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Designing Pull Funding for a COVID-19 Vaccine

Summary

Tune into another episode of Avalere’s Journal Club Review podcast series on Avalere Health Essential Voice. In this segment, our health policy experts discuss a recent study in which a simulation was used to determine whether pull funding could overcome issues related to speed, scaling, and pricing for a COVID-19 vaccine.
“While the pull-funding model does shift investment risk back onto the firm, it could still have the effect of competitively disadvantaging firms who either can't or may be unwilling to take those risks, possibly because they're too small, too new, or some combination of other factors, even if their costs could still virtually be covered through the pull-funding program at a later date.” Christine Liow

Panelists

Moderator
Luke Frazier , Associate, Policy

Luke Frazier supports clients with research and analysis that span a variety of healthcare sectors and stakeholders.

Speaker
Christine Liow , Consultant II, Policy

Christine Liow advises clients on key developments in comparative effectiveness research, the impacts of health technology assessments, evidentiary requirements on patient, provider, and payer needs, and strategies for external public and private engagement.

Transcription:

Luke: Hello, and welcome to another episode in the Avalere Health Essential Voice series focused on the findings and themes from Avalere’s Journal Club. In this series, we provide commentary on a contemporary healthcare publication that was presented at our internal Journal Club meeting.

My name is Luke Frazier, and I work on the policy team here at Avalere. Joining me today is Christine Liow, a consultant on our policy team, and an expert in vaccine value and evidence.

In today’s episode, we will be debriefing on the study titled “Designing Pull Funding for a COVID-19 Vaccine,” published on HealthAffairs.org on July 23. The study aimed at making the case that “pull” funding for a COVID-19 vaccine could overcome issues regarding speed, scaling capacity, and pricing.

Currently, there are two main forms of funding for vaccine development: “push” and “pull” funding.

Push funding, which is most common, is upfront reimbursement for the cost of R&D and production. It incentivizes developers to address overlooked disease areas. Drawbacks to push funding include picking the winners before a developer’s product is known to be safe and effective, and an inability for funders to see development costs.

Pull funding is payment for a successful vaccine candidate.

In the article, the authors conducted baseline simulations and found that a proposed pull-funding mechanism that induced the participation of all 10 possible vaccine candidates produced an overall net benefit of $2.8 trillion, which is almost double the benefit produced under free market conditions. These savings were calculated based on 2.2 billion vaccine doses obtained for $50 a dose, totaling out to $110.4 billion.

Christine, as you review this study, what are some facets you found interesting?

Christine: This article highlights an interesting yet fundamental challenge that is associated with funding the development, manufacture, and distribution of a COVID vaccine on a global scale. As you mentioned, the authors note that most funding to date has been push funding. In the context of this pandemic, this type of funding has reduced the cost of R&D in these early stages, which has, in turn, encouraged innovation and allowed for participation by firms on all levels, including smaller or newer ones that may not have otherwise had the resources to participate.

However, as each candidate progresses through the various stages of research, the authors highlight some inherent challenges with push funding, such as the inability to confirm the accuracy of how much things are projected to cost, the potential risks of investing in an unsuccessful vaccine candidate, and general challenges around funding sustainability through the manufacturing and distribution phases that could hinder manufacturing-capacity building and ultimately compromise efficiencies.

So instead, authors argue here that a universal approach to coordinating and incentivizing firms to make early investments in manufacturing capacity, while streamlining and facilitating equitable distribution, is necessary to ensure efficient global access and, ultimately, broad vaccination. The authors specifically focus on pull funding arrangements for candidates in the Phase III trial stage as one potential way to optimize efficiencies and resources.

Luke: Right. In context of COVID-19, as well as in broader vaccination immunization efforts, there are several organizations that are leading these initiatives. We have the Coalition for Epidemic Preparedness Innovations (CEPI), which finances independent research projects to develop vaccines against emerging infectious diseases. Then we have Gavi, which is a public-private global partnership with a goal of increasing access to immunization in lower income countries. These groups, together with the World Health Organization, are leading the COVAX facility. The aim of COVAX is to boost development and production of a COVID-19 vaccine, or multiple vaccines, and ensure fair and equitable access for every country in the world.

