Presentation on theme: "Stop TB Working Group on New Vaccines: Task Force on Economics and Product Profiles Discussion Points London School of Hygiene and Tropical Medicine."— Presentation transcript:
1Stop TB Working Group on New Vaccines: Task Force on Economics and Product Profiles Discussion Points London School of Hygiene and Tropical Medicine December 2008Andrew Farlow Research Fellow in Economics, Oriel College
3REVIEW OF EVIDENCE ON EPIDEMIOLOGY, SOCIOECONOMIC IMPACT OF TB AND COST-EFFECTIVENESS OF NEW TB VACCINESIntroductionMeasurement of progress against targets setThe complexities of TB – latent infection, HIV and MDR- and XDR-TBExisting vaccination strategies – the BCG vaccineNew vaccination strategies and the health impact of new TB vaccinesDrugs, vaccines and diagnostics working togetherCost-effectiveness of TB control and vaccinationLimitations of cost-effectiveness analysisSocioeconomic analysis and cultural issuesSummary of implications for policy makingA very selective bibliography
4BASIC MARKET AND REVENUE FRAMEWORKS Some introductory thinkingComparing market and revenue frameworksReplacement vaccineBoost vaccineTotal portfolios
5RATE OF ADOPTION AND MECHANISMS OF UPTAKE IntroductionHep B as a model for adoption?EPI levelsEfficacy and coverage
6PRICING STRUCTURES, TIERED PRICING, WILLINGNESS TO PAY The principles of tiered/Ramsey vaccine pricingConsultancy model pricing structuresIncentives for rich market and ‘high risk’ market uptake, and implications for tiered pricing strategiesScenarios for non-rich markets and implications for tiered pricing strategiesVaccine catch-up‘Willingness to pay’
7POLICY PROCESS METHODOLOGY TO IMPROVE ACCURACY OF PRICING AND DEMAND FIGURES AND SPEED OF VACCINE UPTAKEIntroductionAimConsultancy modelsVaccination and health policy literaturePolitical science and public policy literatureNext stepsVaccination and health policy literature for future reviewPolitical science and public policy literature for future review
8COST ISSUES Cost to develop a new vaccine Attrition rates / probabilities of successPortfolio reasoning of ‘at least one’ successApplied Strategies portfolio analysisCommentary: Attrition rates and costs of developmentOther cost of development issues including biomarkers, trial site limitations, time to licensureCOGS and LDC sales brought forwardBooster COGSSome sensitivity analysisCosts caused by plant size and capacity issues
9TB VACCINE AMC OR SIMILAR INITIATIVES Relative role of such mechanisms as:PrizeProduct subsidy (including how best to structure it)Form of production capacity insuranceRole of competitionOther incentive issuesLessons from other cases (see case studies)
10LESSONS FOR TB FROM A SELECTION OF OTHER VACCINES Hepatitis BPneumococcalHuman papillomavirus (HPV)RotavirusHaemophilus influenzae type B (Hib)
12Distribution of tuberculosis in the world in 2003 Estimated incidence rates per 100,000, all forms of TBTaken from Dye C, Watt CJ, Bleed DM, Hosseini SM, Raviglione MC. Evolution of tuberculosis control and prospects for reducing tuberculosis incidence, prevalence, and deaths globally. JAMA 2005; 293: 2767–75.
13High incidence of active TB High incidence of active tuberculosis:High level of latent TB infection (around one-third of the world’s population)Relatively recent problems of coinfection with HIV/AIDSIncreasing multi-drug resistance to treatment9.2 million new cases of TB in 20071.6 million deaths (137 cases/100,000 population, 25 deaths per 100,000 population)31% of which in the African Region55% of which occurred in South-East Asia and the Pacific*Global tuberculosis control: surveillance, planning, financing: WHO report (WHO/HTM/TB/ ).
