Advance market commitment

An advance market commitment (AMC) is a binding contract, typically offered by a government or other financial entity, used to guarantee a viable market for a product once it is successfully developed. Generally AMCs are used in circumstances where the cost of developing a new product is too high to be worthwhile for the private sector without a guarantee of a certain quantity of purchases in advance.

As such, AMCs have been used in the creation of vaccines or other medicine with high up-front development costs. As a result of such a commitment, the market for vaccines or drugs for neglected diseases would be comparable in size and certainty to the market for medicines for rich countries. This would encourage biotech and pharmaceutical companies to invest in the development of new vaccines to tackle the world's most pressing health problems, such as pneumonia, diarrheal disease, HIV/AIDS, and malaria, in the normal course of their business decisions.

An AMC has also been launched for carbon-removal that meets certain technical specifications.

AMCs were proposed by Michael Kremer and Rachel Glennerster in 2004 to encourage research.^[1]

First AMC announced Feb, 2007

In February 2007, five countries (Canada, Italy, Norway, Russia, the United Kingdom), and the Bill & Melinda Gates Foundation committed US$1.5 billion to launch the first advance market commitment to speed the development and availability of a new vaccine which is expected to save the lives of 7 million children by 2030.^[2] The pilot provides 7 to 10 years of funding to support the development of future vaccines against pneumococcal disease. Pneumococcal disease is a major cause of pneumonia and meningitis and it kills 1.6 million people every year. The pilot includes provisions to assure the long term sustainable supply and price for the poorest countries.

The AMC for pneumococcal disease offers an improved market for vaccines now in development. Vaccines are bought only if they meet pre-determined standards of efficacy and safety, and if developing countries ask for them. After 7 to 10 years, the AMC funding is likely to be depleted.

An independent expert committee, with representation from developing and industrialised countries, recommended that pneumococcal disease be the target of the initial AMC pilot. Going forward, the AMC will be overseen by an independent assessment committee, which will set and monitor standards for the vaccines. The World Health Organization will facilitate the establishment of the target product profile and assess the quality, safety and immunogenicity of AMC vaccines. The GAVI Alliance and the World Bank will be responsible for supporting the programmatic and financial functions of the AMC.

Origins of the idea

The idea of such a contract, previously proposed in academic literature by Michael Kremer and opinion pieces in major newspapers, gained additional momentum in 2005 with the publication of a report, Making Markets for Vaccines: Ideas to Action, by a working group organized by the Center for Global Development.^[3]

Target Product Profile

The Target Product Profile (TPP) for the Pneumococcal Advanced Market Commitment (AMC) was developed by the World Health Organization at the request of the AMC Secretariat. On December 11, 2008 the Independent Assessment Committee (IAC) officially endorsed the TPP,^[4] making it the definitive set of guidelines for determining the characteristics of AMC-eligible pneumococcal conjugate vaccines. The TPP sets out the standards a vaccine must meet in order to be eligible for sale under the AMC program and the IAC determines whether a candidate vaccine meets the TPP specifications. To meet the TPP, a vaccine must meet or exceed 13 requirements. Specific requirements in the TPP relate to the projected public health impact, vaccine safety, and suitability of the product for use in developing country health systems.^[5]

Carbon removal

In December 2021, an AMC for carbon-removal was first proposed in a Politico essay by economists Susan Athey, Rachel Glennerster, Christopher Snyder and Nan Ransohoff, the head of Stripe Climate.^[6]

In April 2022, Stripe launched Frontier Climate, an AMC, "to buy an initial $925M of permanent carbon removal between 2022 and 2030."^[7] Ransohoff, who leads the project, told The Atlantic that the carbon-removal market will probably need to reach $1 trillion per year.^[8]

References

1. Kremer, Michael; Levin, Jonathan; Snyder, Christopher M. (2020-05-01). "Advance Market Commitments: Insights from Theory and Experience". AEA Papers and Proceedings. 110: 269–273. doi:10.1257/pandp.20201017. ISSN 2574-0768.
2. [1] 2011-01-13 at the Wayback Machine, GAVI Alliance
3. "Making Markets for Vaccines: Ideas to Action". Center For Global Development | Ideas to Action. Retrieved 2023-06-23.
4. . Archived from the original on 2009-03-03. Retrieved 2009-03-29.
5. http://vaccineamc.org/progress.html
6. "Opinion | Advance Market Commitments Worked for Vaccines. They Could Work for Carbon Removal, Too". POLITICO. Retrieved 2022-09-30.
7. "An advance market commitment to accelerate carbon removal". frontierclimate.com. Retrieved 2022-09-30.
8. Meyer, Robinson (2022-04-13). "We've Never Seen a Carbon-Removal Plan Like This Before". The Atlantic. Retrieved 2022-09-30.