Fair and equitable access is achieved through the Gavi advance market commitment (AMC), which is an example of a pull-funding mechanism. The goal of this AMC is to provide equal access to COVID-19 vaccines for lower-middle income and low-income countries. Funding for the AMC comes from official development assistance through the UN, as well as public and philanthropic aid.

An example here in the US is the Vaccines for Children program, otherwise known as VFC. The VFC Act was passed in 1993 and provides free vaccines for children who are on Medicaid, uninsured, or who are American Indians or Alaskan Natives. VFC also provides free vaccines at federally qualified health centers for underinsured children. The CDC’s Advisory Committee on Immunization Practices (ACIP) votes on funding for new vaccines, and once a resolution is passed, the federal government establishes a contract with the relevant manufacturers to purchase the vaccines.

So, now that we have some concrete examples of what pull funding could look like at the international and domestic level, Christine, what are your thoughts on how the mechanism developed and executed through the simulations in this study could actually be accomplished in reality?

Christine: So, as with these examples, the authors noted that the coordination of a pull-funding program at the global level by a third party entity like Gavi or CEPI would be critical, because this type of arrangement wouldn’t work in a free market. In the true free market situation, absent any global coordination whatsoever, the vaccines would essentially get allocated to the highest bidder.

Now, suboptimal or ineffective global coordination may have a lesser effect than no global coordination at all, but the end result would still be higher vaccine prices and likely inadequate distribution of the vaccine, particularly among poor countries.

In that same vein, if the bids submitted to these manufacturers are too low, or if the total demand for the vaccines is perceived by manufacturers to be inconsistent or inadequate, it may lead firms to underinvest in manufacturing capacity and be slow to scale up, or it may lead some firms to drop out entirely.

These are some of the problems we were trying to solve for through this type of funding arrangement to begin with. So ultimately, the purpose of some global central coordinating entity would be to navigate these issues on behalf of all countries and not only prevent an unnecessary bidding war, but also adequately incentivize the firms to invest early in their manufacturing capabilities.

Luke: Yes, and I think that’s a huge assumption to make. With global trends, politics, and a rise in populism and nationalism, countries coming together to form a global coordinating entity is a heavy lift, but an integral part of making this a reality.

So, Christine, keeping in mind that this was a modeling exercise, what are some of the potential considerations we can think about as we look to apply the findings of this study?

Christine: In the context of a global pandemic where speed, efficiency, and scale are all critical factors in trying to get a potentially lifesaving vaccine out to as many people as possible, under the right conditions, pull funding presents itself as a potential way to address those factors. Toward that end, the authors set out to provide some tangible estimates of costs and benefits so we can begin to discuss and evaluate the potential feasibility of such a program.

However, their model relies on several assumptions about the science of the vaccine, the development, and the behaviors of individual countries and firms, which they acknowledge throughout their paper. As a result, there are still many considerations and open questions about how a pull-funding mechanism on this scale might work.

For one, even if the leadership of a neutral body representing international interests were to be successful, there are some potential implementation challenges with ensuring or maintaining significant participation amongst all the countries and avoiding behaviors such as side deals and indirect negotiations that might tilt conditions back toward a free market approach. Additionally, this type of funding approach also assumes firms have the resources to invest upfront in their manufacturing capacity building.

While the pull-funding model does shift investment risk back onto the firm, it could still have the effect of competitively disadvantaging firms who either can’t or may be unwilling to take those risks, possibly because they’re too small, too new, or some combination of other factors, even if their costs could still virtually be covered through the pull-funding program at a later date.

Push funding has helped level the playing field and mitigated the potential effects of these risks thus far, but certainly at a price. In that sense, it will be even more important to employ, at a minimum, a mix of push and pull funding along the lifecycle, as the authors propose.

Luke: Right. I think it’s important to keep those considerations in mind moving forward as we think through some of these issues on a global and domestic scale.

Christine, thank you for joining me today, and thank you all for tuning in to this Avalere Health Essential Voice Journal Club Review episode. Please stay tuned for more episodes in our Journal Club series. If you’d like to learn more, please visit us at www.avalere.com.

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