Design of a Transferable Exclusivity Voucher Program

Transferable Exclusivity Voucher Program Cover

White Paper

Design of a Transferable Exclusivity Voucher Program

Published date

January 26, 2022

Background 

Developing a drug or vaccine is typically unprofitable when the people in need live in lower-income countries. For this reason, the drug industry neglects many infectious diseases. Drug development is also unprofitable when the existing market is limited and the interventions are aimed to address future risk, such as bioterror attacks, infectious disease pandemics, or antibiotic-resistant pathogens. The lack of commercial incentive discourages companies from investing in drug development for such diseases. 


Governments and foundations have created incentives for drug and vaccine development for otherwise neglected diseases. The incentives fall into two categories: pull mechanisms and push mechanisms. 


Pull mechanisms provide a known return on investment, a viable market, or reward for successful development and launch. There are at least four types of pull mechanisms. First, an advanced market commitment gives a successful developer a guaranteed purchase price for a given volume. Second, a market entry reward gives a successful developer a lump sum payment upon approval. Third, an extended exclusivity period gives a successful developer more time with limited competition. Fourth, a priority review voucher gives a successful developer a tradeable right to faster regulatory review.

Push mechanisms provide up-front support to drug developers to reduce their costs and foster innovation. Examples of a push mechanism are a tax credit, such as through the Orphan Drug Act, or direct funding through grants and contracts, such as funding from the US National Institutes of Health (NIH). For example, the NIH and the Bill & Melinda Gates Foundation spent a combined $300 million on push funding for malaria in 2019. The combined investment of all other governments and foundations totaled approximately $200 million of push funding for malaria that same year. The FDA’s Tropical Disease Priority Review Voucher program offers a pull mechanism worth about $100 million for a new malaria drug (or drug for other eligible neglected diseases). Yet, the need for investment is far greater as successful development of a new drug costs more than $1 billion dollars.


We need another powerful incentive to ignite drug development for neglected diseases. One option for policy makers is to enact a transferable exclusivity voucher program. Exclusivity vouchers have been discussed at least since at least 2000, refined in 2016, and proposed by the U.S Congress in the “Re-Valuing Antimicrobial Products Act of 2018.” However, the exclusivity voucher program has yet to become law. In this paper, we describe the voucher program, detail four concerns raised about it, discuss how to address those concerns, and propose how to implement the program.
 

Duke-Margolis Authors

Beth Boyer, MPH photo

Beth Boyer, MPH

Policy Research Associate

David Ridley

David Ridley, PhD

Dr. and Mrs. Frank A. Riddick Professor of the Practice of Business Administration
Margolis Executive Core Faculty