14Following the peaking of epidemics in Africa and Europe, TB case rates are stable or falling
15Trajectories of tuberculosis epidemic for nine epidemiologically different regions of the world See scoping study for full reference, fig 1.3
16Current TargetsTargets centre around expanding Directly Observed Treatment Strategy (DOTS) and on achieving reductions in TB incidence, prevalence and death ratesThe Millennium Development Goals set out the impact target of halting and reversing TB incidence by 2015WHO’s Stop TB Strategy (launched in 2006) has set further targets:By At least 70% of people with sputum smear-positive TB will be diagnosed (i.e. under the DOTS strategy), and at least 85% cured. These are targets set by the World Health Assembly of WHO (first set in 1991)By The global burden of TB (per capita prevalence and death rates) will be reduced by 50% relative to 1990 levelsBy The global incidence of active TB will be less than 1 case per million population per yearThe principal WHO measure of case detection is the rate of case detection for new smear-positive cases in DOTS programmes
17ProgressNational estimates suggest 77 countries met the 70% target for case detection rates by the end of 2006*Although some countries have met the target, progress has been much slower in the African, Eastern Mediterranean and European regionsNevertheless, the fall in incidence has been slow and projected incidence will still be 100 times the elimination threshold in 2050Observe that as an epidemiological measure of success, incidence usually changes more slowly than prevalence or deaths in response to control efforts*Global tuberculosis control : surveillance, planning, financing : WHO report 2008
18Projected incidence/million/year to 2050 From: Dye. C. 2008
19Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Surveillance and data:Sound cost-effectiveness analysis needs sound epidemiological analysisPoor-quality data and potential bias in incidence estimates (for example, case detection uses total number of smear positive cases as the denominator)Not controlled experiments - difficult to do inferenceSee Table 1.1, p11 of Part 1 of Scoping StudyDiscussion Points:To what degree does the Task Force take such surveillance problems as given and work analysis according to these constraints?To what degree does the Task Force engage in discussions about the surveillance systems and the data generated from such systems with an eye to improving data available to its tasks?What are the advantages and disadvantages of various approaches to measuring tuberculosis incidence, prevalence and mortality?Data ‘ownership’ issues
20Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Latency:The latent nature of TB means that it will take a long time to achieve a low rate of infectionLatent stage TB infection (LTBI) can be detected via a tuberculosis skin test (TST), and thence treated to decrease the chance of progression to active TB. However, the interpretation of TST can be complicated if a person has had a vaccineDiscussion points:What are the full complications and implications of the latent nature of TB for vaccine markets?How does this affect the decision of countries to use vaccines as part of a control strategy and hence cost effectiveness analysis of such strategies?For example, in countries where exposure to active TB is rare, treating latent TB is more likely to be the strategy of choiceHow might this incentive change over time for countries that start off using vaccines?
21Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Cost effectiveness methodologies – quantity and distribution:See p22-31 of Part 1 of Scoping StudyUsed to determine the relative cost of an intervention, such as vaccination, and the outcome or effect compared to no intervention (or another alternative)In global health, cost of a health intervention per unit of outcome e.g. healthy life year averted (usually presented in Disability or Quality Adjusted Life Years - DALYs or QALYs)Cost-effectiveness used to identify of knowledge gaps and the need for further researchFew cost effectiveness analyses of control strategies for TB, let alone of TB vaccines
22Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Floyd (2003), , 66 studies, 28% were in high-burden countriesFew related to vaccination strategiesExpensive, and time-to-build longEvidence from other vaccine launches: especially useful to design such studies around vaccine trial sites on the basis of a targeted early launch strategy that creates momentum for successBaltussen* et al:Most economic studies of tuberculosis in high burden countries do not assess the impact of interventions on transmissionMost use indicators of effectiveness that are specific to tuberculosis control, rather than generic measuresThis can prevent the results on cost-effectiveness of tuberculosis control being compared with that of interventions for other diseasesThis limits the usefulness of these studies in decision-making at the policy level*Baltussen R, K Floyd and C Dye “Cost effectiveness analysis of strategies for tuberculosis control in developing countries” British Medical Journal (2005) doi: /bmj (published 10 November 2005)
23Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Potential benefits to different institutions of an improved vaccine or vaccines:From Bishai, D. M., and Mercer, D
24Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Discussion points:See p24-p27 of scoping study for some resultsUpdate?Take the level and range of cost effectiveness studies as given or expand the level and range of such studies?Current distribution of such studies?Priorities for the future distribution if such studies are to be used as part of an evidence base for vaccine launch?Priorities at different horizons?Optimal combination of cost effectiveness studies by region or country?Multivariate cost effectiveness sensitivity analysis of authors such as Zif et al?
25Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Breadth of coverage of measures and Common protocols:See p 28 for limitations and issuesGoal to make studies comparableOften studies are found at a later date to be non-comparable or not as comparable as they could have been with a bit more prior thought and coordinationWeakens the ability to use such analysis for advocacy and to influence policy decision processMost studies use indicators of effectiveness specific to tuberculosis control, rather than generic measures, making it difficult to compare with the cost effectiveness of interventions for other diseasesFurther limits ability to use such evidence in the policy-making processDiscussion point:Should the Task FOrce be more involved in standardizing the protocols of such studies so at to make results more comparable (e.g. hospitalization costs, productivity impacts, treatment of exchange rates, appropriate sensitivity analysis, end points, etc.)?
26Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Integrated strategies for prevention and control: TB vaccines more cost effective when combined with other control strategies:
27Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Discussion point:How can DOTS expansion complement the launch of a new vaccine or vaccines and vice versa?How to use DOTS to identify gaps?What are the implications at different horizons for infrastructure and costs?How should analysis be adapted to take account of new drugs being developed?*Are the intermediate goals and metrics of success different for different interventions, even if the final goals are the same?What are full benefits and limitations of integration?*In many of the analyses, the public markets for vaccines in poor countries are valued relative to costs (and efficacy) of non-vaccine options, and this is usually presumed to be the current state of play vis a vis DOTS. There is a presumption underlying some investment case figures (those of BVGH/BCGH) that there will be no new drugs between now and 2030
28Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Pre- and postexposure vaccine strategies:Debate about the best strategy to improve immunisation against TB (pre- or postexposure, combination of vaccines and boost strategies)Ziv et al, effectiveness of a pre- or postexposure vaccination strategy in developing countries with high incidence and prevalence of diseaseAt first, postexposure vaccines have a greater impact in reducing the number of cases of diseaseThis effectiveness declines over time (even with continuous vaccination campaigns)effectiveness of preexposure vaccines risesPre vaccination ultimately nearly twice as effective in reducing the number of new infectionsOver a year horizon cases prevented under post- or preexposure vaccination campaigns roughly equalEither way a widely deployed and highly effective vaccine, whether pre- or postexposure, the number of cases of TB in high-incidence countries is likely to remain highNeed for several vaccines or combination* Ziv et al (2004), extending the work Lietman T, Blower SM. The potential impact of tuberculosis vaccines as epidemic control agents. Clin Infect Dis. 2000;30:S316–22. Lietman T, Blower SM. Tuberculosis vaccines. Science.1999;286:1300–1
29Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines 70%-80% reduced infection rate does not translate into 70%-80% reduced disease rateIncidence of TB disease is driven by:Susceptible persons who become infected and quickly progress to diseasePreexposure vaccines, given to uninfected individual, to reduce this route, but has little impact on the second routeLatently infected persons who slowly progress to disease often with a long time lag. but with little impact on the secondPostexposure vaccines, given to latently infected persons, act mainly on the second route with little impact on the first
30Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Flow diagram for postexposure TB vaccine
31Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Flow diagram for preexposure TB vaccine
32Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Predicted cumulative percentage of new infections with Mycobacterium tuberculosis prevented (preexposure = black, postexposure = red) under different uncertainty analysis. Zif et al monte Carlo simulation methods
33Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Predicted cumulative percentage of tuberculosis cases prevented (preexposure = black, postexposure = red) under different uncertainty analysis
34Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Discussion points:See p19-p20 of reportCurrent consensus regarding pre- and postexposure vaccines?How important in determining product profile, market, etc., is the mechanism by which a preexposure vaccine works?Investment case literature: Are there nuances that that literature misses and ways that that literature could be improved by a more sophisticated approach to choice between vaccine strategies?
35Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Multi-drug resistance, discussion points:How important is multi-drug resistance as a driving force for uptake of vaccines?How is multi-drug resistance captured in models involving combinations of prevention and treatment measures?HIV:It is unclear what the effect of co-infection with HIV will be on TB vaccine effectivenessAbout 40% adults with TB (15-49 age) are co-infected with HIVDiscussion point:Does the TF need to know more about the long-term role of the HIV epidemic or does it take the work of others as given? Impact on:Incidence of TBvaccine effectivenesscost effectiveness in developing countriescontrol programsImplications for product profiles and market sizing?
36Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Duration of protection of new vaccines:Product profiles in willingness to pay questionnaires usually specify ten yearsDiscussion points:Significance of finding that duration of immunity has a much greater impact on cost effectiveness if it is greater than ten years?Implications for cost-effectiveness analysis of ten versus twenty versus life-long protection (delivery costs, long-term consequences for epidemiology of TB, etc.)?Transmission dynamics:Ideally estimates of averted DALYs should incorporate any transmission effects of the diseaseHow disease incidence may change in the futureA more substantiated claim on the effectiveness of a new interventionDiscussion point:State of such analysis in the case of TB?
37Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Cohort studies:Discussion point:What is the situation regarding cohort studies for informing disease burden and existing vaccination and treatment coverage and impact?
38Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Other effects of a vaccine – discussion points:When assessing a new vaccine candidate, how important is the interrelation with BCG and both direct and indirect effects of the new vaccine candidate?How significant are non-specific survival benefits from vaccination?Active pulmonary TB:Active pulmonary TB is the leading cause of death in HIV/AIDS patients in the developing world and has spiraled in the last decade or soDiscussion points:What is the state of play of modeling and evidence on this?No modeling relating to this in the investment case analyses
39Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Socio-cultural limitations:See p28-30 for issuesThere are many socio-cultural factors associated with TB, which can have severe implications for accessibility and acceptability of treatment and prevention strategiesE.g. care-seeking strategies of the poorE.g. Chinese cost recovery systemsE.g. social stigmaSuch factors have a direct implication for the validity of any assumptions about coverage made in a standard cost-effectiveness analysisOther costs include early exit from school by children on account of their parents’ TB, the impact of social stigma, etc.Discussion point:To what degree does the Task Force regard these as an area the TF should investigate, or should this be left to others?
40Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Health systems:Concern about DOTSWide variation in the selection and implementation of control strategies within and among countriesDOTS programmes have mostly recruited patients who would have been detected and treated anyway in the public health systemsDOTS has failed in some countries to reach deeply into the private sector, and in others to provide access to patients living in areas with inadequate health servicesRates of improvement limited by quality of health systemBloom et al, reaching populations gets harder and harder after the first wave of a new interventionDiscussion point:If vaccines are to optimally ‘integrate’, what are the implications for modeling vaccination strategies and cost effectiveness of new TB vaccines – especially boost and prime boost – of the health systems issues?
41Epidemiology, socioeconomic impact of TB and cost-effectiveness of new TB vaccines Discussion points:What are realistic success metrics for vaccines over such horizons presuming a vaccine is launched, and presuming that vaccines are combined with other interventions?How do such horizons impact:investment decisionsproduct profile decisionsthe nature of follow-on generations of vaccinessponsor funding, etc.?Epidemiologically-driven targets:TB targets, as encapsulated in the MDGs, are not driven by an epidemiological frameworkDiscussion Points:What would epidemiologically-driven TB targets look like, and what are the implications for vaccines?How can the Task Froce influence an improved epidemiological basis for such targets?
42Basic market and revenue frameworks t = the time of the cash flown = the total time of the projectr = the discount rateCt = the net cash flow (the amount of cash) at time t.C0 = the capital outlay at the beginning of the investment time (t = 0)So long as NPV is positive, risk neutral* investors should invest*Perhaps because they can diversify such as to be in effect risk-neutral on this investment.The above is a little too simplistic. If there is any potential variability of input values, uncertainty, even disagreement, the NPV derived will vary – potentially very considerably
43Basic market and revenue frameworks Current market and investment case analysesSee p35-36 for basic comparisonsSee p36-p42 for a caseSee p44 on for boost and global XDRSee p48-p50 for total portfolio figuresDiscussion points:How satisfactory are the global market and investment case analyses so far created?What is the balance between the need to generate absolute market numbers (the focus of current market and investment case analysis) and the need to improve the functioning of the market for vaccines, and more effective launch strategies?Strategic thinking discussion point: Because of the concern to get numbers, much of the market analysis is remarkably devoid of strategic thinking. For example, over simple issues like: the levers that can be used to improve adoption of new technology; the relationship between efficacy and ease of uptake; catch-up strategies. Would it be too difficult to have investment case reports adopting a more strategic approach?
