An industrial incentive
Several organizations are pursuing new ways to encourage the pharmaceutical industry to increase investment into the research and development of an AIDS vaccine
Investing in biomedical research is a risky business. University research laboratories and small biotechnology companies are often where key scientific advances occur, but these institutions are unable to spend the large sums of money that are required to transform this basic research into a drug or effective vaccine that can be approved and licensed. This transition is more likely to occur at large pharmaceutical companies, which have the necessary technological, regulatory, and manufacturing expertise. Only a handful of companies have historically developed many of the vaccines that protect people from diseases.
However, the involvement of pharmaceutical companies in the research and development of AIDS vaccines has so far been limited. Even though the total investment in AIDS vaccine research has climbed from US$160 million in 1996 to an estimated $690 million in 2004, annual spending on AIDS vaccine research and development from all sources still represents less than one percent of the total spent on all health-related research. And while about 48% of the world's investment in new health products comes from the pharmaceutical industry, it accounts for just 10% of all AIDS vaccine funding.
One obstacle to industry's participation is the high cost associated with developing an effective vaccine. It can cost around $800 million to develop a new medicine and the price tag on a new vaccine will be even higher. This is especially true for an AIDS vaccine since the scientific challenges remain so great. But companies aren't likely to put forth more resources if they can't recover their extensive research, development, and production costs. "The main thing that causes companies to enter a field is the prospect of a market," says Stanley Plotkin, emeritus professor of pediatrics at the University of Pennsylvania and executive adviser to the chief executive officer of the vaccine company Sanofi Pasteur.
And the market for an AIDS vaccine is primarily in the world's poorest countries, where the total market for vaccines is only about $500 million a year. This may sound like a big payoff, but it's small when compared to drug profits that can soar to billions of dollars. In terms of profits, vaccines are sure to lose out since a vaccine may be used only a few times in a lifetime while drugs are often taken every day.
So to encourage more pharmaceutical companies to pursue AIDS vaccine research, many public health experts are exploring a new process that could guarantee vaccine manufacturers that if they develop an effective vaccine, there will be a market or group of governments and organizations that will be willing to pay and provide the company with financial returns comparable to those they could expect from developing a successful drug for the American or European markets. This incentive is called an advance market (or purchase) commitment (AMC). Increasingly private foundations, governments, and the global health community are considering this as a way to get companies involved in vaccine research that targets diseases including AIDS, malaria, and tuberculosis.
Although the concept has been around for some time, AMCs have received support in recent years from donors such as the Bill & Melinda Gates Foundation, the World Bank, the G8 Finance Ministers, and many biopharmaceutical industry representatives. In 2003 the Center for Global Development, an independent organization working to reduce global poverty, assembled a group of economists, public health professionals, lawyers, and pharmaceutical experts to transform a rough idea into an actual proposal. Their report issued in May of this year examines the major issues associated with this approach.
AMCs have also received attention from some governments. In late 2004 the UK government expressed support for this concept as part of a larger package of new ideas to expand financing for international development. The UK and the other G8 nations asked the World Bank in May to determine the feasibility of establishing an AMC to support development of vaccines against AIDS, malaria, and other diseases. The G8 heads of state asked the Italian government in July to lead the development of a proposal by the end of this year. These global leaders hope that AMCs will succeed in drawing more private sector or industry investment into vaccines.
The proposed model for an AMC consists of a binding agreement between companies and donors, either from governments or private foundations. The donors would pledge to purchase an effective new vaccine to immunize a pre-determined number of people at a set price that would be high enough to generate revenues similar to those for other products. They would only be required to pay after an effective vaccine is developed.
The vaccine company would be obligated under this agreement to sell the vaccine to eligible developing countries at an affordable price. Such a fixed-price commitment would only apply to low-income countries, leaving companies free to sell the vaccine at much higher prices in rich countries.
IAVI has held consultations with industry to gauge the interest in the proposed AMC structure. Recent consolidation has left just five major vaccine manufacturers; GlaxoSmithKline, Sanofi-Aventis, Merck, Wyeth, and Chiron. In general the response from executives has been positive, although most agree that the specific details remain to be worked out. "If you don't put significant resources into a vaccine commitment then you will fail," says Rudi Daems, executive director of policy and corporate affairs at Chiron Vaccines.
One reason that vaccines create lower profits for companies is the power of international agencies such as The United Nations Children's Fund (UNICEF) to negotiate lower prices. These reduced prices have helped ensure the expansion of child immunization programs around the world, writes World Bank senior health specialist Amie Batson in a recent issue of the Journal Health Affairs. But they have also discouraged several companies from investing in new research. Experts suggest that the urgent need for an AIDS vaccine could put additional pressure on the vaccine maker to sell the product at a heavily discounted price or even to give it away free.
An AMC could prevent this from happening since vaccine developers would be assured the money promised to them through a legally binding agreement. An independent group composed of experts from industry and the global public health community would decide if the product has met the qualifying efficacy criteria.
Several organizations are exploring the AMC concept for different diseases. The National Bureau of Economic Research released a preliminary proposal on how malaria vaccine development could benefit from the AMC model. For an AIDS vaccine, IAVI has proposed a draft market commitment that would require the vaccine to be at least 50% effective at preventing the transmission of HIV subtypes A and C, the most common subtypes in the poorest nations. Eligible countries would be required to contribute a small payment and the donor organizations would make up the rest.
While the AMC proposal is designed to entice vaccine developers, it also has numerous benefits for donors. An AMC is meant to ensure donor organizations that an effective vaccine developed by the pharmaceutical industry will be made available to those who need it the most, including the low-income countries in Africa and Asia that bear the biggest disease burden. Millions of needless deaths can occur when a vaccine is too expensive for purchase by developing countries, causing children to remain unvaccinated. An estimated 4.5 million children have died from Haemophilus influenzae serotype b (Hib)-related disease over the last decade, even though an effective vaccine exists.
AMCs would also stimulate competition among manufacturers to produce the vaccine as quickly as possible in order to claim the guaranteed price described in the agreement. Importantly, since donors would only pay when a vaccine is developed they would be free to spend their current funds on vaccine-promoting efforts.
But efforts to ensure the vaccine is accessible to people in developing countries must extend beyond setting an affordable price. Also of concern are infrastructure problems in many countries that can affect the delivery of vaccines. Every year about 3 million people die of diseases such as measles, hepatitis B, and tetanus that can be prevented with existing and affordable vaccines. These issues are another essential component and are now being addressed by the Global Alliance for Vaccines Initiative and its partner, the Vaccine Fund, both of which are supportive of AMCs. "We very much welcome the conversation surrounding advanced market commitments," says Alice P. Albright, the Vaccine Fund's chief financial officer.
Many global health experts would agree that AMCs are not the entire answer to the problems that surround vaccine development and delivery. "Advance market commitments are part of a menu of things that are necessary, none of which alone is sufficient," says Seth Berkley, president and CEO of IAVI. As the research efforts progress so must capacity building for testing, distributing, and delivering vaccines to the people who need them most.
Vaccines are the best way to protect the most vulnerable victims of the AIDS pandemic, such as women and children, says Kate Taylor, IAVI's senior director of policy and advocacy. "It is critical to continue care today but also to develop the next generation of preventive technologies because the tools we have today are not sufficient," she says. "Developing a vaccine against HIV is one of the greatest scientific challenges of all time. The science is really hard. Advance market mechanisms provide incentive for the required long-term commitment and significant investment."