Advance market commitment
An advance market commitment (AMC) is a promise to buy or subsidise a product if it is successfully developed. AMCs are typically offered by governments or private foundations to encourage the development of vaccines or treatments. In exchange, pharmaceutical companies commit to providing doses at a fixed price. This funding mechanism is used when the cost of research and development is too high to be worthwhile for the private sector without a guarantee of a certain quantity of purchases.
The idea of advance market commitments was developed by economists in the 2000s. This idea was applied to finance the pneumococcal conjugate vaccine. During the Covid-19 crisis, the COVAX AMC provided 1.8 billion vaccine doses to 87 low and middle-income countries.[1] AMCs could be used to stimulate research on universal vaccines, which would contribute to pandemic preparedness. An AMC has also been launched for carbon-removal that meets certain technical specifications.
Description
In the case of vaccines, an advance market commitment is a contract between three types of parties: the sponsors, the recipient countries, and the firms.[2] The sponsors promise to largely subsidise vaccines that meet certain eligibility requirements, up to a fixed number of doses. For example, a global fund can guarantee to pay $14 out of $15 for the first 200 million doses of vaccines that have an efficacy of more than 70%. Countries benefiting from the vaccines agree to pay the remaining part of the price ($1 in the example). This small co-payment ensures that there is an actual demand for the vaccines. In return, the firms commit to provide further doses at a small price, close to the cost of production. In the example, the pharmaceutical companies which develop an eligible vaccine would benefit from the high $15 price for the first 200 million doses, but would have to provide all further doses at a low price, like $1 per dose. This stipulation prevents manufacturers from abusing their market power by setting a high price.
Origins of the idea
In 1998, Michael Kremer published an academic article on patent buyouts: he argued that governments could improve access to treatments by buying patents and placing them in the public domain.[3] Inspired by his experiences in Kenya, where he contracted malaria, he then proposed the idea of a "vaccine purchase commitment" to encourage research on neglected diseases.[4][5] In 2001, a report of the United Kingdom mentioned that a potential global fund to fight HIV/AIDS, malaria, and tuberculosis could also make advance purchase commitments.[6] This idea continued to gain traction in 2004, when Michael Kremer and Rachel Glennerster published a book advocating for it.[5] It gained additional momentum in 2005 with the publication of a report by the Center for Global Development.[2] In 2006, the G8 was considering setting up an "advance market commitment", and this expression was used in an academic paper estimating the cost-effectiveness of the measure.[7]
Applications
Pneumococcal disease
The first advance market commitment was launched in 2009 by GAVI, the World bank, WHO, UNICEF, five national governments, and the Gates Foundation.[8] It targetted pneumococcal disease. According to a 2005 WHO estimate, at that time, pneumococcal disease killed 1.6 million people every year, mostly in the Global South.[9] The AMC sponsors provided $1.5 billion to subsidise vaccine doses,[8] at an initial $3.5 per dose.[10] In 2010, GSK and Pfizer each committed to supply 30 million doses each year.[11] In 2020, the Serum Institute of India started producing a third vaccine at $2 per dose.[12][13] The Gavi Pneumococcal Conjugate Vaccine AMC officially finished in 2020, with contracts with manufacturers lasting until 2029.[14]
In 2021, Dalberg published a report evaluating the impact of the AMC.[14] The report did not find evidence that the AMC sped up the creation of new vaccines. However, the AMC led manufacturers to develop multi-dose vials, which helped drive down cost per dose. Despite initial production delays, the number of doses distributed each year grew from 3 million in 2010 to 150 million in 2015. Recipient countries introduced pneumococcal conjugate vaccines faster than HPV, rotavirus and Hib vacines, which did not benefit from an AMC. Overall, the Dalberg report found that the AMC was probably successful at increasing vaccination coverage, which led to saving more lives.[14]
Covid-19
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Pandemic preparedness
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Carbon removal
In December 2021, an AMC for carbon-removal was first proposed in a Politico essay by economists Susan Athey, Rachel Glennerster, Christopher Snyder and Nan Ransohoff, the head of Stripe Climate.[15]
In April 2022, Stripe launched Frontier Climate, an AMC, "to buy an initial $925M of permanent carbon removal between 2022 and 2030."[16] Ransohoff, who leads the project, told The Atlantic that the carbon-removal market will probably need to reach $1 trillion per year.[17]
Comparison to other incentives
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References
- ^ "COVID-19 Market Dashboard | UNICEF Supply Division". www.unicef.org. Retrieved 2024-01-31.