44Basic market and revenue frameworks Public and private sectors:The treatments of the division between public and private sectors in the various market/investment cases so far have been relatively rudimentaryDiscussion points:How is the division between public and private sectors best modelled?Should this division be based on country-level data pertaining to other vaccines or past vaccine launches?Does it depend on price?Is it useful having more granular details about this, or will the effort just complicate the process of deriving a market figure while adding little value?Conversely, is knowing the division useful for knowing how to adapt launch strategies?
45Basic market and revenue frameworks Global MDR-TB and XDR-TB:Analysis of impact of global MDR-TB and XDR-TB seems rudimentary in much market analysisIn theory governments and individuals should be prepared to pay to avoid MDR-TB and, even more so, XDR-TB because of the high costs of treatmentOne of the market analyses (Applied Strategies) relies heavily on global XDR-TB to generate large revenue figures and NPVs from booster vaccine take-up (3X the NPV without)Not clear how global XDR-TB feeds through to dictate prices and country decision-making processesGiven such heavy weight on global XDR-TB to drive large NPVs in some analysis, there seems little epidemiological and cost-effectiveness modelling of the impact of it
46Basic market and revenue frameworks Discussion points:What is the scientific basis of any probability of MDR-TB/XDR-TBHow should it be used in market analysis?Why is Global XDR-TB modelled as having little impact on NPV of replacement vaccines, though it does for booster vaccines?It seems that Global XDR-TB drives the biggest differences in levels of tiered pricing – but on what basis?
47Basic market and revenue frameworks High-income high-risk groups:We find repeatedly that the role of the high-income country and high-income high-risk groups still needs clarifyingPotentially, such markets could be important for tiered pricing strategiesMiddle-income and private sectors discussion points:What is the role of middle-income countries and the private sector in general?Replacement vaccine discussion point:What are the strengths and limitations in presuming that replacement vaccine will replace current BCG vaccine?
48Basic market and revenue frameworks Cases of large NPV:In some of the boost vaccine and global XDR-TB scenarios, NPVs are very largeDiscussion points:Is this realistic?What happens if there are other interventions (drugs and diagnostics) ‘competing’ at the same time?If the NPVs are truly that large, why does private investment not flood in and drive NPVs down?If the problem is scientific uncertainty, and if the NPVs truly are that large, if a vaccine candidate gets through to stage III, should we not expect private investors to take it all the way to licensure?Is something missing in this reasoning?
49Basic market and revenue frameworks Efficacy and duration of protection of BCG vaccine discussion point:Given that efficacy levels presumed in the various investment case materials are defined relative to BCG vaccine (and phrased that way in ‘willingness to pay’ questionnaires) how do we view these in the light of there being no consensus regarding the effectiveness or duration of protection of BCG vaccine, and the natural bias and the role of other factors in assessing those vaccinated and non-vaccinated individuals?
50Rate of adoption and mechanisms of uptake Hep B is used in one market analysis as a template:Cumulative Number of Children Reached in GAVI-Supported Countries*projected Source: WHO/UNICEF
51Rate of adoption and mechanisms of uptake Hep B and establishment of GAVI
52Rate of adoption and mechanisms of uptake Global and regional EPI coverage. Source: WHO, 2005
53Rate of adoption and mechanisms of uptake EPI coverage
54Rate of adoption and mechanisms of uptake Discussion points:Are the assumptions regarding rate of adoption accurate in any of the analyses? (see p51-53 for some presumptions about uptake)How might a methodology/system be created to gather and process the requisite information to improve the accuracy of this information?Is Hepatitis B a good template for modelling rate of TB vaccine adoption, in particular of booster and prime-boost vaccines?In some of the analysis there is no connection between efficacy and rate of adoption. What specific role does efficacy play in dictating the shape of the adoption curve?
55Rate of adoption and mechanisms of uptake China and India:In none of the models is this particularly well defined, yet we know that the emerging and middle income markets in such countries will be important in ten to twenty years time, particularly with respect to global tiered pricing strategiesDiscussion points:What are sensible assumptions to make about speed of vaccine uptake in China and India?At horizons of ten or twenty years?What are the sources of information?What are the policy processes in such countries?
56Rate of adoption and mechanisms of uptake Catch-up strategies:Catch-up is treated inconsistently across the investment case literatureAt best there is (apparently) a limited catch-up phase modeled in many of these analysesCatch-up is a way of generating lots of early sales and hence high NPV for every sale madePrice is also usually modelled as higher earlier, before competitive events lock in, further reinforcing the impact on NPV of early salesTherefore catch-up strategies are likely to heavily impact the value of R&D investmentsDiscussion points:What are likely catch-up strategies, particularly of booster vaccines?How will catch-up strategies likely vary across countries?How can this be worked into the policy-making literature?
