Run-AMCThe latest idea in vaccine funding won't cure AIDS and malaria.

Is he getting the best vaccine?The quest to save the world with vaccines has been faltering. After increasing during the 1970s and '80s, vaccination rates have fallen since about 1990 for basic diseases in developing countries. Development of vaccines for emerging and expanding diseases (like AIDS and malaria) has also moved haltingly. Only half the children in sub-Saharan Africa get basic vaccination for diphtheria, tetanus, pertussis, and measles; rates for those vaccines in some countries have dropped below 25 percent. Every year, 10 million people die from diseases for which vaccine development or delivery is lagging.

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Drug companies spend little to produce or distribute vaccines for developing-world diseases because that's not where profits lie. Recently, however, health-policy experts have been floating a newish way to prod the industry into action: the advanced market commitment. The AMC is a promise by a donor country or organization to reward the development and production of a specific vaccine by buying upfront a certain number of doses at a price that will ensure the drug developer a healthy return. Since the typical earnings of a successful new drug are about $3 billion, AMC advocates suggest that sum as the promised return for each new vaccine. So, if the United States and Europe want to inspire production of 200 million treatments of malaria vaccine, they would promise $15 a treatment—for $15 x 200 million treatments, or $3 billion—to the first vaccine maker that develops, tests, and brings to market the specified vaccine. Though technically not a prize, the AMC creates a sort of race: The money is awarded not through a contract but to the first company that successfully completes all trials and has a vaccine ready for manufacture. The "pull" of this demand is meant to complement the "push" of grants for drug research and development.

Variations of the AMC have been around for nearly a decade, but its current form and name come from "Making Markets," a report produced last April by the Center for Global Development, a small but influential anti-poverty think tank, and written by Harvard economist Michael Kremer with the CGD's Owen Barder and Ruth Levine. The idea quickly caught on. In September, a bill designed to raise vaccination rates in developing countries, introduced by Sens. Richard Lugar, R-Ind., and John Kerry, D-Mass., included AMC funding as a key element. In December, Britain announced it would fund AMCs for malaria and AIDS vaccines, and other European Union countries said they would consider doing so in 2006.

But even as the AMCs' momentum built, some of the experts who advised the group that wrote "Making Markets," including Oxford economist Andrew Farlow and Princeton health-policy specialist Donald Light, charged that Kremer and his co-authors had ignored problems that make AMCs clumsy and inefficient—and likely to inspire mainly mediocre vaccines. The heart of the Farlow group's criticism is that AMCs by their nature will produce not the best drugs that money can buy but those that are quickest and least expensive to bring to market. To motivate drug companies, an AMC sets specifications for the desired vaccine that seem realistic at the time. Like all drugs, however, vaccines typically take a decade to develop. And in light of research developments in those intervening years, the original specs may prove quite unambitious. But the AMC would still go to the first drug company to produce and test a vaccine that meets the predetermined minimum specs.

Consider, for instance, an AMC for a malaria vaccine that effectively inoculates 60 percent of the people who get it. Four years into its research, Company A makes a breakthrough that makes it possible to achieve a 90 percent rate of inoculation. But Company B gets its 60 percent-effective vaccine to market first. Company B gets the prize; Company A gets nothing—and its vaccine never gets developed. Farlow notes that many AMCs could go not to new vaccines but to existing products that drug makers developed and then shelved because they lack profit potential.

The winner-take-all nature of AMCs and the long path of drug development, then, could allow mediocre drugs to capture most AMC rewards. A fresh round of AMC funding could be offered for a second, better vaccine. But companies that lost out the first time couldn't count on new money, so, until it appeared, development of potentially superior vaccines could stall. The basic flaw is that AMCs tend to attract easy solutions to disease and discourage more ambitious ones. As Farlow and his group point out, this hardly resembles a fluid, dynamic market in which buyers and sellers haggle over terms to determine value. And the problems seem either inherent to the AMC concept or remarkably intractable: Despite the expenditure of a lot of time and money, they've gone uncorrected since at least 1999, when AMCs were the subject of an intensive colloquium put on by the Sabin Vaccine Institute.

Kremer's response to this critique is incomplete and unsatisfying. He and his co-authors attribute the Farlow group's criticisms to ideological differences over whether market incentives have a place in public-health initiatives. In response to Farlow's practical beefs, Kremer says little. Addressing the charge, for instance, that many AMC rewards will go to less-ambitious, on-the-shelf vaccines, Kremer asserts that AMCs "can … be designed to create incentives for new products and competition." But he doesn't say how. Instead, he simply restates criticisms he has made of the existing system for vaccine production that AMCs are supposed to address.

Kremer's main target here is the primary engine of present efforts to increase vaccination rates in the developing world: public-private partnerships. Through PPPs, drug companies develop vaccines in conjunction with nonprofits like the Bill & Melinda Gates Foundation or government agencies like the National Institute of Allergy and Infectious Diseases. The AMC crowd assumes that PPPs won't suffice since they've presumably allowed the recent declines in investment and vaccination rates. But that premise is wrong. The declines are primarily the result of the consolidation of drug companies, which reduces innovation, and the increasing emphasis on creating and marketing blockbuster drugs, which discourages investment in less-profitable vaccines.

Despite these shifts in the market, PPPs have made a dent during the last five years or so in developing the vaccines that poor countries need. PPPs created the malaria vaccine that recently produced such encouraging trial results in Mozambique, for instance. Such partnerships have also advanced AIDS vaccine efforts, cut measles deaths significantly, and eradicated the deadly Hib virus in Gambia. At first glance, the AMC looks like the alphabet-soup option of choice. But its problems have proved terribly stubborn. At this point, like so many market offerings, it appears to be oversold.

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