least. So, I was curious if you thought through some of those other mechanisms.
BETH BOYER:
Those are great. I'll start with your second question first. And that's something that we've gone back and forth on a lot, whether or not we should specify disease area. The reason we went with it being open-ended is because we don't really know where the best matches are. So, if we were to limit the disease scope in any way and realize, oh, there's really no good candidates for generic drugs that could be repurposed, then you miss out on a lot of other opportunities. So, we don't necessarily have a strong sense of where the best opportunities are, it's really just so unexplored, I think. There's some really exciting things coming forward, like AI platforms that can do the matching, which might help better inform this, but it's still very new and underway. So, I think keeping it open-ended has that benefit. We just really don't know where the best matches are. And then to your first question on the risk of failure to firms. That is something we've thought about a little. I can't say I have the best answer for what that would be... I think we would hope that ideally, this would also draw in additional push funding that would help to fund some of those early-stage trials and to help get them moving.
But I do see that there is still that risk of failure. I guess the other thing worth mentioning, though, is that the overall costs are still low compared to the other... Yes, they would take on drug development. Yeah. But it's still something to consider, though.
LEAH ROSENZWEIG:
To go to an audience question right here. Please introduce yourself, please.
LATE LAWSON:
Thank you for the presentation and the model. My name is Late Lawson. I'm chief innovation officer with Oxfam. One thing in terms of process that we work on is also the feasibility and the validity of the idea. So, I'm just curious if you have tested some of those ideas with maybe potential donors or even pharmaceutical. If so, what feedback have you received? I'm just curious about that aspect. Thank you.
BETH BOYER:
Yeah, that's a really good question. So, I have had one conversation with someone from a US funder who actually seemed like they might be more interested in the neglected disease mechanism, which was interesting. We haven't had a lot of conversations with funders yet though. We were having conversations with firms to see if this would be something that would interest them to incentivize development. But I think initially what we've found is that there is definitely interest in the neglected disease mechanism for a few funders. But yeah, we still haven't gone out and really pitched this idea too far with them.
LEAH ROSENZWEIG:
Are there audience questions?
NEIL HACKER:
Hi. Neil Hacker. This gets back to the capital expenditure point. But for the common diseases case, there's no prize and just a payment on use to the original person who pushed the drug through. Just to clarify, does that payment on use? So, even if it was a different generic drug manufacturer that produced the drug, if it was prescribed for the case, the subsidy goes back to the original one who funded?
BETH BOYER:
Yes, that's correct. So, the subsidy is based on all prescriptions, no matter who the firm making the drug is. So, it would capture the entire. So, for the US market would capture the entire US market for prescriptions of that drug for the new indication. And that would go only to the firm that did the research.
CLAIRE QURESHI:
Sure. Just a quick, can you very quickly talk through how you rack and stack assess the various candidates that come back in terms of social value? Can you talk a little bit more about just... I was thinking a little bit about if I understand the point on keeping the aperture quite open because you don't know where the best things will come from. On the other hand, on the back end, it's hard to evaluate when they're so heterogeneous. And I wondered how you thought about just the assessment piece.
BETH BOYER:
That's a great question. I mean, that definitely was challenging. And it was easier for neglected diseases 'cause obviously we could select a few from listed exist. But for the US common diseases, honestly, one big consideration was how feasible it is to model the health impact. We had considered doing diseases such as obesity or depression, but those are a little bit more difficult 'cause there's so many other factors at play. But we wanted to try to pick some diseases where we had seen some signals of where there was some drug repurposing action happening or some research, and also where we felt that there could be significant impacts. Like preterm birth was selected because there is no treatment at now to prevent preterm birth. So, we felt like this was exciting example. And there is some research being done on potential repurposing there as well. So, that's what we thought about when we selected those diseases. But I think it would be interesting to explore other ones and maybe go a little bit deeper and see what the different potential societal benefits would be.
LEAH ROSENZWEIG:
Alex, did you have a question?
ALEX COHEN:
Yeah. This is more for the neglected tropical disease side, but is there a concern about drug resistance when we're repurposing an old drug? A concern that we're expanding it to more people, more risk of resistance?
BETH BOYER:
That's a really good point. I think it would depend on the class of drug we're talking about. And it is open-ended to being so many things. I think that would be something we'd wanna weigh in this. As we've thought about the weeds of the mechanism is that there should be some like technical advisory group for the mechanism, too, that can be reviewing some of these potential candidates and can inform the developer early in the process if this is something worth pursuing as well or not, and maybe they can flag issues like that.
LEAH ROSENZWEIG:
Yes. Last question.
ATTENDEE:
Is there a way to sell this generic drug repurposing thing to health systems as... Negative results are useful too. So, some drugs are used off label and this costs money, and it's sometimes unclear what the evidence base for this is. So, there might be a case for if it works, great, this company gets some money. If it doesn't work, health systems can stop spending money on this. I guess if the political economy for not paying for a drug after a trial shows it doesn't work there. So, there's an interesting counter here. I wonder if you've thought a bit about that angle.
BETH BOYER:
Thank you. I hadn't thought of that, but thanks for strengthening the argument for this. I think that's a really good point 'cause I think there's a lot of off-label use that just isn't backed by any evidence. And it could save money, it could save time and selecting the right treatment for patients. If we were to be able to rule out which ones aren't working. So, I think there is some benefit to having some failure in generic drug repurposing. It's a really great point.
LEAH ROSENZWEIG:
Great. Well, thank you so much, Beth. (APPLAUSE) Thank you to all of the afternoon speakers and to our judges. This now concludes our live stream. If you're interested in seeing the results of the prizes, you can check out the CGD and MSA websites tomorrow. They will be posted there. For those in the room, we will now take a brief break for a reception and reconvene here around 5:00pm for the announcement of the prizes.