A theoretical flaw in the advance market commitment idea

Abstract

Infectious and parasitic diseases cause massive health problems in the developing world. Research and development of drugs for diseases that mainly affect poor people in developing countries is limited. The advance market commitment (AMC) idea is an incentivising mechanism for research and development of drugs for neglected diseases. Discussion of the AMC idea is of renewed interest given the launch in June 2009 of the first AMC. This pilot AMC is designed to, among other things, test the idea for potential future applications. This paper is a critique of the AMC idea. It seeks to show that the idea has a hitherto unrecognised theoretical flaw that should make policy-makers and donors hesitant to embrace future applications of the idea.