How Should the World Pay for a Coronavirus Disease (COVID-19) Vaccine?

The potential health and economic value of a vaccine for coronavirus disease (COVID-19) is self-evident given nearly 2 million deaths, "collateral" loss of life as other conditions go untreated, and massive economic damage. Results from the first licensed products are very encouraging; however, there are important reasons why we will likely need second and third generation vaccines. Dedicated incentives and funding focused explicitly on nurturing and advancing competing second and third generation vaccines are essential. This article proposes a collaborative, market-based financing mechanism for the world to incentivize and pay for the development of, and provide equitable access to, second and third generation COVID-19 vaccines. Specifically, we propose consideration of a Benefit-Based Advance Market Commitment (BBAMC). The BBAMC uses health technology assessment to determine value-based prices to guarantee overall market revenues, not revenue for any specific product or company. The poorest countries would not pay a value-based price but a discounted "tail-price." Innovators must agree to supply them at this tail price or to facilitate technology transfer to local licensees at low or zero cost to enable them to supply at this price. We expect these purchases to be paid for in full or large part by global donors. The BBAMC therefore sets prices in relation to value, protects intellectual property rights, encourages competition, and ensures all populations get access to vaccines, subject to agreed priority allocation rules.

Designing Pull Funding For A COVID-19 Vaccine.

A widely accessible vaccine is essential to mitigate the health and economic ravages of coronavirus disease 2019 (COVID-19). Without appropriate incentives and coordination, however, firms might not respond at sufficient speed or scale, and competition among countries for limited supply could drive up prices and undercut efficient allocation. Programs relying on "push" incentives (direct cost reimbursement) can be complicated by the funder's inability to observe firms' private cost information. To address these challenges, we propose a "pull" program that incentivizes late-stage development (Phase III trials and manufacturing) for COVID-19 vaccines by awarding advance purchase agreements to bidding firms. Using novel cost and demand data, we calculated the optimal size and number of awards. In baseline simulations, the optimal program induced the participation of virtually all ten viable vaccine candidates, spending an average of $110 billion to generate net benefits of $2.8 trillion-nearly double the net benefits generated by the free market.