57Rate of adoption and mechanisms of uptake Efficacies in durability in product profiles:The product efficacies in the investment cases so far are fairly unsophisticated. It is not clear how they are derived as ‘targets’ (see p56)The investment case literature regards this as still to be formulatedThere is no proper ‘sensitivity’ analysis done of this in the investment case analysesInvestment analysis has little to say about impact of durability of response on price and demandDiscussion points:What is the mechanism for integrating discussion about such efficacies into analysis of all other parts of the analysisSuch as rate of uptake, pricing, and indeed R&D costs if higher R&D expenditure leads to higher expected efficacy)?How sensitive are all the demand figures to percent efficacy?Including, e.g., willingness to expand delivery mechanisms, especially amongst adult populationsWillingness to change organizational practice)?What is the impact of durability of response on price and demand?How do we capture the impact of the durability of response which is not captured in the efficacy measure?What is the evidence for the impact of rBCG vs prime-booster from a durability point of view?
58Rate of adoption and mechanisms of uptake EPI improvement initiatives, discussion points:Can many recent ongoing initiatives to improve EPI performance (BMGF, WHO, PATH all have recent initiatives to improve EPI performance) be integrated into thinking about TB vaccine launch strategies, especially of booster vaccines?Delivery systems and organizational change, discussion points:As a function of efficacy…What is the evidence of willingness to expand delivery mechanisms Especially amongst adult populations?To change organizational practiceE.g. to provide vaccine to LTC and the homeless in the US?
59Pricing structures, tiered pricing, and willingness to pay “I cannot believe that anyone seriously believes that America should manufacture vaccines for the world, sell them cheaper in foreign countries, and immunise fewer kids as a percentage of the population than any nation in this hemisphere but Bolivia and Haiti”With apologies to Bill Clinton. This is an oft-cited quote of in the vaccine literature, taken from a press conference on the Childhood Immunisation Initiative in Public papers of the president of the United States. William J Clinton. Book I. January 20 to July 31, Washington, DC: Office of the Federal Register, National Archives and Records Administration, These days the Clinton Foundation plays its part in getting product prices down for the developing world, usually well below rich-world prices. Others point out that this is as much a criticism of US immunization policies at the time as a comment on global tiered pricing.
60Pricing structures, tiered pricing, and willingness to pay The principles of tiered pricing. See p for full explanation
61Pricing structures, tiered pricing, and willingness to pay Tiered pricing will not work with all vaccine casesMore difficult if the product used in rich markets deviates from that used in poor markets or if there is simply no demand in higher-income marketsIt seems that TB vaccines will more likely be universally applicable?Depends on efficacy considerations and ability to integrate with other control strategies in richer countriesUnlike case of pneumococcal, appropriate serotypes covered, etc.Discussion points:A strategy of tiered pricing (and communicating this well in advance)?Combined with emphasis on achieving ‘affordable’ production costs?What is the situation with regard to possible tiered pricing strategies for different TB vaccines?If not the same product in all markets, what effort could be made to ensure that in advance the product is much more similar, such that tiered pricing can be used?
62Pricing structures, tiered pricing, and willingness to pay Overview of current studies, discussion point:What does the Task Force feel about the pricing structures used in the various TB market analyses?See p60-63 for pricing structures usedDiscussion points:What is the role of market research in setting prices?Are there useful market research lessons from other products (both vaccine and non-vaccine)?What mechanisms should be put in place to derive pricing information in future, and updating it, and at what horizons?For example, the further from product launch, the more unreliable one would imagine the information would be
63Pricing structures, tiered pricing, and willingness to pay A typical pricing structure. See more on p60-p63
64Pricing structures, tiered pricing, and willingness to pay Low-income market prices:Farlow figures show the power of poorer and middle income markets, even at lowish prices, to boost NPV if uptake is quicker Mainly the issue is sheer quantity of sales and whether COGS can be low enoughEven just a $1-$2 mark-up has big impact if the number of doses is large and sold early enough (given the discounting of the value of sales)A $7 per-dose sale in 5 years is worth about $3 now at 15% rate of discountingDiscussion points:What are sensible low-income market prices?What about prices for China and India over likely horizons?
