Development Today: Editorial on Advance Market Commitment

Questioning the 1.5 billion dollar vaccine deal

Development Today

www.development-today.com

 

25.04.08
 

Médecins Sans Frontières does not deny the rationale of the Advance Market Commitment: a new vaccine against pneumococcal disease is desperately needed. Over a million people, mostly children, die each year of pneumonia, bloodstream infections and meningitis caused by pneumococcal bacteria. But why is it so expensive?

Any initiative that aims to get these important vaccines deployed in poor countries, as soon as they come to the market in wealthier ones, is therefore laudable. Reassuringly, the GAVI Alliance has a track record in increas-ing the take-up of underused vaccines. GAVI’s pilot Advanced Market Commitment for pneumo-vaccines is therefore an important proposal. But it also is just that: a pilot, an experiment that tests the benefits of using this type of financing tool. And although the AMC donors are set to meet in May to finalise the deal, many questions remain unanswered.

The big questions obviously surround the USD 1.5 billion price tag. To date, there is insufficient explanation of why such a large carrot is needed.

Firstly, the AMC money for the most part does not have to recoup industry’s R&D costs. True, as yet unidentified emerging suppliers whose candidate vaccines are still far away from licensure may need their R&D costs covered - the AMC could act as an R&D incentive for them. But that is not the case for the two vaccines that will capture most of the scheme’s rewards. The vaccines nearing development by GSK and Wyeth are primarily to be marketed in rich countries, and the firms will be rewarded from sales there.

Next, developing countries will be asked to pay USD 1-2 per dose (with initial GAVI susbidy for poorest countries), which is roughly equivalent to GAVI’s estimate for the cost of production. The USD 1.5 billion will then not pay for the cost of goods. It will only act as an incentive - except for emerging suppliers, where it will stimulate R&D - to increase production capacity and dedicate sufficient production of vaccines to poor countries. Is USD 1.5 billion too big a carrot for such a remit?

Contrast the pilot AMC with the results of another new vaccine initiative, and the differences are telling. The conjugate meningitis A vaccine is being developed through grants for USD 70 million and will be marketed at US 40 cents per dose. Unlike the AMC pilot, the money spent includes the financing of R&D, and the vaccine has no market in rich countries. Although the complexity and market size of the two vaccines obviously vary, the cost differences are of such an order that they deserve to be explored.

More worrying, GAVI’s Expert Group has warned that the large AMC carrot might still not be attractive enough to the firms that are already expected to gain a windfall from the scheme. Indeed GSK, whose product will be launched first, will initially be in a monopoly position, which it can use to maximize the profit reaped from the AMC. But it would seem that the AMC designers’ major focus is to make the carrot bigger still, so that selling in poor countries will be as profitable as selling in rich countries.

That the AMC should provide a fair and positive return on investment should be enough to reward firms participating in the pilot. If they do not take part, it would show that the high price of health products in rich countries acts as an indirect but powerful barrier to access to health products in poorer countries, where the rewards cannot hope to compete.

Thus, the pilot AMC raises a funda-mental question: do companies such as GSK, which will sell their pneumo-vaccines highly profitably in Western markets, have a moral obligation to make the same vaccines available in poor countries, in sufficient quantities and at affordable prices?

After the initial design of the Pneumo AMC was released in 2007, MSF commented to the GAVI Expert Group that USD 600 million of industry profit would be generated simply due to the design of the AMC. The updated design seems to address many of the initial inadequacies. Crucially though, the economic simulations on which GAVI’s Expert Group bases its recommendations have not been made public. Until they do, the real mechanism of the AMC remains opaque. GAVI has pledged to make data available but says this will take several weeks. With the signing of the AMC agreement only weeks away (Governments are due to meet on May 20th), this leaves a short time for public scrutiny and debate.

This AMC project is an experiment. It may well be that the AMC is deemed an unsuccessful or inappropriate alternative financing model in the future. What is certain though is that without more transparency AMCs will never be recognised as a funding mechanism accepted by all stakeholders.

Governments may find it easier to commit to AMCs than to confront the complex issue of intellectual property and R&D. But they should recognize that AMCs are only a minor adapta-tion of the present system, and that the ambition to develop policies for essential health R&D should go well beyond AMCs. Other alternative financing mechanisms may be better suited to solve certain problems.

Donors should therefore engage in discussions, including the forthcoming WHO Intergovernmental Working Group on Public Health, Innovation and Intellectual Property (IGWG) that pursue other models, such as prize funds or an R&D treaty. The IGWG is mandated to promote alternative financing mechanisms that address the link between the cost of R&D and the price of products. In 2007 the World Health Assembly called on the WHO Director General to encourage the development of such mechanisms. The AMC, which fails to address that link, cannot be the only proposal on the table.

Dr Tido von Schoen-Angerer, Director of Campaign for Essential Medicines at MSF.