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Political Economy and Public Policy Paper
Advanced Purchase Commitments for a Malaria Vaccine: Estimating Costs and Effectiveness
Ernst R. Berndt, Rachel Glennerster, Michael R. Kremer, Jean Lee, Ruth Levine and Georg Weizsäcker April 2005
Paper No' PEPP 02:
Full Paper (pdf)

JEL Classification: I18; O19; O31; O38;

Tags: advance purchase commitment; r&d; pharmaceuticals; vaccines; malaria

To overcome the problem of insufficient research and development (R&D) on vaccines for diseases concentrated in low-income countries, sponsors could commit to purchase viable vaccines if and when they are developed. One or more sponsors would commit to a minimum price that would be paid per person immunized for an eligible product, up to a certain number of individuals immunized. For additional purchases, the price would eventually drop to short-run marginal cost. If no suitable product were developed, no payments would be made. We estimate the offer size which would make the revenues from R&D investments on a malaria vaccine similar to revenues realized from investments in typical existing commercial pharmaceutical products, as well as the degree to which various contract models and assumptions would affect the cost-effectiveness of such a commitment for the case of a malaria vaccine. Under conservative assumptions, we document that the intervention would be highly cost-effective from a public health perspective. Sensitivity analyses suggest most characteristics of a hypothetical malaria vaccine would have little effect on the cost-effectiveness, but that the duration of protection against malaria conferred by a vaccine strongly affects potential cost-effectiveness. Readers can conduct their own sensitivity analyses employing a web-based spreadsheet tool.