Creating Markets for New Vaccines Part II: Design Issues

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Several programs have been proposed to improve incentives for research on vaccines for malaria, tuberculosis, and HIV, and to help increase accessibility of vaccines once they are developed. For these programs to spur research, potential vaccine developers must believe that the sponsor will not renege on the commitment once research costs have been sunk. Given appropriate legal language, the key determinant of credibility will be eligibility and pricing rules, rather than whether funds are physically placed in separate accounts. Requiring candidate vaccines to meet basic technical requirements would help ensure that funds were spent only on effective vaccines. Requiring developing countries to contribute co-payments would help ensure that they felt that the vaccines were useful given the conditions in their countries. Purchases under a vaccine purchase program could be the conditions in their countries. Purchases under a vaccine purchase program could be governed by a market exclusivity provision similar to that in the U.S. Orphan Drug Act. A program could start by offering a modest price and increasing it if it proved inadequate to spur research. If donors pledge approximately $250 million per year for each vaccine for ten years, vaccine purchases would cost approximately $10 per year of life saved. No funds would be spent or pledges called unless a vaccine were developed.

Published: Creating Markets for New Vaccines - Part II: Design Issues, Michael Kremer, in Innovation Policy and the Economy, Volume 1 (2001), MIT Press

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