D Strategies for Achieving Full U.S. Participation in the Children's Vaccine Initiative

The Institute of Medicine Committee on the Children's Vaccine Initiative recognized early on in its deliberations that achieving the vision of the Children's Vaccine Initiative (CVI) would require choosing among a range of strategies and options, each of which could have profound implications for the future development, production, delivery, and use of vaccines for children in economically disadvantaged countries of the world. To facilitate consideration of possible options, the committee devised three major "strategies." Each strategy depends on certain requirements and each has positive and negative implications. It should be noted that these strategies and the various approaches they encompass are not mutually exclusive. The following discussion of these strategies is designed to permit those with a commitment to childhood vaccines to evaluate a number of new ideas and approaches to achieving the goals of the CVI. In discussing and defining strategies as to how to enhance overall United States public-and private-sector participation in the CVI, the committee recognized the following:

  • The combined scientific base of the U.S. public and private sectors for the development of vaccines is not exceeded anywhere in the world.

  • The process of vaccine development, from basic research through to commercialization, breaks down for those vaccines of little commercial interest, most particularly at the point of pilot production.



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The Children's Vaccine Initiative: Achieving the Vision D Strategies for Achieving Full U.S. Participation in the Children's Vaccine Initiative The Institute of Medicine Committee on the Children's Vaccine Initiative recognized early on in its deliberations that achieving the vision of the Children's Vaccine Initiative (CVI) would require choosing among a range of strategies and options, each of which could have profound implications for the future development, production, delivery, and use of vaccines for children in economically disadvantaged countries of the world. To facilitate consideration of possible options, the committee devised three major "strategies." Each strategy depends on certain requirements and each has positive and negative implications. It should be noted that these strategies and the various approaches they encompass are not mutually exclusive. The following discussion of these strategies is designed to permit those with a commitment to childhood vaccines to evaluate a number of new ideas and approaches to achieving the goals of the CVI. In discussing and defining strategies as to how to enhance overall United States public-and private-sector participation in the CVI, the committee recognized the following: The combined scientific base of the U.S. public and private sectors for the development of vaccines is not exceeded anywhere in the world. The process of vaccine development, from basic research through to commercialization, breaks down for those vaccines of little commercial interest, most particularly at the point of pilot production.

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The Children's Vaccine Initiative: Achieving the Vision Without a major initiative in research, development, production, and procurement capability, new vaccines and new combinations will be used exclusively in economically advantaged countries, while less advantaged countries will remain dependent on the current Expanded Program on Immunization (EPI) vaccines and on the local production of vaccines. It is insufficient just to develop new and improved vaccines; such vaccines must be manufactured and made available to the CVI and EPI. U.S. pharmaceutical firms are profit-driven; their continued presence in vaccines depends on adequate returns on their investments. The availability of vaccines in the United States depends almost entirely on incentives to commercial firms to develop and produce them. Over 80 percent of the world's children are born in countries producing one or more of the EPI vaccines and almost 60 percent of diphtheria and tetanus toxoids and pertussis vaccine used in the world today is produced in the country that uses it. U.S. inner-city and rural populations face vaccine delivery and coverage problems similar to those being addressed by CVI, and many CVI goals are compatible with national interests. STRATEGY 1: RETAIN THE CURRENT SYSTEM It is entirely possible that the current vaccine system, which has many strengths, could be augmented sufficiently to permit full U.S. participation in the CVI. The process of vaccine innovation in the United States, involves numerous organizations in both the public and private sectors. In contrast, the actual production of vaccines depends on a handful of commercial and two state manufacturers. Under the current system, commercial manufacturers pursue the development of vaccines for which there is perceived to be adequate returns on investment. For the most part, commercial vaccine manufacturers cannot justify their investment either in the development of new vaccines or in the improvement of existing vaccines intended for predominately developing-country markets. Some priority CVI vaccines have limited industrialized-country markets and are therefore perceived to be unprofitable. The two largest buyers of vaccines internationally, the Pan American Health Organization (PAHO) and the United Nations Children's Fund (UNICEF), have procured vaccines for many years at very low prices. Given that no new vaccines have been developed and introduced to the UNICEF/PAHO/EPI market since its inception, it would appear that the prices quoted to UNICEF/PAHO are not sufficient to stimulate vaccine innovation. Within the current system, small and medium-sized biotechnology

