While investments in biomedical R&D have led to tremendous scientific breakthroughs and health improvements in the modern era, the benefits have been shared unevenly. Take, for example, neglected tropical diseases (NTDs), which impact more than one in six people worldwide, often the most poor, but receive less than 0.5 percent of global pharmaceutical investment. Innovative financing mechanisms (IFMs) are a critical tool to address this imbalance by catalyzing and accelerating medical innovations for use in low-resource settings. As the recent UN High Level Panel on Access to Medicines pointed out, IFMs have the ability to delink the final cost of R&D from the final price of the product, thereby increasing access to these new medical products for patients in the developing world.

In a previous post, we explored an important innovative financing mechanism known as the Priority Review Voucher. In this blog, we'll turn to another innovative financing mechanism designed to encourage investment in underfunded medicines, diagnostics or vaccines: the advanced market commitment (AMC). The AMC fosters demand for an undeveloped product by guaranteeing its procurement at a predetermined price, it is often described as a pull-type financing mechanism. AMCs provide a much-needed incentive for companies to invest in expensive and risky research to produce a new product, and also alleviate the concern that the product will be too expensive for end-consumers to afford.

AMCs are particularly useful for encouraging the development of products for neglected diseases or other ailments that afflict mostly poor or underserved populations with limited purchasing power. Theoretically, widespread use of AMCs to encourage investment and to “pull” pharmaceutical companies into creating new vaccines for neglected diseases could close the medical innovation gap. Below, we break down exactly what an AMC does and how it might impact the market.

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So how does an AMC work? An AMC is meant to augment the demand for companies to develop a new medical product. An AMC begins with a pre-established monetary fund, usually created by pooling large contributions from governments, private philanthropic sources and international donors. The director of the fund can then use it to sign contracts with companies to guarantee the purchase of a certain amount of product before development. This is especially critical for vaccines, which typically take more time and money to develop than medicines or diagnostics.

For example, imagine an AMC fund for a schistosomiasis vaccine. When the vaccine is developed, the AMC fund would then be used to purchase or subsidize a predetermined number of vaccines, usually at a predetermined price. Then, these purchased or subsidized vaccines could be distributed or sold at a low price, thereby ensuring access to the vaccine for those in need. In short, the AMC bolsters the purchasing power of low-income markets, putting them on par with the purchasing power of high income markets.

Have AMCs worked in the past So far, only one AMC has been implemented: the AMC for the pneumococcal conjugate vaccine. After the WHO announced it officially supported testing a pilot AMC to evaluate the concept, the Bill and Melinda Gates Foundation initiated an AMC pilot program for the pneumococcal conjugate vaccine in 2007. The program was managed by Gavi, the Vaccine Alliance. Within two years, four companies were registered to manufacture pneumococcal vaccines under the AMC, and by late 2010, the vaccine began being distributed to low and middle-income countries.

Normally, a newly developed vaccine introduced into high-income countries would take 10-15 years to reach low and middle-income countries. But because of the AMC, the pneumococcal conjugate vaccine has been rolled out in low-income countries much faster than what would have been expected. It is estimated that by 2030, this AMC will have helped save 5.4 million children.

Why not just pay companies directly, like with a prize? An AMC is more nuanced than a direct monetary prize. AMCs are designed to artificially augment the market size for a product. Ideally, with an AMC, several companies would compete to bring their best products to market the fastest. Unlike with a prize, whichever company develops a vaccine first does not “win” the whole fund. Instead, similar to a real market, an AMC is designed so that if several products are developed, better products receive a larger market share, or a larger piece of the AMC fund. Thus, while many prizes are winner-take-all, AMCs are designed to foster greater competition and generate more than one winner and better, more effective products overall.

If it’s such a great idea, why hasn’t the AMC been used more often? One criticism of the current pneumococcal AMC is that it hasn’t been able to generate competition from companies based in low- and middle-income countries and that it essentially supports highly profitable, global companies headquartered in high-income countries. If companies based in low and middle-income countries were encouraged to compete, they could help drive down the final price of the final product – meaning a greater volume could be purchased and more children could be treated.

Another criticism is that the pneumococcal conjugate vaccine was a poor test for the AMC because that vaccine had already been developed when the AMC was initiated. Some argue that a better AMC evaluation would use the tool for a less developed vaccine. Another critic, Donald Light from the University of Medicine & Dentistry of New Jersey, believes that the cost per child saved via the pneumococcal AMC is much too high, and the money would be better spent proliferating the use of already established vaccines, such as for yellow fever or measles. Some also argue that vaccines could be developed more cheaply and efficiently through single-manufacturer models, or if the pneumococcal vaccines were bought through a different program. However, a common counter-argument is that, despite inefficiencies, the AMC did hasten the delivery of the pneumococcal conjugate vaccine to low-income countries, saving lives. The AMC also facilitated a dramatic price reduction for the vaccine to all Gavi countries that will help support sustainable vaccine markets in developing countries.

How are AMCs relevant to Sabin? Sabin’s mission is to reduce needless human suffering from vaccine-preventable and neglected tropical diseases by developing new vaccines, advocating for increased use of existing vaccines, and promoting expanded access to affordable medical treatments. AMCs may help support this mission by providing incentives to pharmaceutical companies to hasten the development of new vaccines for diseases that Sabin is focused on. At the same time, the AMC may help decrease the risk of investing in the development of vaccines for neglected diseases by supporting demand for the product once it is developed. In essence, AMCs are a mechanism within the broader innovative financing toolkit that help bring new vaccines to those who need them most – a key principle in the mission and work of the Sabin Vaccine Institute.

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While the effectiveness of the AMC for the pneumococcal conjugate vaccine relative to other mechanisms is debatable, there is little doubt that it has contributed to saving the lives of millions of children. We now know that with AMCs we can bring newly developed vaccines into poor or underserved communities more quickly and cost-effectively than without. Sabin is currently developing nine vaccines for various NTDs. An AMC for one of Sabin’s vaccines would have a major impact on Sabin’s ability to produce and distribute a future product, enable access to vulnerable low and middle-income country populations.

 

Julien Rashid contributed to this blog post.

Photo by Anna Grove.