Saying goodbye to pneumonia

Written By Sarah Martin

In the poorest countries in the world millions are dying every year from diseases that modern medicine can treat and prevent. Surprising but true, in Africa pneumonia claims more children’s lives than AIDS.

Vaccination against pneumococcal disease, which causes pneumonia, meningitis and other lethal illnesses, could greatly reduce child fatality rates in the developing world. The problem is that no such vaccine exists.

So far there has been no incentive for drug companies to develop and produce vaccines for the diseases that claim the most lives worldwide. Where these vaccines are needed the most, people are too impoverished to demand them. In developing countries as little as £9 or less is spent per person per year on health care. Shockingly, over 90 percent of drug investments go to diseases that affect the richest 10 percent of the world’s population.

The Advance Market Commitment (AMC) for vaccines is market-based solution to this market failure. Originally proposed by Harvard economist Michael Kremer and the Centre for Global Development, an AMC is a pledge to subsidise future purchases of a vaccine not yet available.

A pilot AMC is underway for a vaccine to prevent pneumococcal disease. Six of the world’s richest countries (including the UK) and the Bill & Melinda Gates Foundation have pledged a total of £750 million pounds. It is estimated that it could save the lives of as many as 5.4 million children by 2030.

This is how it works: When a safe and effective vaccine is developed, the benefactors of the scheme subsidise the price down to a level more affordable for developing countries, thereby spurring demand. The promise of this demand is an economic incentive to supply the vaccine, and thus a market for the vaccine is created. The AMC provides the subsidy for an agreed period of time, after which the pharmaceutical company is obligated to provide the vaccine at a low price.

And this is why it could work: An AMC is not a purchase guarantee, there is only a cost once a vaccine is available that is actually demanded by developing countries. The competition for demand means that the best and most cost-efficient vaccine will prevail. The subsidy will provide enough return on the drug company’s investment in research and development to justify supplying the vaccine at a low price after the AMC ends.

The main obstacle now is to determine what subsidised price to provide the vaccine at. At the moment a price of about £2-3 is being discussed. This would involve a 90 percent reduction in price, the steepest drop ever seen in the price of vaccine in its first year of production.

However, some are concerned that this is still too expensive. They question whether a vaccine could be produced at lesser cost in by drug companies in India rather than in the West.

If successful the AMC for pneumococcal disease could be the first in a series of AMCs for vaccines against such diseases as malaria, tuberculosis and AIDS, and in the long term AMCs could save literally millions of lives.