Three Donor Investment Choices:

What Would You Do?

Adrian Towse

Office of Health Economics,

United Kingdom

Agenda

• Choice 1. Funding R&D as compared to greater access to existing treatments?

• Choice 2. Which PDP? How to measure PDP performance?

• Choice 3. To fund Push or Pull – the role of AMCs?

Choice 1: The Basic FrameworkR&D INVESTMENT

OUTLAY FOR DONOR

Annual cost for each phase of R&D

Duration of each phase

Current distribution of PD PPP programs by phase

Failure rate by phase

Cost of getting products to market

$X

R&D RETURN FOR DONOR

Estimate expected quality of product

Estimate the likely take-up of product in target markets

Estimate the number of DALYs averted in target markets

DALYs

DALYs averted across countries

R&D Cost-EffectivenessCombine DALYs averted with R&D cost estimates to generate cost/DALY ratio

Donor decides how that compares with other options

SUMMARY W003 W003 W009 W009 W020 W0201. 1. 3. 3. 8. 8.

Tuberculosis: Tuberculosis: HIV/AIDS: HIV/AIDS: Malaria: Malaria:Region Population

('000) (e)% of regional

populationEstimated

total DALYs ('000), 2002

% of regional DALYs

Estimated total DALYs ('000), 2002

% of regional DALYs

Estimated total DALYs ('000), 2002

% of regional DALYs

AFR D 311,272.7 0.0502 3,785.2 0.1091 15,846.0 0.1853 16,861.7 0.4875AFR E 360,965.3 0.0582 5,480.2 0.1579 49,805.1 0.5824 13,610.8 0.3935AMR A 333,579.7 0.0538 11.8 0.0003 399.8 0.0047 0.1 0.0000AMR B 445,161.2 0.0718 505.2 0.0146 1,544.2 0.0181 99.7 0.0029AMR D 73,810.4 0.0119 409.6 0.0118 1,136.0 0.0133 40.9 0.0012EMR B 143,323.3 0.0231 111.9 0.0032 46.6 0.0005 76.4 0.0022EMR D 360,296.4 0.0581 2,926.8 0.0844 1,040.2 0.0122 1,468.8 0.0425EUR A 414,527.7 0.0668 47.1 0.0014 197.8 0.0023 1.4 0.0000EUR B 212,311.1 0.0342 430.8 0.0124 49.4 0.0006 138.8 0.0040EUR C 239,717.1 0.0386 1,031.1 0.0297 975.8 0.0114 1.7 0.0001

SEAR B 298,972.8 0.0482 3,178.6 0.0916 1,491.9 0.0174 556.2 0.0161SEAR D 1,291,860.2 0.2083 10,751.0 0.3098 10,883.1 0.1273 1,251.9 0.0362WPR A 155,400.5 0.0251 36.7 0.0011 10.3 0.0001 0.1 0.0000WPR B 1,562,135.8 0.2518 5,991.5 0.1727 2,096.7 0.0245 481.8 0.0139

6,203,334.1 1.0000 34,697.5 1.0000 85,523.0 1.0000 34,590.3 1.0000

% of world total 1,964,098.2 0.3166 20,016.4 0.5769 76,534.3 0.8949 31,724.4 0.9171

TARGET REGIONS

Efficiency frontier

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000Cumulative DALYs averted

Cum

ulat

ive

cost

($k)

Budget constraint

• PD PPP technology pushes efficiency frontier outwards

Introduction of new technology

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

- 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000

Cumulative DALYs averted

Cu

mu

lati

ve c

ost

(m

n)

Expenditure implied by wtp constraint

Additional DALYs averted

A

B C

Current cost-effectiveness frontier

New frontier

Base case results for notional portfolios

Cost per successful

portfolio ($mill)

Cumulative DALYs averted per successful

portfolio (mill)

R&D costs per DALY averted

Vaccines

Ringfenced

4951.36 46.22 107.13

DALY share

4951.36 138.75 35.69

Unrestricted

4951.36 407.42 12.15

Drugs Ringfenced

1593.46 109.73 14.52

DALY share

1593.46 94.21 16.91

Unrestricted

1593.46 127.97 12.45

Conclusions and Policy Issues• Funding R&D via PDPs for neglected diseases offers

good value to donors. • Crucial feature of the donor-funded R&D approach is the

extent of participation/co-operation required from the recipient countries.

• If the latter do not adopt a new technology in spite of its proven cost-effectiveness, then the donor’s R&D funding will have been wasted.

• Donors could end up in the position of having to fund take-up to ensure that the fruits of its R&D investment are realised.

• Linked to this is the issue of recipient governments placing a very low willingness-to-pay value for a DALYas compared to the donor.

Choice 2:PDP metrics -FSG Report

• It is possible to classify PDP performance metrics in a way that makes sense for PDPs and donors.

• Four areas of performance– R&D to Commercialisation – Organisational Strength– Enabling Environment– Health Impact

Portfolios• Donors have to deal with the low likely success rates of

individual projects. The best way to do this is through a portfolio of investments.

• PDPs are better placed to manage a portfolio of projects.• PDPs need quantifiable objectives to enable donors to

assess performance.• Donors should seek to align funding with objectives:

– Productivity goals can only be achieved with realistic portfolios. Having a portfolio that is large enough to deal with project failure is crucial.

– Supply of candidate projects is an issue in some disease areas. There is no point in PD-PPPs building a portfolio that is larger than justified by the scientific merit of the projects available.

Measuring Performance:

• Use of productivity goals:– specific goals help funders evaluate

performance– some PD-PPPs do have measurable goals

• But funders still have to judge whether goals are ATTAINABLE, REALISTIC or TIMELY

Choice 3: Push versus PullPushInitiatives

PD-PPPs Funding for specific trials

or development /discovery programmes within specific objectives of achieving licensed products.

ADIP Activities to support market

access for key products in development.

PullInitiatives

AMCs Funding to purchase

products that have not yet completed development, including a return on R&D.

Supply contracts Funding to purchase products

already on the market (it does not reward R&D)

Factor

Estimated effect on donor discounted cost/DALY averted

1. Speed of uptake of product Very High

2. Cost of capital High

3. Higher product quality High

4. Success rate (especially Phase III) High

5. Cost of development Medium / low

6. Cost of discovery Medium / low

7. R&D timelines Medium / low

Results of sensitivity analysis

Push versus Pull

All pull

All push

Combination of push and

pull

Discovery

Phase I

Phase II

Phase III

Access

Manufacturing plant

Supply contract

Late stage

Early stage

Summary