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The Children's Vaccine Initiative: Achieving the Vision companies are a new force in the pharmaceutical industry, contributing especially to the development of new and improved technologies for constructing vaccines. Few of these companies, however, have the capability to manufacture a vaccine on a pilot scale, and almost none have a full-scale manufacturing facility. To manufacture their products on a commercial scale, most biotechnology companies must form strategic alliances with larger pharmaceutical companies. Ultimately, then, the decision to make a vaccine rests entirely with large, private industry, which bases its activities on the perception of a commercial market. Assuming no fundamental changes in the current system of vaccine innovation summarized above, the committee identified three possible approaches for enhancing U.S. participation in the CVI: substantial increase in financial support for CVI vaccine research carried out by government agencies, federal purchase of existing vaccines for use in programs such as the EPI, and improvement in the delivery of existing vaccines. Option 1: Increased Funding for CVI Vaccine Research Under this option, substantial new funding would be added to the budgets of the various agencies involved in vaccine-related research. The additional money would supplement the investment in vaccine research at the National Institutes of Health (NIH), the U.S. Department of Defense (DOD), the U.S. Food and Drug Administration (FDA), and the Centers for Disease Control and Prevention (CDC). The main benefit of this option is a continued commitment to vaccine research in the public sector. In addition, increased resources would be directed toward vaccines that are most relevant to the CVI. However, this option does not encourage enhanced participation by private industry, neither biotechnology firms nor established manufacturers, and the superb resources that they could bring to the CVI. In this sense, it does not foster optimal participation in the CVI by the United States. Also, by simply increasing funds for the beginning stages of vaccine development, this option does not effectively overcome any of the obstacles in the current system that might impede the process of vaccine development and manufacture, most particularly the shortage of facilities used to produce pilot lots of vaccine. Finally, injecting additional resources into public-sector vaccine research would do little to increase the commercial viability of CVI vaccines; as a result, production of these vaccines would be unlikely. For this option to materialize, an estimate of resource requirements would need to be made and the U.S. Congress would have to appropriate the additional funds. No other major changes in the status quo would be

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The Children's Vaccine Initiative: Achieving the Vision required, except that the budgets, and possibly staffs, of certain government agencies would increase. Contribution to the Global CVI This option would contribute to the global CVI by maintaining a strong U.S. presence in basic and applied vaccine research. There would likely be substantial spin-offs to the global CVI for new approaches to vaccine development. Unfortunately, the global CVI lacks the capability to ensure that new approaches are tested and developed. Option 2: Purchase Existing Vaccines Under this option, the U.S. government, through the U.S. Agency for International Development (AID), could procure bulk or finished vaccines from U.S.-based manufacturers for use in immunization programs in developing countries. Another approach would be for the U.S. government to contribute money directly to UNICEF, enhancing UNICEF's ability to implement immunization activities, including the procurement and distribution of vaccines. (It is unlikely, however, that U.S. manufacturers would bid on UNICEF contracts [see Chapter 4]). This option would enable the United States to contribute its high-quality vaccines to children in the developing world. In addition, AID could advance technology transfer to developing countries by supplying bulk vaccine, accompanied by assistance for training, quality control, and quality assurance in filling and packaging the vaccine. Lastly, the first two alternatives included in this option would guarantee an overseas market to U.S. manufacturers for existing vaccines or bulk products. Despite these advantages, this option does not build upon U.S. strengths in vaccine research and development. The purchase of existing vaccines is unlikely to lead to the development of new CVI vaccines under current market arrangements. In addition, because this approach is resource intensive, it is not likely to be sustainable in the long term, particularly with the advent of more expensive combination vaccines. Furthermore, any benefit to countries receiving U.S.-purchased vaccines may be reduced if the value of those purchases is deducted from an overall U.S. foreign aid package. The success of this option would depend on the ability of selected U.S. government agencies to alter the ways in which they operate. For instance, the Office of Health at AID would have to orient itself more toward procurement. In essence, the U.S. government, through AID, would be