65Pricing structures, tiered pricing, and willingness to pay Rich-world vaccines:Rich-market sales are potentially (since it is not clear yet) key to positive NPV and to tiered pricing strategiesBut it is not clear how new TB vaccines potentially fit into current prevention and treatment strategies according to efficacy in such high-income (and in the case of countries like the US, high-risk) settingsSee p64-75Discussion points:How are high-income countries to be treated in market analysis?How do we find out exactly what policy makers in those countries are likely to do according to product profile? How should the problem they face be better modelled?Under what circumstance would the US and many EU countries that do not currently use BCG vaccine start to use new vaccines?
66Pricing structures, tiered pricing, and willingness to pay Private market pricing (especially in middle income countries):At the moment the treatment of division of public and private market in low and middle income countries is very rudimentary in investment analysisIn some of the analyses, private sector pricing is a small multiple of an already low price (2x, say, 10 cents)Discussion questions:Given the importance put on the private sector market, how should the division between public and private sector, including this division according to country, be accessed?How can the division be made more accurate?
67Pricing structures, tiered pricing, and willingness to pay Production capacity and tiered pricing, discussion points:Role of production cost decisions in achieving tiered pricingIncluding technology used in the US (such as the Aeras production facilities), and manufacture in some of the most affected countries?Do other vaccine stories suggest lessons applicable to TB (Hep B, Meningitis, pneumococcal, HPV, etc.)?Questionnaires, discussion points:What sort of questions should questionnaires about pricing contain?Who should such questionnaires be directed to?What is the best timing for using such questionnaires?How should efficacy be communicated in such questionnaires?Competition:, discussion points: What is the impact on ‘willingness to pay’ if there are competing (non-TB) vaccines and other control interventions?
68Policy process methodology to improve accuracy of pricing and demand figures and speed of vaccine uptakeBooster v. replacement:The various investment case analyses count booster vaccine ‘in’ or ‘out’ but once ‘in’ do not treat them as particularly problematicDiscussion points:Are booster vaccines more problematic for policymakers to deal with than replacement vaccines?If so, what are the likely specific challenges?Empirical evidence about decision making:Boston Consulting Group’s and Applied Strategies’ models do not have an underlying analytical structure for the decision making componentWhat is the current level of use of models and empirical evidence of decision-making processes in informing market-building and procurement strategies?Is it worthwhile improving this, or too expensive and out of the remit of a Task Force on economics and product profile?
69Policy process methodology to improve accuracy of pricing and demand figures and speed of vaccine uptakeFrameworks:Section 5 of the scoping study details a range of frameworks from the political science and public policy literature.Discussion point:Does any of this look promising?Mapping vaccine adoption stories, discussion point:Is it worth mapping out previous vaccine adoption stories for selected countries using any of these frameworks and creating country-specific models?Do we stick with the current consultancy models and improve them, or are there other approaches to taking advice?Vaccination and health policy literature, discussion point:Are there any specific comments on any of the vaccination and health policy literature or the political science and public policy literature?
70Cost issues Portfolio analysis and attrition/success probabilities: Some analysis uses portfolio analysisThis can look very sophisticated even if the underlying information is limited or even simply wrongThe best way to control for this is by having openness about the figures used in calculations and an ability to do sensitivity analysis For example better stress-testing of probabilitiesDiscussion points:Who will do this portfolio analysis in the future?Should it be a consultancy company under instruction, or some other entity?Are the success probabilities used in investment cases plausible?Do ‘current industry benchmarks’ of success probabilities apply to the case of TB vaccine candidates?How do we make attrition/success probabilities for new vaccines more robust?What if we are being too optimistic?