- ^ a b "Making Markets for Vaccines: Ideas to Action". Center For Global Development. Retrieved 2023-06-23.
- ^ Kremer, Michael (1998). "Patent Buyouts: A Mechanism for Encouraging Innovation". The Quarterly Journal of Economics. 113 (4): 1137–1167. doi:10.1162/003355398555865. ISSN 0033-5533. JSTOR 2586977. S2CID 31023203.
- ^ Kremer, Michael (January 2000). "Creating Markets for New Vaccines. Part I: Rationale". Innovation Policy and the Economy. 1: 35–72. doi:10.1086/ipe.1.25056141. ISSN 1531-3468. S2CID 153622261.
- ^ a b Kremer, Michael; Glennerster, Rachel (2004). Strong medicine: creating incentives for pharmaceutical research on neglected diseases. Princeton, N.J.: Princeton Univ. Press. ISBN 978-0-691-12113-0.
- ^ Kvåle, Gunnar (September 2001). "Tackling the diseases of poverty". The Lancet. 358 (9284): 845–846. doi:10.1016/s0140-6736(01)05996-7. ISSN 0140-6736. PMID 11570414.
- ^ Berndt, Ernst R.; Glennerster, Rachel; Kremer, Michael R.; Lee, Jean; Levine, Ruth; Weizsäcker, Georg; Williams, Heidi (2006-10-02). "Advance market commitments for vaccines against neglected diseases: estimating costs and effectiveness". Health Economics. 16 (5) (published May 2007): 491–511. doi:10.1002/hec.1176. ISSN 1057-9230. PMID 17013993. S2CID 10511922.
- ^ a b "GAVI partners fulfill promise to fight pneumococcal disease". gavi.org. Archived from the original on 13 January 2011.
- ^ World Health Organization (2007). "Pneumococcal conjugate vaccine for childhood immunization—WHO position paper" (PDF). Weekly Epidemiological Record. ISSN 0049-8114.
- ^ Nayar, Anjali (2011-02-11). "Pneumococcal vaccine rolls out in developing world". Nature. doi:10.1038/news.2011.89. ISSN 1476-4687.
- ^ Kremer, Michael; Levin, Jonathan; Snyder, Christopher M. (2020-05-01). "Advance Market Commitments: Insights from Theory and Experience". AEA Papers and Proceedings. 110: 269–273. doi:10.1257/pandp.20201017. ISSN 2574-0768.
- ^ "Pneumonia vaccine price drops dramatically for lower-income countries thanks to the Gavi pneumococcal Advance Market Commitment". India Education | Latest Education News | Global Educational News | Recent Educational News. 2020-06-17. Retrieved 2024-02-16.
- ^ "Supply agreements". www.gavi.org. 2018-06-06. Retrieved 2024-02-16.
- ^ a b c Dalberg (15 October 2021). Gavi PCV AMC pilot: 2nd Outcomes and Impact Evaluation (PDF).
- ^ "Opinion | Advance Market Commitments Worked for Vaccines. They Could Work for Carbon Removal, Too". Politico. 22 December 2021. Retrieved 2022-09-30.
- ^ "An advance market commitment to accelerate carbon removal". frontierclimate.com. Retrieved 2022-09-30.
- ^ Meyer, Robinson (2022-04-13). "We've Never Seen a Carbon-Removal Plan Like This Before". The Atlantic. Retrieved 2022-09-30.