Ideas to Action:

Independent research for global prosperity

A Tool to Estimate Cost Effectiveness of an Advance Market Commitment

Michael Kremer and Rachel Glennerster, authors of the recent book Strong Medicine: Creating Incentives for Pharmaceutical Research on Neglected Diseases, set out the theoretical underpinnings of pull incentives in more detail. Ernst Berndt and others have developed a spreadsheet model that allows users to manipulate all relevant variables in a flexible and user-friendly way, thereby permitting the analysis of a large number of different scenarios. The spreadsheet allows for the analysis of costs and benefits of commitments for malaria, HIV and tuberculosis vaccines under various assumptions of vaccine characteristics as well as various contract parameters on the price and quantity of vaccines that would be purchased at the initial, high price. The spreadsheet combines these user-entered assumptions with a collection of demographic and disease burden data to estimate the cost per DALY saved as well as to calculate the net present value of the revenues that would accrue to a vaccine developer.

For example, the user may vary general parameters (such as the discount rate and the cost effectiveness threshold for a DALY), and parameters that define vaccine efficacy and the number of required doses. The user may change the set of countries covered by the program manually, by disease burden and/or using a GNP per capita cutoff. The user can also vary the conditions of adoption, including steady-state adoption rates and the length of time to reach the steady state. A technical guide posted online with the spreadsheet explains the calculations in detail in the order that the worksheets appear in the Microsoft Excel file. Since parameters can be modified and results displayed in the graphical user interface, the user will rarely, if ever, need to refer to these detailed sheets. Berndt and others (2005) discuss both the general results of the spreadsheet analysis and sensitivity checks.

Full documentation (PDF | 363k)

Spreadsheets (Zip file | Large file - 6 MB) requires Winzip (free download)