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Advance market commitments for vaccines against neglected diseases: estimating costs and effectiveness

Berndt, Ernst R., Glennerster, Rachel, Kremer, Michael R., Lee, Jean, Levine, Ruth, Weizsacker, Georg and Williams, Heidi (2007) Advance market commitments for vaccines against neglected diseases: estimating costs and effectiveness. Health Economics, 16 (5). pp. 491-511. ISSN 1057-9230

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Abstract

The G8 is considering committing to purchase vaccines against diseases concentrated in low-income countries (if and when desirable vaccines are developed) as a way to spur research and development on vaccines for these diseases. Under such an advance market commitment, one or more sponsors would commit to a minimum price to be paid per person immunized for an eligible product, up to a certain number of individuals immunized. For additional purchases, the price would eventually drop to close to marginal cost. If no suitable product were developed, no payments would be made. We estimate the offer size which would make revenues similar to the revenues realized from investments in typical existing commercial pharmaceutical products, as well as the degree to which various model contracts and assumptions would affect the cost-effectiveness of such a commitment. We make adjustments for lower marketing costs under an advance market commitment and the risk that a developer may have to share the market with subsequent developers. We also show how this second risk could be reduced, and money saved, by introducing a superiority clause to a commitment. Under conservative assumptions, we document that a commitment comparable in value to sales earned by the average of a sample of recently launched commercial products (adjusted for lower marketing costs) would be a highly cost-effective way to address HIV/AIDS, malaria, and tuberculosis. Sensitivity analyses suggest most characteristics of a hypothetical vaccine would have little effect on the cost-effectiveness, but that the duration of protection conferred by a vaccine strongly affects potential cost-effectiveness. Readers can conduct their own sensitivity analyses employing a web-based spreadsheet tool.

Item Type: Article
Official URL: http://www3.interscience.wiley.com/journal/1133854...
Additional Information: © 2006 John Wiley & Sons, Ltd
Library of Congress subject classification: H Social Sciences > HN Social history and conditions. Social problems. Social reform
H Social Sciences > HV Social pathology. Social and public welfare. Criminology
R Medicine > RA Public aspects of medicine
Journal of Economic Literature Classification System: O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O19 - International Linkages to Development; Role of International Organizations
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O38 - Government Policy
I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy; Regulation; Public Health
Sets: Collections > Economists Online
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 20 May 2008 16:07
URL: http://eprints.lse.ac.uk/4937/

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