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The Children's Vaccine Initiative: Achieving the Vision embarking on a price subsidy policy analogous to that in agriculture by buying vaccines at one price and selling them overseas at a lower price. This option would also require that international activities within the FDA be expanded in order to increase its assistance with quality control and quality assurance in developing countries. Contribution to the Global CVI This option would enhance the quality control capacity of developing countries that are or would be capable of manufacturing CVI vaccine products and would foster production-sharing between the United States and those developing countries. It might also enable the United States to supply CVI vaccines to developing countries; however, under this option these vaccines would most likely be developed only if they also served an industrialized-country market. Option 3: Improve Vaccine Delivery Under this option, U.S. foreign aid efforts would focus on enhancing vaccine delivery in the developing world. This could be done, for example, by strengthening health infrastructure. Implicit in this approach is the assumption that the best way for the United States to help alleviate problems of immunization coverage in the developing world is by improving the delivery of existing vaccines rather than contributing to the development and introduction of new vaccines. This option would help to provide needed resources and supplies to achieve better immunization coverage in the developing world. However, a focus on vaccine delivery is not likely to result in the development of CVI vaccines, some of which would facilitate easier delivery by virtue of their characteristics. For example, heat-stable polio vaccine would reduce cold-chain difficulties, and combination or sustained-release vaccines would reduce the number of needed visits to health clinics. This option, then, would not capitalize on the significant U.S. resources devoted to vaccine research, development, and manufacture. Finally, technology transfer to developing countries would not be facilitated under this option. To accommodate this new mission, AID would need to either shift more resources into vaccine delivery efforts or convince the U.S. Congress to appropriate new funds for this purpose. In other respects, current funding streams to U.S. government agencies would continue, although the United States would probably contribute additional amounts to UNICEF and PAHO for vaccine procurement.

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The Children's Vaccine Initiative: Achieving the Vision Contribution to the Global CVI This scenario would channel additional U.S. resources into enhancing the delivery of existing vaccines rather than ensuring the development and supply of new and improved vaccines. As a result, the burden of developing CVI vaccines would rest within the international CVI. However, the United States would still maintain an effective basic and applied vaccine research capability, which may produce technological spin-offs relevant to the CVI. STRATEGY 2: FORGING NEW PARTNERSHIPS BETWEEN THE PUBLIC AND PRIVATE SECTORS A significant obstacle to encouraging private-sector involvement in the development of CVI vaccines is that most of these products are currently of little commercial interest. Considerable resources are required to bring a candidate vaccine from the laboratory bench to the point at which it can be used to protect a child from disease. Given this level of investment and the relatively small profit margins associated with vaccines used predominately in the developing world, there are few incentives for the private sector to develop CVI vaccines. Currently, U.S. strengths in vaccine-related activities lie in the public and private resources devoted to and available for research, development, and manufacture. Therefore, for the United States to contribute fully to the CVI, ways must be found to eliminate or reduce some of the costs and risks associated with vaccine development and pilot production. Realistically, only then would U.S. vaccine manufacturers consider assuming the scaleup of a final CVI vaccine product. Two options were identified: (1) establish a brokering mechanism, supported by incentives attractive to industry, to bring the private and public sectors together to develop CVI products, and (2) establish a facility to conduct CVI research and development and to produce pilot lots of vaccine. Such an entity could be independent, or it could be located within an existing government agency. Both options hold the promise of facilitating the development of new vaccines against diseases of primary importance in developing countries as well as improvements in existing vaccines. Establishing partnerships between the public and private sectors through a brokering arrangement or establishing a CVI research and development facility would encourage the creation of technologically simple, low-cost vaccine technologies that could be easily transferred to vaccine manufacturers in developing countries. Either approach would permit the exploitation of vaccine technologies that are nonproprietary and therefore of little interest to commercial manufactur-

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The Children's Vaccine Initiative: Achieving the Vision ers who desire market exclusivity. Finally, either would allow the development of "orphan" vaccines that have very small or nonprofitable markets. Option 1: Broker CVI R&D and Pilot Manufacture A CVI division within any of a number of government organizations (AID, CDC, DOD, FDA, NIH, or the National Vaccine Program [NVP]) or as an independent entity, could administer a program of grants and contracts supporting applied research and development that would focus on two or three high-priority CVI vaccines. Such an entity might operate similarly to the Defense Advanced Research Projects Agency (see Box D-1). Money would be awarded on a competitive basis to development-stage firms, pharmaceutical companies, university-based researchers, or government research laboratories. A peer-review system, similar to that used at NIH, could be used to evaluate the scientific merit of proposals. This CVI division could provide a market for new vaccines by guaranteeing the purchase of a given volume over a specified number of years and at a predetermined price. To be truly effective as a grants management entity for the CVI, the CVI division would offer incentives to the private sector (see box), retain patent rights for products resulting from CVI unit-funded research, and have the ability to license products to developing countries. This option would strengthen and broaden an already solid U.S. research and development capability in vaccines. By guaranteeing a stable market for over a period of years and providing grants and various incentives, this option would both enable and encourage development-stage companies to develop CVI vaccines. One critical factor that this option does not address is the shortage of pilot production facilities in the United States. Those parties that are willing to take part in developing CVI vaccines, but that do not have in-house pilot production capabilities, would only be able to develop the products up to the point of pilot manufacture. Both options in this strategy would require an infusion of public funds into the U.S. vaccine development system. This option would also require that a relevant government agency be willing and able to accommodate a CVI division. Contribution to the Global CVI This option would capitalize on the unique expertise and capabilities in the U.S. private sector and make maximal use of existing resources in the U.S. public sector in advancing CVI vaccine research and development. If these vaccines are indeed successfully developed, they would be accessible

