Pull Mechanisms for Neglected Vaccines

1
Pull Mechanisms for Neglected Vaccines

• Michael Kremer
• May 20, 2004

2
Overview

• Pull Mechanisms Working Group
• Rationale for pull
• Design
• Size and cost-effectiveness

3
Pull Working Group

• Set up by CGD at request of Gates Foundation to
  analyze how to operationalize advance contracts
  as a tool for encouraging research on neglected
  diseases

4
Process of the Working Group

• Consulted with vaccine experts to understand
  vaccine supply, funding and procurement
• Worked with legal team to draft term sheets
• Discussed proposals with industry and potential
  funders
• Assessed necessary commitment size and
  cost-effectiveness

5
Working Group Products

• Term sheets for contract
• Report
• Spreadsheet tool
• Book Strong Medicine Creating Incentives for
  Pharmaceutical Research on Neglected Diseases

6
Rationale for Pull

• Need for vaccines
• Lack of RD
• Market and government failures global public
  good, time-consistency
• Push and pull incentives

7
Alternative Pull Mechanisms

• Purchase commitments
• Patent buyouts
• Prizes
• Best-entry tournaments
• Patent extensions on existing pharmaceuticals

8
Vaccine Eligibility

• Technical criteria
• Independent Adjudication Committee
• Market test

9
Later Products

• Variety of options (including mimic existing
  market)
• Appropriate RD incentive
• Static Efficiency
• Orphan Drug Act

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A Possible Pull Program

• Price commitment for a malaria vaccine
• Guarantee 15 (real) per person immunized for the
  first 200 million people immunized, conditional
  on 10 copayment
• Supplier agrees to modest mark-up on cost
  afterwards
• NPV of revenue comparable to commercial products
  even with pessimistic uptake scenario
• Cost/DALY lt 15

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Designing Contract Provisions

• Evaluate possible pricing structures for a
  malaria vaccine price guarantee
• Revenues sufficient to stimulate RD
• Cost-effectiveness of vaccine

12
Approaches to Determining Commitment Size

• RD costs 873 million (2004 dollars)
• 500m peak annual sales rule of thumb
• Actual sales of existing pharmaceuticals

13
Commitment Size
14
Cost-Effectiveness

• Inputs to the calculation
• Contract provisions
• Vaccine characteristics
• Countries covered by the program
• Adoption rates

15
Cost-Effectiveness

• In base case, highly cost-effective at less than
  15 per DALY saved
• Robust to changes in vaccine efficacy, adoption,
  prices offered
• More sensitive to assumptions on delivery costs,
  vaccine duration