Innovative Financing Strategies and Mechanisms

“Push” and “pull” mechanisms were presented as potential novel financing strategies designed to strengthen the SLD market over the long term. Push mechanisms create incentives for new suppliers to enter the market. Rifat Atun, Imperial College London, suggested the following push strategies:

 

•   reengaging public–private partnerships;

•   providing R&D credits for investments in small markets; and

•   accelerating regulatory approval.

 

Pull mechanisms create demand and signal a market both for new entrants and for current players to stay in the market. Atun commented that market signaling is as important as funding because potential suppliers prepared to undertake a 10- to 15-year commitment to invest in R&D and manufacture drugs need assurance that they will be able to recoup their investment. He suggested the following long-term pull strategies for the MDR TB market:

 

•   long-term instruments such as a TB bond to provide 10- to 15-year funding;

•   at the domestic level, expanded health insurance or catastrophic risk insurance to cover MDR TB;

•   venture capital impact funds for development of new SLDs;

•   value-based pricing; and

•   outcome-based financing to reward successful novel approaches.

 

Yadav suggested two specific types of new contracting structures that could be employed to shift the push-pull boundary, leading to expansion of forecast-driven orders, as follows:

 

1.   long-term contracting agreements with quantity flexibility that allow quantities to be adjusted, subject to specified restrictions, if actual demand turns out to be slightly different from forecasted demand; and

2.   a volume increase-price decrease trajectory contract that can guarantee a supplier a 10 percent volume increase for each of the next 3 years in return for a reciprocal 10 percent yearly price decrease over the same period.



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