Accelerating health technologies with incentive design
health technologY for covid-19
We need treatments, diagnostics, and vaccines to address the challenges created by the COVID-19 virus. But without a substantial change to traditional practices, we risk long delays in getting the health technology we need. Vaccines typically take years, even decades to research, develop and distribute, and most vaccine candidates fail. Vaccine manufacturers typically don’t even start to scale up manufacturing capacity until after clinical trials succeed, and even then the process of scaling up requires careful testing and extensive regulatory oversight. Society would benefit enormously if firms could be incentivized to make manufacturing capacity ready to go shortly after safety and efficacy trials conclude. The IMF estimates the economic costs of the crisis to be about $86 billion per week. Since firms capture only a small share of the societal benefits that they create by ending the crisis, there is an important role for government in providing incentives to firms to accelerate development.
Designing an effective incentive scheme can be challenging even in normal times. In the current crisis, accelerating the development of health technology requires substantial changes to the standard processes without compromising health and safety. Our goal is to carefully analyze alternative financing and incentive schemes for health technology in order to guide the design of these programs. In the early 2000s, several members of our research team worked extensively on the design of Advance Market Commitment (AMC) models for health technology financing. In 2007, the model was applied to incentivize development of the pneumococcus vaccine, guaranteeing vaccine manufacturers sales at a fixed price in return for an effective vaccine. The pneumococcus AMC led to the successful development and distribution of hundreds of millions of doses of vaccine and saved an estimated 700,000 lives. Drawing on lessons from this experience, we are analyzing the financing of health technology for COVID-19.
We are grateful to many individuals and organizations who have given their time and expertise to inform our work. In particular, we thank Keystone Strategy, Whit Athey, Ph.D. (independent consultant, formerly Food and Drug Administration), Lisa Danzig, M.D. (independent consultant, formerly in senior leadership positions within the vaccines and diagnostics industry), and Mary Wu (independent consultant, formerly in leadership positions in vaccines and diagnostics industry).