A Historic Call to Action
On February 9, 2007 the first Advance Market Commitment (AMC) – a $1.5 billion financing mechanism to encourage industry investment in much-needed vaccines for the developing world – was launched in Rome. Italy, the United Kingdom, Canada, Norway, Russia, and the Bill & Melinda Gates Foundation are making the commitment, which guarantee a market in developing countries for new pneumococcal vaccines to prevent deadly respiratory infections in children.
BVGH applauds the launch of the AMC. This landmark decision changes the landscape of neglected disease research and development by creating real markets for vaccines in the world’s poorest countries. We hope this initial pilot is the first in a series of donor commitments to create markets for the world’s most devastating neglected diseases.
Why AMCs Are Needed
Across the biopharmaceutical industry, select companies are pursuing global health research and development but the level of effort is far too limited given the magnitude of need for new and improved medicines for neglected diseases. Lack of market opportunities for products that address neglected diseases has made it difficult for some companies to advance innovative medicines and has kept others out of the field entirely.
From industry’s perspective, the numbers tell the story. Today, the entire global market for vaccines – products with the greatest potential impact in poor countries – is about $6 billion, less than 2 percent of the amount spent on pharmaceuticals. And the total developing-world market for vaccines is a mere $500 million a year – 4 percent of sales for the leading cholesterol-lowering drug.
In low-resource countries, there is simply too little market pull. The world’s least developed nations spend $17 per capita per year on health. Other low-income countries spend an average of $36. High-income regions like Europe and Japan spend, on average, more than 60 times as much.
To spur industry investment, the developing world opportunities must be strong enough to compete with other product opportunities a company faces. Advance Market Commitments do just that.
AMCs increase the value of otherwise insufficient markets, creating incentives for companies to invest their own resources toward products for the developing world. And AMCs can help sponsors leverage their funds by aligning incentives around a particular disease and encouraging industry to compete for the best solution.
Putting AMCs to Work
Under AMCs, donors commit to guaranteed, preferential prices for a certain number of vaccines sold to the poorest countries. In return, manufacturers agree to lower their prices substantially after an agreed-upon period to ensure long-term access by countries with patients most in need. By that time, the company (or companies) would have made a reasonable return on the investment.
An independent committee would oversee the implementation of the contracts and determine which products meet the pre-set qualifications – qualifications that cannot change throughout the length of the program. Any company that meets the specifications will qualify, allowing them to compete in the marketplace to receive the guaranteed price for each vaccine sale.
While donors must commit to create a market up front, they pay only for success. If no one develops a successful vaccine, donors pay nothing. Instead, companies assume the risk, investing their own resources to pursue the rewards of an attractive market.
BVGH's Role in Shaping AMCs
The creation of new markets required extensive effort by the international global health community, donor countries and industry to turn the concept of an Advance Market Commitment into a reality. BVGH convened meetings and held discussions with more than 150 senior executives from a cross-section of the biopharmaceutical industry – including those already committed to developing world markets and capable innovators that might be enticed to enter the field if the returns can compete with other opportunities.
Different companies and sponsors raised different concerns. BVGH worked to synthesize these issues into solutions that have enough scale with both the public and private sector to have a chance of working.
Our recommendations were outlined in a report, Making Markets for Vaccines: A Historic Call for Action, issued last May. Working directly with the World Bank and the Global Alliance for Vaccines and Immunizations, BVGH helped incorporate many of the report’s recommendations into the design of the initial AMC pilot.
