How Should the World Pay for a Coronavirus Disease (COVID-19) Vaccine? Where are we 6 Months on?

Article by: Adrian Towse, Kalipso Chalkidou, Isobel Firth, Hannah Kettler and Rachel Silverman

The May issue of Value in Health includes the paper “How Should the World Pay for a Coronavirus Disease (COVID-19) Vaccine?” co-authored by OHE’s Adrian Towse and Isobel Firth, along with Kalipso Chalkidou , Imperial College, Hannah Kettler, (PATH), and Rachel Silverman, Center for Global Development. The paper, finalised in December 2020, has three elements: an overview of COVID-19 and vaccine development; a proposal for a benefit-based advance market commitment (BBAMC) as the best means to get the vaccines needed; and proposals for future pandemic preparedness.  In this blog, we update our December thinking to take account of the events of the last six months.

Many more deaths and an ongoing crisis. Deaths have increased from 2 million in December 2020 to  4 million at the end of June 2021, with estimates of overall excess mortality (including non-COVID-19) at around 10 million people. Illness and death have accelerated across the global south, in part fueled by new emerging variants of concern.

Vaccines are licensed, and others are under regulatory review. We now have vaccines from AZ, J&J, Moderna, and Pfizer with Emergency Use Authorisation from the FDA and/or EMEA. The WHO has, in addition, authorised the Sinopharm vaccine and has more in its review process. The EMA has vaccines from CureVac, Novavax, Gamaleya and Sinovac under rolling review. 

The vaccine effort has been impressive but unequal. To date, 2.8 billion vaccine doses have been administered worldwide, with nearly 25% of the world’s population having at least one dose. But only 0.9% of people in low-income countries (LICs) have received at least one dose.  The Gavi COVAX Advance Market Commitment (AMC), buying on behalf of Low and Middle Income Countries (LMICs), recently reported US$ 2.4 billion in pledges, exceeding the original target of US$2 billion. These funds, combined with prior financial and dose-sharing commitments, are intended to provide 1.8 billion COVID-19 doses in 2021 for lower-income economies.

The immediate challenges are to ensure manufacturing commitments are met, total volume increased and, as important, that the distribution be made more equitable.

Overcoming supply shortages to meet these commitments, together with the needs of self-financing middle-income countries contracting through the COVAX Facility, is critical. A coalition of LMIC governments, supported by international advocacy groups and now endorsed by the US Administration, have proposed a temporary waiver of TRIPS (intellectual property) protections on vaccines as a means to expand supply; they suggest that breaking vaccine monopolies freeing up access to technologies will allow other manufacturers to enter the market and ease supply constraints. 

However, we and others have argued that an IP waiver is highly unlikely to increase supply in the immediate to medium term; and a waiver would erode incentives to develop future vaccines. High Income Countries (HICs) agreed at the recent G7 meeting their intent to make some of their contracted supply available to the COVAX AMC, although some of this replaces earlier commitments. Practical proposals to increase manufacturing capacity and vaccine supply within a voluntary licensing framework were made in March in a document prepared by CEPIIFPMADVCMN, and BIO, and also in March by Castillo et al. (2021) and in April by McClellan et al. (2021). A number can, and should, be acted upon now.

Modifications to existing vaccines are in the pipeline, and more new vaccines in development.  We set out in the paper that vaccine development would need to continue for a number of reasons, including uncertainties about the impact of the continued mutation of the virus on the efficacy of vaccines, thermostability, the potential for a shift to single dose regimens, the logistical challenges of delivering some vaccines, the potential for rare but serious adverse events to emerge, and the need for additional supply capacity. These reasons remain, and it is very encouraging to see the progress already being made to modify licensed vaccines. There are, additionally, 103 candidates in clinical development, with 18 in Phase 3. However, it is not clear how many of these have the funding needed to complete clinical development.

