Attachment 1
IAVI BACKGROUNDER
SECURING A
MARKET FOR
HIV VACCINES—PURCHASE
FUNDS AND
TAX CREDITS
ON SALES
A vaccine for HIV will not achieve the ultimate
goal of bringing the AIDS epidemic under control unless it is
rapidly and widely accessible around the world. Communities in
lower and middle-income countries (LMICs) have typically waited
a decade or more for new vaccines after they have been licensed
in industrialised countries. Given the urgent nature of the AIDS
crisis, such a delay in the delivery of an HIV vaccine would have
catastrophic public health implications.
A credible and well-funded initiative to guarantee
or expand the market for HIV vaccines in the developing world
could significantly accelerate their development and have a profound
impact on the AIDS pandemic. It would also set a valuable precedent
for delivery of other pharmaceutical products to populations in
the developing world. First, a purchase guarantee would assure
private sector vaccine developers of an LMIC market for an HIV
vaccine, encouraging companies to initiate or intensify research
and development efforts on HIV vaccines appropriate for LMIC populations.
Second, a purchase guarantee mechanism would
enable multi-lateral health organisations and LMIC governments
to acquire an HIV vaccine soon upon its licensure, both because
the initiative would provide funds for immediate product acquisition,
and because vaccine developers would be encouraged to build HIV
vaccine manufacturing facilities large enough to meet LMIC demand.
The concept of a purchase fund or pre-commitment
to purchase HIV vaccines has been endorsed by international organisations
and academic leaders, and is the subject of legislation in the
US Congress. Several of these proposals are outlined below. It
is unlikely that any single initiative in and of itself will create
a sufficiently funded, credible, and sustainable system for HIV
vaccine procurement by all LMICs. Multiple programmes will probably
be needed.
Current proposals to expand the market for HIV
vaccines
Vaccines for the New Millennium Act of 2000—S.
2132 and H.R. 3812
Legislation introduced by Senator John Kerry
and Rep. Nancy Pelosi seeks to establish a "Lifesaving Vaccine
Purchase Fund" administered by the US Treasury. The Secretary
of the Treasury would be authorised to spend up to $100 million
per year from the Fund for purchases of vaccines for HIV, malaria,
and tuberculosis for distribution in developing countries. The
Act would also direct the President to enter into negotiations
for creation of a "multilateral vaccine purchase fund"
that would accept contributions from governments and use them
to purchase and distribute these priority vaccines.
Presidential Proposal for Tax Credit on Vaccine Sales
In his fiscal year 2001 budget, the President
proposed a 100 per cent tax credit on the sale of vaccines for
malaria, TB, HIV or any infectious disease that kills one million
or more people annually. Under the proposal, if a vaccine manufacturer
sold a quantity of HIV vaccine for $2 million, it could claim
a $2 million tax credit. Vaccine manufacturers could claim the
credit only for vaccine sales to nonprofit organisations that
purchase and distribute vaccines to developing countries. The
credit proposal is "capped" at a total of $1 billion
in tax credits over 10 years.
World Bank International Development Association
"Replenishing Fund"
World Bank President James Wolfensohn has proposed
that the Bank create a special $1 billion fund of International
Development Association (IDA) loans for communicable disease programmes.
This "replenishing fund," re-capitalised as necessary,
would provide interest-free financing for the purchase of vaccines
against HIV and malaria, and vaccines and improved treatments
for TB. Funds would also be available for a variety of programmes
to combat communicable disease. The IDA programme provides long-term
loans to the 78 poorest countries in the world where per capita
income in 1998 was less than US $895.
Vaccine Purchase Pre-Commitments
Jeffrey Sachs and Michael Kremer of Harvard
University have proposed a system of purchase pre-commitments
for vaccines for HIV, TB, and malaria. Under the proposal, governments
and international organisations would commit to purchase products
meeting certain specifications, but would not be required to actually
appropriate funds for these purchases until products are licensed.
A commission with members from industry and the public sector
would be charged with determining "minimum technical requirements"
for vaccines, such as efficacy level. A base price for particular
vaccines would be set in advance and "bonus" prices
would be paid for vaccines meeting higher standards of efficacy
and other measures of usefulness. IMICs would be given separate
country accounts to use in partial payment for vaccines, in order
to build "ownership among participating countries,"
and allow them to evaluate the usefulness of vaccines for their
own populations.
Key issues in development of a market expansion
programme
Proposals to create market expansion mechanisms
for HIV vaccines are untested, but there are several elements
that will likely be important in designing successful programmes,
including: credibility—industry must be convinced that promised
funding for purchase of a vaccine will be readily available when
a product is licensed; adequate resources—in order to motivate
industry R & D on vaccines for developing world populations,
funding of $250 million to $500 million annually may be required,
adequate return on investment—a market assurance system
should not have the effect of reducing the per unit price of a
vaccine to the point where industry questions its ability to recoup
at least its manufacturing costs for the vaccine; multiple products—a
vaccine purchase system must anticipate the need to purchase multiple
HIV vaccine products as vaccines improve over time and as different
products meet different needs in countries around the world.
International AIDS Vaccine Initiative
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