Combining health and social protection measures to reach the ultra ...

Innovation
future global health financing mechanisms using a simple
framework based on these dimensions of source, use, user,
and financing modality.
Possible new financing mechanisms for
vaccine R&D
R&D windows in existing global health financing mechanisms
One possible new source of funds for vaccine R&D would be
existing global health financing institutions, which could
broaden their scope to support the development of new
health technologies. Among the institutions that might open
such new “windows” for R&D are the Global Fund, UNITAID,
the GAVI Alliance and the World Bank. The strongest
argument for such an expansion of the mission of these
institutions is that investment in R&D now can increase the
payoffs from future spending (or cut costs) by making more
effective vaccines available sooner.
For example, an effective vaccine against HIV could save
billions in annual treatment costs. The IFFIm mechanism
which currently funds GAVI was designed to allow the
frontloading of expenditure on immunization, yet the benefits
of spending now rather than later are even more compelling
for R&D expenditure.
The most suitable use of new resources from these
institutions might be to fund clinical trials in developing
countries, since this would constitute less of a departure from
their current activities. The new funds for R&D could be
channelled through PDPs and other organizations sponsoring
trials or through national governments where the trials will take
place. New resources for efficacy trials would help to fill one of
the critical gaps in current vaccine R&D financing. Moreover,
financing from UNITAID or GAVI could be more predictable and
longer-term than most existing funding, since both UNITAID
(through the airline tax) and GAVI (through the IFFIm
mechanism) have access to dedicated, predictable resources.
Government-guaranteed bond financing
A different kind of financing innovation would be to draw on
the international bond markets to support vaccine R&D, just
as the IFFIm has done to pay for expanded purchase and
delivery of existing childhood vaccines. Such a fund, the
International Finance Facility for Neglected Diseases or IFFnd,
has recently been proposed for drug R&D; the concept could
apply equally well to vaccines 10 . As with IFFIm, borrowing at
competitive rates would be made possible by donor
government guarantees. Unlike payment for vaccine purchase,
however, investment in vaccine R&D could ultimately lead to
a vaccine with commercial potential. Thus donor repayment
commitments could potentially be offset in part by product
royalties. Nonetheless, donor governments could expect to be
responsible for the bulk of repayments, and might reduce their
current or future support for vaccine R&D through other
channels in return for backing the R&D bonds.
Funds raised through a government-backed bond issue of
this kind could be disbursed through an institution such as
GAVI. Alternatively, the resources generated through the bond
sales could flow through PDPs. In either case, funds raised in
this manner would help to assure sufficient volume and
greater predictability of financing. There is no theoretical
reason to limit the use of funds from a bond issue to a
particular stage of R&D, although an expectation from donors
that their obligations would be reduced by sales revenues
might create pressure to focus on later-stage or less risky
projects, or on those more likely to be used in rich world
markets as well as low-income countries.
Targeted approaches to financing scientific innovation
Another class of innovative financing mechanism would focus
specifically on early stages of R&D – on fostering and
translating innovation – and thus aim to fill the gap between
public funding of university research and later-stage
development work carried out by industry, PDPs, or in some
cases, public sector institutions. We will mention three
promising ideas.
Innovation funds administered by PDPs: IAVI will soon
launch a fund, co-funded by IAVI and the Gates Foundation,
to provide small grants to biotechnology companies (and
perhaps some university labs) to test ideas considered too
risky to attract venture capital or other private sector support
and not appropriate for standard public sector research
grants 11 . By drawing on the expertise of experienced fund
managers and its own knowledge of the relevant science, IAVI
also hopes to be able to evaluate projects more rapidly than
traditional mechanisms. Until now, nothing of this kind has
existed for vaccine R&D and no innovation fund has been set
up and managed by a PDP. Although mechanisms of this
kind represent a departure from the traditional role of PDPs in
supporting mid and later stages of product development
through partnerships with industry, they have the potential to
feed new ideas and candidate products into the PDP pipeline.
University/industry matching funds: while most scientific
innovation occurs in university labs, breakthroughs are not
always efficiently transferred to industry where they can be
developed into useful products. The Swiss government’s
Commission for Technology and Innovation is attempting to
foster early collaboration between university researchers and
biotech companies by providing grants to academic labs on
the condition that the money is matched by an industry
partner, which then receives preferential access to intellectual
property that is created 12 . This system could be modified to
target AIDS and other neglected disease vaccine R&D,
perhaps by reducing the contribution required from the
private sector partner. The Wellcome Trust’s Seeding Drug
Discovery initiative, which funds translational research on
unmet medical needs and pairs researchers with experienced
industry advisors, could be another model for bridging
this gap 13 .
Subsidized venture capital funds: venture capital funds
are an important mechanism for financing early-stage R&D in
the private sector – in 2004 they mobilized $3.7 billion for
the biotechnology industry 14 . Venture capital firms have so far
shown relatively little interest in AIDS, malaria and TB
vaccines, however, because the likely markets for these
products are seen as insufficiently attractive or too uncertain
to offset the scientific risk, which, especially in the case of
AIDS vaccines, is seen as unusually high. One way to offset
Global Forum Update on Research for Health Volume 4 ✜ 091