Beggar-thy-neighbour policies to pre-empt supplies have been the norm. As we set out in the paper, to date, push funding of R&D by high income country governments, linked to Advance Purchase Commitments (APCs) (i.e. agreements to buy a given quantity of a company’s vaccine if it gets regulatory approval) has been the norm. It has been effective in getting the chosen vaccines to market but has led to: a number of high income countries over-purchasing as they seek to compensate for likely development failures; a failure to link high income country purchases and/or R&D funding to commitments to supply vaccines to middle and low income countries; and price determination that is not value-driven. We argue for a demand-side approach. By pooling commitments and pre-agreeing vaccination priorities, countries avoid destructive beggar-thy-neighbour policies to pre-empt supplies, instead sending clear signals to market entrants. Many MICs and LICs are at risk of being deprioritised for supplies, even as global leaders are committed to leaving no one behind. Most countries are not funding their own vaccine candidates, have no or only limited manufacturing capacity, do not offer an attractive market, and are underrepresented at the global tables. A sustainable solution that recognises and responds to the different circumstances and needs of HICs, MICs, and LICs is needed.  

Our proposal is for a Benefit-Based Advance Market Commitment (BBAMC).

The BBAMC proposal builds on an earlier proposal to tackle TB and on the successful AMC for a vaccine for pneumococcal disease, with the key addition of the use of early HTA to set value-based prices instead of cost-based prices, so that vaccines that provide more benefit get relatively higher prices. It is important to reward quality, i.e. vaccines with better efficacy, dose regimens, and other required characteristics set out in a Target Product Profile, in order to promote competition based on quality and cost-effectiveness. As part of the BBAMC, countries would make revenue commitments based on expected value as reflected in the early HTA. The market would be guaranteed, but not to any particular company. There would be tiered pricing across countries, reflecting differential ability to pay, and developers would need to commit to supply to the poorest countries at a heavily discounted “tail price”.

The importance of speed

There are two reasons why HIC governments have seen primarily push-based incentives as more useful than pull-based ones. The first is speed. We agree. Companies need to run activities in parallel that they would normally run sequentially. The most important is to build manufacturing capacity at risk, i.e. before we know if the vaccine is likely to get regulatory approval and how well it works, and to do this for a number of candidates. Ahuja et al. (2021) show that it is more efficient to bring forward manufacturing by paying for capacity in a push incentive rather than simply paying for doses in either a push or pull incentive. This means that a push and pull mix is required, and, as we say, “to ensure the public does not pay twice for a vaccine, pricing can account for push funding...by adjusting either the price or the size of the AMC made by each country. Only push funding for successful vaccine candidates should count against countries’ market commitment.”

In our procurement model, the main driver of private sector investment in vaccine development would be a pull commitment to a market, i.e. to buy quantities of the successful vaccines at value-based prices. By making this commitment at a market level rather than for each product, portfolio risk remains with the private sector who manage their own R&D portfolios. However, it is clear that push incentives to speed up development and manufacturing supply have to be an important part of the policy mix.

Building equitable access into purchasing arrangements

The second reason given for push incentives is to enable countries to pre-empt supplies by requiring priority as a push funder by combining this with an APC. This has been highly effective but, we would argue, has created the current global inequality in vaccinations and also distorted portfolio investment towards domestic vaccine candidates. It would be difficult to agree allocation rules, but we can note the EU Joint Procurement does have an allocation rule specifying that “Access to vaccine doses will be allocated to Participating Member States according to the population distribution key.” There is no doubt that the richer EU countries could have gone it alone at the expense of the rest, but they chose to co-operate and there is evidence,  for example, that the German people support the decision to use an EU-wide mechanism. An AMC would be vulnerable to bilateral deals bypassing the regional or global advance market commitments. Hence the need for global agreement on priorities. This is, arguably, also the only way to get agreement not to introduce export restrictions, which have led to demands for regional supply capability. Global vaccine manufacture has become highly specialised, with India the largest global manufacturer. There is a strong case for locating plants where there are capabilities and skills, rather than tackling export bans by many more countries (including LMICs) investing in expensive, redundant local capacity, especially as such capacity cannot address raw material shortages.  However, without robust allocation arrangements, more countries will understandably seek to build local capacity, risking diverting health monies from more pressing uses.

