Concerns surrounding the use of AMCs
Several concerns surrounding AMCs should be highlighted. The ones below are by no means an exhaustive list of the questions already raised concerning the potential impact and pitfalls of AMCs.
AMCs rely on forecasting of a number of uncertain parameters.
If their supporters argue that AMCs may be tailored to suit specific objectives, what is often glossed over is that this involves forecasting highly uncertain aspects. If the AMC is signed when no product has yet been developed, how much will the R&D and manufacturing cost? How likely is it that the product will actually meet the defined criteria? What level of risk is the company accepting to undertake, and how should it be compensated for that risk? How will the demand for the product develop? Will eligible countries seek to buy it? What co-payment is too high for them? When will the AMC start paying out? What are the expected profits for the companies, and are these expectations fair and realistic?
Crucially, the earlier the stage of R&D, the harder these parameters are to determine with any precision, because the technology to be used for a health product (be it vaccine, diagnostic test or drug) might not be known at the time the AMC is set up. AMCs therefore seem more suitable for health technology already in late-stage development.
The number of competitors participating in an AMC remains a potential source of problems.
The design of an AMC is also confronted with uncertainty about how many companies participate in the AMC. How should an AMC be designed so that it remains attractive to pharmaceutical companies?
As they are designed today, AMCs are open to any manufacturer that can meet the product specifications: if you can come up with the goods, you are eligible for the cash. The argument is that this would allow for a larger number of competing products, which should be favourable for access to medicines.
But the financial size of AMCs is of course limited: there is not enough money to finance an unlimited amount of companies investing in R&D and manufacturing. If any firm can enter the AMC at any time, a company that has chosen to participate in the AMC will always run the risk that an unexpected competitor could develop a rival product, and that its projected piece of the AMC pie will suddenly be reduced, as the new competitor eats into its share.
This increases the risk for pharmaceutical companies. Firms may find ways to deal with this risk by trying to discourage new competitors in a way or another. This would have the unintended effect of limiting competition, and at the same time rewarding a firm with an amount that was initially designed to provide incentives for a higher number of competitors, which would be a waste of taxpayers’ money. Alternatively, companies could ask to be paid a higher price per dose, as they could argue the incentive is not sufficient to cover their risks, and so will only participate in the AMC if the terms are more generous.
The way AMCs deal with the number of competitors is therefore caught between two opposite problems. Opening up the AMC to as many competitors as possible would have the impact of making it more wasteful, or more expensive. On the other hand, limiting the number of companies will limit the extent of competition.