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Health Affairs, 24, no. 3 (2005):
652
doi: 10.1377/hlthaff.24.3.652 © 2005 by Project HOPE |
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Financing |
PROLOGUE
Vaccine Financing And Economics
The problem of financing vaccine development and use presents the policy community with a unique opportunity to set aside ideological preconceptions. Nowhere is it clearer that simplistic public-versus-private thinking serves no useful purpose. Evidence of market failure is pervasive. Although vaccines represent the most cost-effective class of medical therapies available, they command pitifully low prices, and the unwillingness to pay can be traced to consumers as well as to institutional purchasers. Suppliers have exited the market in droves; shortage episodes have occurred with increasing regularity. Only 10 percent of the world’s $70 billion annual spending on health research and development (R&D) goes to diseases prevalent in poor countries—many of them potentially vaccine-preventable—that account for 90 percent of the global burden of illness. Yet public-sector efforts to shore up dysfunctional vaccine markets have compounded these problems by driving prices further downward, further attenuating reliable supply and drying up capital for R&D.
Financing biomedical innovation is a generic problem that extends well beyond the realm of vaccines. Along with public research subsidies, generous public and private insurance programs in the United States have provided substantial cross-subsidies for R&D as well as virtually guaranteed markets for new products for most of the past half-century. But stressed public budgets and an increasingly competitive global economy have stripped many of these supports away. The papers that follow offer open-minded thinking about public and private roles in vaccine financing that could lead toward promising approaches to these larger challenges as well. Ernst Berndt and John Hurvitz outline a proposal for advance-purchase agreements to support vaccine markets that has already attracted interest in the United States, the United Kingdom, and other countries. Tracy Lieu and colleagues provide an overview of the complex economics of vaccines, which highlights government’s conflicted role as promoter of vaccine use as well as low-price purchaser and concludes that both "pull" mechanisms like advance-purchase agreements and "push" strategies that support vaccine development are needed. Mark Pauly offers further analysis of the unusual dynamics of vaccine markets, focusing on the circumstances that tend to drive prices down despite the high apparent value of vaccine products. Pauly, too, concludes that public and private strategies need not be mutually exclusive, although "movement through this ideological minefield is likely to be challenging." A distinguished group of commentators—Amie Batson, Patricia Danzon and Nuno Sousa Pereira, Henry Grabowski, and Alan Hinman—contribute their perspectives.
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