NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Advanced Purchase Commitments for a Malaria Vaccine


Advanced Purchase Commitments for a Malaria Vaccine

Today approximately forty percent of the world's population is at risk of malaria, a life-threatening parasitic disease carried by mosquitoes. Each year, malaria causes over 300 million acute illnesses and one million deaths. Malaria primarily affects individuals in low-income countries - the majority of its victims are young children and pregnant women in sub-Saharan Africa. Children who survive severe cases of malaria may suffer brain damage and learning disabilities, and often become weak and lethargic from the disease later in life.

The scientific challenges in developing an effective malaria vaccine are formidable; nonetheless, many scientists are optimistic. There has also been encouraging news recently with the completion of a phase IIb malaria vaccine clinical trial, although there are many steps before this vaccine or others would be ready for widespread use. However, of primary concern is whether the necessary financial resources will be invested to move this and other candidate malaria vaccines further along in the development pipeline. Pharmaceutical companies may be unwilling to invest in developing a new vaccine or drug for which the affected population is very poor. Companies may also worry that once a product has been developed which is needed in low-income countries, governments and aid institutions will use their power as the primary buyers of the product to keep prices below the level needed for firms to recoup R&D costs.

One possible way to address these concerns is through an "advance purchase commitment." Under this mechanism, credible sponsors such as large foreign aid donors would commit, in advance of a vaccine's development and licensure, to a minimum price that would be paid per person immunized for an eligible product, up to a certain number of individuals immunized. In exchange, firms would commit to produce additional doses in the longer-term at a low price. If no suitable product were developed, no payments would be made. Such a commitment would not eliminate all risk to developers (for example, a vaccine may still fail in clinical trials), but would greatly reduce the uncertainties that are specific to products for low-income country markets and thereby put malaria on a more equal footing with health conditions that affect affluent populations in firms' R&D allocation decisions. The UK Government has expressed support of such a proposal for malaria and HIV vaccines, and the G8 (Group of Eight) countries are exploring the use of such mechanisms.

In "Advanced Purchase Commitments for a Malaria Vaccine: Estimating Costs and Effectiveness" (NBER Working Paper 11288), researchers Ernst Berndt, Rachel Glennerster, Michael Kremer, Jean Lee, Ruth Levine, Georg Weizs├Ącker, and Heidi Williams estimate the commitment size necessary to provide a market for a malaria vaccine comparable to the revenue realized from typical existing pharmaceuticals, and discuss the cost-effectiveness of such a program.

The authors first consider reported sales numbers of existing commercial pharmaceutical products. Using data on new chemical entities introduced in the U.S. in the early 1990s, they find that the present value revenue stream derived over the life cycle of the average product in their sample is $3.44 Billion. Since the authors anticipate that marketing costs would be lower for a malaria vaccine than the typical new pharmaceutical product, they reduce this figure by 10%, to $3.1 Billion.

As a check on this calculation, the authors also derive a commitment size estimate based on estimates from individuals in the biotechnology venture capital industry on what level of revenue is needed to spur substantial R&D investments, and find that this method produces an estimate quite similar to the $3.1 Billion figure. The authors note that because the starting year of purchases under the program is highly uncertain, the commitment should be indexed to account for inflation.

Next, the authors consider the cost-effectiveness of such an advance purchase commitment. As a benchmark for determining cost-effectiveness, they note that health interventions in poor countries that cost about $100 per disability adjusted life year (DALY) saved are generally considered highly effective. Alternatively, the cost-effectiveness of a malaria vaccine could be compared to the cost of purchasing and delivering the antiretroviral drugs being used to treat AIDS in low-income countries, which are estimated to cost at least $613 per year of treatment.

The authors consider a benchmark malaria vaccine advanced purchase commitment that would guarantee the manufacturer $15 per person for the first 200 million people immunized and set the price of the vaccine at $1 per person thereafter. Such a commitment would generate $3.2 Billion in revenues for the vaccine manufacturer. Under their baseline set of assumptions, they find that such a commitment would cost less than $15 per DALY saved, including vaccine purchase and delivery costs, making it an extremely cost-effective health expenditure.

In their calculations, the authors must make numerous assumptions about vaccine efficacy, delivery costs, countries participating in the program, rate of adoption of the vaccine, and purchases in non-covered countries. In their benchmark calculations, the authors combine these assumptions with data on disease burden and fertility, as well as the distribution of burden of disease by age and gender, in order to calculate the discounted burden of disease that would be averted under this program as well as other figures such as the cost per DALY saved.

The authors then test the sensitivity of their results through varying the baseline assumptions, and also provide a downloadable spreadsheet tool readers can use to vary the assumptions themselves. The sensitivity results suggest that the cost-effectiveness of the vaccine is relatively insensitive to change in assumptions about efficacy, take-up rates, and the price paid for the vaccine, but is more sensitive to changes in the number of vaccine doses and the duration of vaccine protection - suggesting that stipulations regarding the maximum acceptable number of doses and minimum duration of protection for eligibility should be built into the advance purchase contract.

The authors conclude that a commitment of $3.1 Billion may be sufficient to stimulate substantial new investment in the development of a malaria vaccine, yet still be extremely cost-effective from a public health perspective. A larger commitment would be expected to spur more firms to enter the search for a vaccine and result in quicker development. Finally, they note that this same framework could be used to analyze the size and cost-effectiveness of advance purchase commitments for vaccines to prevent other health conditions primarily affecting lower-income countries, such as HIV and tuberculosis.


The authors acknowledge financial support from the Pull Mechanisms Working Group of the Global Health Policy Research Network, a program of the Center for Global Development that is supported by the Bill & Melinda Gates Foundation.
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us