Creating Markets for Vaccines

Abstract

Malaria, HIV, and tuberculosis kill five million people each year, almost all of them in poor countries. Relative to the social need, there is a dearth of research and development (R&D) on health technologies for these and other diseases concentrated in poor countries. One commonly cited estimate is that half of all global health R&D in 1992 was undertaken by private industry, but that less than 5 percent of that was spent on diseases specific to poor countries. 1 It is estimated that in 2004, private industry was responsible for only 10 percent of the total $682 million in global HIV vaccine R&D investments. 2 Private biotechnology and pharmaceutical firms are unlikely to invest in R&D on products which they expect to be unable to sell at prices that would cover their risk-adjusted costs. As we will discuss, low expected prices for products such as an HIV vaccine reflect both the poverty of the relevant populations as well as severe distortions in the markets for drugs needed for poverty-related diseases. One proposal to incentivize private sector R&D investments in products for diseases concentrated in poor countries is for sponsors (rich-country governments, private foundations, or international organizations such as the World Bank) to undertake "advance purchase commit-ments" for desired products, such as an HIV vaccine. A commitment to purchase these products in advance of their development would create market incentives for firms to develop needed vaccines. Advance purchase commitments can also be structured to ensure access to these vaccines, if and when they are developed, for the people who most need them (in both the short and long term). If no vaccine is developed, no donor funds would be spent; if a desired vaccine is developed, an advance purchase commitment would be an extremely cost-effective expenditure from a public health perspective, saving more lives than virtually any comparable health expenditure. 3