Three lessons for future pandemic preparedness were proposed in our paper. These were (i) complementing the role of The Coalition for Epidemic Preparedness Innovations’ (CEPIs) in early stage push funded R&D with a market-based pull mechanism such as the BBAMC to finance vaccine development, manufacturing and procurement (ii) building on the work of the COVAX allocation rules by agreeing on global international allocation rules for future pandemic priority products that would cover HICs and MICs as well as LICs, and (iii) robust advance finance commitments to pay for LIC vaccines, triggered by a pre-set hurdle such as a pandemic declaration, enabling a future style Gavi COVAX AMC to have a pre-set pathway to obtaining the funding needed for it to buy vaccines.

With proposals for a Pandemic Treaty made by world leaders in March and agreement to hold a special World Health Assembly in November to discuss one, addressing these issues is key.  We recommend as part of any future market procurement mechanism that innovators must agree to supply the poorest countries at a discounted tail price or to facilitate technology transfer to local licensees at low or zero cost to enable them to supply at this price. The recent Report of the WHO Independent Panel for Pandemic Preparedness and Response made a comparable point. It recommended the need for technology transfer and voluntary licensing commitments to be included in all agreements where public funding is invested in R&D and for the creation of an International Pandemic Financing Facility to provide for rapid surge financing for response in the event of a pandemic.

The Independent Panel report also argues for “shifting from a model where innovation is left to the market to a model aimed at delivering global public goods.”  This fails to recognise that vaccines are not public goods.  If one person is treated with a vaccine dose, another person cannot have this dose. They do benefit if the vaccinated person is less likely to transmit the vaccine, but this additional benefit of vaccination (helping to create herd immunity), although an important externality, does not make the vaccine dose a public good. The Panel is mixing up knowledge generated from R&D with the need for manufacturing capacity to supply individual doses and the finance to pay for them, and the added value of herd immunity from comprehensive uptake of vaccines. The real need, as we point out in the paper, is to ensure that there are rewards for innovation, but that these are conditional upon making supply available to low income populations at a “tail price” close to costs. 

The BBAMC provides a route for a future pandemic COVAX Facility that embraces not only LICs in an AMC, but high and middle income countries as well. By linking voluntary licensing commitments to rewards for innovation that reflect value, whilst respecting intellectual property rights, this will incentivise private investment in R&D, which if successful, and matched with donor funding and complementary push incentives to speed development and manufacture, will increase the likelihood of getting globally needed quantities of vaccines in the future.

Citation

Towse, A., Chalkidou, K., Firth, I., Kettler, H. and Silverman, R., 2021. How Should the World Pay for a Coronavirus Disease (COVID-19) Vaccine? Value in Health, 24(5), pp.625–631. 10.1016/j.jval.2020.12.008.

Related Research

Towse A and Firth I. 2020. How Should the World Pay for a COVID-19 Vaccine? OHE Annual Lecture 2020. Office of Health Economics. Available at: https://www.ohe.org/publications/how-should-world-pay-covid-19-vaccine

Chalkidou K, Towse A, Silverman R, et al. 2020. Market-driven, value-based, advance commitment (MVAC): accelerating the development of a pathbreaking universal drug regimen to end TB. Available at: https://gh.bmj.com/content/5/4/e002061

Chalkidou K, Kettler H, Ramakrishnan G, Silverman R, and Towse A. 2020 Leave No One Behind: Using a Benefit-Based Advance Market Commitment to Incentivise Development and Global Supply of COVID-19 Vaccines.  CGD Note available at https://www.cgdev.org/publication/leave-no-one-behind-using-benefit-based-advance-market-commitment-covid-vaccine

Berdud, M., Jofre-Bonet, M. and Rodes Sanchez, M., 2021. Key Learnings From COVID-19: The Importance of Portfolio Management and How to Procure, Pay For, Distribute, and Use Vaccines During a Pandemic. Available at: https://www.ohe.org/news/key-learnings-covid-19-importance-portfolio-management-and-how-procure-pay-distribute-and-use

Steuten, L., Bell, E. and Neri, M., 2020. The Broader Value of Existing Vaccines in the Fight Against COVID-19: Beware of Tunnel Vision. Available at: https://www.ohe.org/news/broader-value-existing-vaccines-fight-against-covid-19-beware-tunnel-vision

 

 

 

Posted in Emerging Markets, Drug Development/R&D, Value-Based Pricing | Tagged External publications