Advance purchase commitments
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Advance purchase commitments

Governments encourage research by paying favoured scientists to complete specific projects or programmes of work.  The idea is that they will eventually link together to produce something useful like a malaria vaccine.  

It does not work well because the incentives are all wrong.  No individual scientist or group is responsible for actually producing an effective vaccine.  Instead success is judged by the research papers they produce.  

So scientists produce papers in their millions, each one calling for more research, but people keep dying of malaria, also in their millions.  Maybe some papers will turn out useful one day, but most are almost worthless.  Governments are paying for failed research.  

They need a way to pay for research by results.   A private pharmaceutical company only gets paid for researching a new drug if it brings it successfully to market and it proves useful enough for doctors to prescribe.  That focuses the minds of the researchers, or at least of their bosses. 

Unfortunately the health systems in the poor world, where malaria is common, are unlikely to pay much for even a successful vaccine, so Western companies tend to divert their resources to finding cures for more profitable disease such as hypertension.  

That's where advance purchase commitments (APCs) come in.  An APC is a contractual agreement by rich country governments to buy a successful vaccine if and when one is invented.  

Michael Kremer, an economist at Harvard has developed the idea in a recent book Making Markets for Vaccines.   He suggests the G8 rich nations should commit to buy vaccines for AIDS, malaria, TB, rotavirus (which causes diarrhoea in children), human papilloma virus (the cause of cervical cancer) and pneumococcus (one cause of pneumonia).   He reckons the commitment should be about $3 billion for each vaccine, about the same as the market for a new drug against a major rich world disease.  That is a lot of money but it only has to be paid out if an effective vaccine appears.

Some academics object.   They say that by defining a successful vaccine governments will stifle research into other areas, that companies will create a vaccine only just good enough to get the funding, that those who make a better vaccine later may find the money has all been spent and that the rich government supplement for each vaccine dose will create opportunities for corruption.  

All true.  A better alternative would be social policy bonds (value $3 billion - Click here for details), payable when malaria death rates fall below a certain level.  These would encourage everyone who had a realistic prospect of reducing malaria mortality - vaccine producers, DDT deregulators, and drainers of marshes.   There would be no risk of corrupt governments pocketing the money, and like APCs the rich governments would only have to pay out for success.  

Jim Thornton, Nottingham, 2 April 2006

Making Markets for Vaccines: Ideas to Action.   Click here

The case against is here.  Click here.

 

 

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Last modified: November 12, 2006