71Cost issues Optimal portfolio: The optimal portfolio seems a function of policy makers risk aversion about how high a probability of getting no vaccine they are prepared to tolerate, and the costs needed to achieve particular probabilities of getting ‘at least one vaccine’. Intuitively:As the pool of vaccine candidates increases in size, at first new additions to the pool have a big and initially growing positive impact on the probability of ‘at least one success’At some point, the addition of new candidates, while increasing the percent chance of success, does so at an ever-decreasing rateAssuring 95% chance of ‘at least one success’ can be very expensiveAt that probability the act of raising the chance of ‘at least one success’ by a few more percent is getting ever harder (and more expensive) to doThe bigger the portfolio the higher the probabilities of getting variety of products.In this way decisions about portfolio size and shape interact with decisions about Target Product Profile
72Cost issues Discussion points: How do we think about ‘optimal TB candidate portfolio’ size?How does this interact with thinking about TPP?What is the portfolio formula for working this out?How do we turn portfolio measures into measures of impact?Can we, for example, model a link between a portfolio at a particular point in time to its expected impact, especially for candidates that have reached phase 3?
73Cost issues Average cost per new vaccine, Trials and phase III: For each percent chance of at least one success, a portfolio will produce a range of possible numbers of new vaccinesDiscussion points:What will be the average number of successful products, and the average cost per successful product, for any given probability of at least one successful product?What is the average cost per product based on the 95% reasoning?How many products are logically possible in phase 3 anyway?What are the potential trial site bottlenecks?What is the optimal sizing of the number, distribution, and sizing of trial sites given the lumpy nature of trials needs?
74Cost issues Sponsor return, discussion point: What do sponsors get as their payout (in terms of contract deals on quantities and prices in exchange for their investments)?COGS, discussion point:What is the importance of COGS, especially of booster vaccines?How might lower booster manufacturing costs stimulate uptake?How does that feed in to NPV?Competitive event, discussion point:What is the ‘competitive event’?What is the social value of the ‘competitive event’?Plant size/capacity, discussion point:What are the various plant size and capacity issues?
75Cost issues Investment externalities: The greater the investment and the earlier the success via drugs in tackling MDR-TB and XDR-TB, the lower will be the value of vaccine-based investmentsSimilarly, a combination of new pre- and postexposure vaccines could substantially reduce the risks of emergence of MDR-TB and XDR-TB and reduce the value of the market for drugsBetter diagnostics enable more precise targeting of booster vaccines, with impacts on booster vaccine sales (probably able to be lower) and prices (probably able to be higher)Better clinical biomarkers will shorten trial lengths, sizes and costs, and yet there will be poor incentive to develop and supply such biomarkers if they are costly to develop and if the benefits can’t be internalizedDiscussion points:What is the combination of negative and positive investment externalities across different possible areas of R&D?How does it impact investor incentives? How should any trade-offs be modelled?How should investment case analysis adapt to this?
76AMC and similar mechanisms The amount of R&D to pay for and the sizing exercise, discussion points:In setting any prize-like mechanism to incentivise R&D, what amount of R&D would be targeted?What would be the methodology for setting the size for TB vaccines?How would the following be factored in:Complexity of underlying scienceR&D costsEpidemiological issuesAlready spent private and sponsor fundingProduction costsWould an ‘auction’ be used as originally proposed, followed by a monitoring mechanism (to check firms are investing ‘enough’)?Follow-on incentives discussion points:What dynamic follow-on incentives are envisaged that TB vaccine development will need?How will this be best managed?
77AMC and similar mechanisms PDP issues:How would this or any other mechanism interact with vaccine/drug/diagnostic PDPs?Given that it is supposed to work by pulling in private finance?Affordable prices:How is pressure kept up on affordability, especially in the light of the recent pneumococcal experiences? How does a ‘prize’ stop becoming an inefficient pre-sunk subsidy?The pneumococcal lesson:The pneumococcal AMC case is providing a lesson; what are the salient features so far of that case?Given the heavy monitoring and evaluation being proposed (the recently-released report of the ‘monitoring and evaluability study’ is 110 pages long), this suggests that by the time TB becomes a potential target, a great deal more will be known. Is there some sense in waiting?
78AMC and similar mechanisms Alternatives/complements, discussion points:If an AMC is a prize-based R&D mechanism, what alternatives/complements are there in terms of:Procurement policyOther predictable funding streamsDemand forecastingTiered pricingDelivery mechanismsProduction capacity insurance, etc.?How does this feed back on the original prize-based mechanism?At what point, does the AMC nomenclature stop referring to a ‘prize’ and start referring to something else?Funding available and tradeoffs, discussion points:The current AMC counts on balance sheets earlier than originally thought. How does this affect the tradeoff of funding mechanisms?What is the probable budget constraint?How much funding is going to be available probably?