Healthy Skepticism Library item: 13573

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Publication type: news

Von Schoen-Angerer T
Questioning the 1.5 billion dollar vaccine deal
Development Today 2008 Apr 25
http://www.development-today.com/magazine/2008/DT_6/Opinion/3362

Full text:

Medecins Sans Frontieres 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,
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.