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Authors’ response to Unjournal evaluations of “Advance Market Commitments: Insights from Theory and Practice”

Authors’ response to Unjournal evaluations of “Advance Market Commitments: Insights from Theory and Practice”

Published onMar 20, 2023
Authors’ response to Unjournal evaluations of “Advance Market Commitments: Insights from Theory and Practice”
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Response to The Unjournal Reviewer Reports on American Economic Association Papers and Proceedings (May 2020) vol. 110, pp. 269–273.

Michael Kremer

Jonathan Levin

Christopher M. Snyder

Introduction: We wrote this article as an invited short paper for the 2020 American Economic Association conference. Given the tight page constraints, our focus was necessarily limited. The UnJournal reports are if anything more helpful for this short paper than they would be for a full-length article, suggesting useful ways that the analysis might be expanded to consider a broader set of mechanisms and settings.

Acknowledgments: Before responding to specific comments from the three reviewers in turn, we want to express our deep gratitude to all three reviewers for taking the time to review our paper and to the UnJournal for organizing this exercise. We also thank Arthur Baker for assistance in preparing this note.

Reviewer 1: We thank Reviewer 1 for their comments. We agree with them that there are several market-shaping instruments other than Advance Market Commitments (AMCs), each of which might be appropriate for different circumstances. In this short paper, we focused on AMCs, partly because policymakers decided to implement a $1.5 billion dollar AMC. We felt that it was worth discussing the experience of this practical example. We are not aware of a recent R&D prize of a similar magnitude to compare to. A fuller theoretical analysis is provided in our follow-on paper, “Designing Advance Market Commitments for New Vaccines” (Kremer et al 2022).

We also agree with Reviewer 1 that AMC would not have been the optimal contract for COVID-19 vaccines. In “Market Design to Accelerate COVID-19 Vaccine Supply” (Castillo et al 2021), two of us along with coauthors make recommendations for how governments could invest to accelerate vaccine availability during the COVID-19 pandemic. Rather than an AMC, which is a form of “pull” funding (payments for a successful innovation), we call for funding roughly 85% of firms’ investment expenditures with “push” funding (payments that reimburse the firm’s R&D investments unconditional on product success). In “Preparing for a Pandemic: Accelerating Vaccine Availability” (Ahuja et al 2021), two of us along with coauthors suggest lessons that can be drawn from the COVID-19 experience for future pandemics.

We have pointed out other settings where market-shaping mechanisms other than AMCs may be better for incentivizing vaccine development. In “An Optimal Mechanism to Fund the Development of Vaccines Against Emerging Epidemics” (Snyder et al 2022), one of use along with coauthors noted that without additional stipulations, the per-dose subsidy involved in an AMC may generate perverse incentives for the efficacy of vaccines administered to quell an emerging epidemic. The more effective the vaccine, the faster the epidemic is quelled, reducing the total award under an AMC.

Reviewer 2: We thank Reviewer 2 for their comments. We agree that the results of our empirical exercise should be interpreted with caution. Regarding their comment, “It would be helpful to know how to fund an AMC in perpetuity or how to transition off the AMC,” the AMC for a pneumococcal vaccine included a provision committing firms to cap their prices close to marginal cost. The idea is that the AMC's top-up payments provide sufficient incentive for R&D and capacity investments even with firms’ charging prices close to marginal cost. Firms’ price-cap commitments ensures that vaccines are affordable in the long-run.

Reviewer 3: We thank Reviewer 3 for taking the time and effort to conduct a quantitative analysis of the speed of rollout of other vaccines to developing countries. We are gratified to see that they find that our results should be “fairly robust,” given that coverage rates for alternative comparator vaccines are lower than the comparison we used, rotavirus.

We agree with the reviewer that there are a number of factors not included in our rough estimate of the number of DALYs averted due to the pneumococcal conjugate vaccine's (PCV’s) faster rollout. They mention two such factors—one which would reduce our estimate and the other which would increase it—concluding that our estimate might be too generous. Note that the overall calculation only considers the benefits from the faster rollout of the PCV starting from the observed date of availability, taken as given. It understates the value of the AMC to the extent that the AMC accelerated the vaccine’s development.

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