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The Children's Vaccine Initiative: Achieving the Vision Box D-1 Defense Advanced Research. Projects Agency The Defense Advanced Research Projects Agency (DARPA) was established in 1958 after the Soviet Union's launch of Sputnik. One of the primary motives for establishing DARPA was to develop technologies to serve missions in which no single uniformed service was interested or missions that spanned the needs of several services. Moreover, DARPA was primarily concerned with the ''early-stage" development of new technologies; their incorporation into specific weapons systems was the responsibility of the uniformed services' research and technology facilities. Today, DARPA functions a "technology-broker" or venture capitalist within the Pentagon, monitoring and funding the early development of high-risk, advanced technologies with applications to military systems. DARPA does not carry out research in its own facilities but contracts work to industry, universities, and branches of the armed services. DARPA has a full-time staff of 132 and manages an annual budget of $1.43 billion. Overall, DARPA is an efficient organization that has minimized bureaucratic obstacles to program success. It has been able to attract talented scientists and engineers from outside government. An important reason for DARPA's success is that the Defense Department serves as a test customer for the technologies developed by DARPA. Projects benefit from feedback of user needs generated by a strong customer-client relationship.   Source: Reprinted with permission from The Government Role in Civilian Technology: Building a New Alliance. Copyright 1992 by the National Academy of Sciences. Courtesy of the National Academy Press, Washington, D.C. to the developing world through licensing agreements. Option 2: Develop an Entity with CVI-Related R&D and Pilot Manufacturing Capabilities In the event that the grants and contracts mechanism fails to stimulate sufficient private-sector interest, the creation of a publicly funded entity to conduct R&D and pilot manufacture for subsequent handoff to commercial manufacturers may be necessary. Access to pilot production facilities would

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The Children's Vaccine Initiative: Achieving the Vision Box D-2 Existing and Proposed Incentives to the Private Sector Orphan Drug Act (1983) Enacted in 1983 as Public Law 97-414, the Orphan Drug Act was designed to provide incentives to the pharmaceutical industry to develop drugs against diseases affecting fewer than 200,000 citizens in the United States. Among the incentives offered are research grants, a 50 percent income-tax credit on most clinical research expenditures, assistance with FDA approval, and exclusive license to market the product for 7 years, which begins the moment the drug is approved by the FDA. It is this 7-year exclusivity which has since emerged to be the most powerful incentive to industry. According to the Pharmaceutical Manufacturer's Association, 64 orphan drugs have been developed and an additional 189 are under development (Pharmaceutical Manufacturers Association, 1992). There is criticism, however, that many orphan drugs, developed with considerable assistance from the U.S. government, are not fiscal orphans at all. A number of these products have been exceedingly profitable for their manufacturers. Small Business Innovation Research Program Enacted in 1982 as part of the Small Business Innovation Development Act (P.L. 97-219), the Small Business Innovation Research (SBIR) program seeks to encourage small businesses to engage in technological innovation and to commercialize discoveries originating in federally funded research and development through various mechanisms including grants, cooperative agreements, and contracts. To be eligible for the SBIR program, businesses must have fewer than 500 employees, be 51 percent U.S. owned, and conduct all research and development in the United States. The U.S. government retains a royalty-free license on all patent rights resulting from SBIR-funded research for federal use and reserves the right to require the patent holder to license rights in certain circumstances. Guaranteed Procurement Under a procurement guarantee, the U.S. government could guarantee 5-year downstream purchasing of a given number of doses of a desired vaccine at a set price. This could include a "cost-plus x" agreement, where "x" would be in the range of 12–15 percent of returns on investment. However, cost-plus agreements generally do not offer incentives to manufacturers to hold costs down. Such a guarantee could also include provisions for licensing and transfer of the vaccine technology and the vaccine product to developing nations.

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The Children's Vaccine Initiative: Achieving the Vision Patent Extension In response to taking up the challenge of developing and manufacturing a CVI vaccine at an affordable price, the government could extend a company's patent on an existing product (either a vaccine or a drug) for a set period of time. Such a patent extension would have to be negotiated early on and publicized so as to avoid charges of unfair competition from the generic drug industry. Income-Tax Credits Establishment of a tax credit based on participation in the CVI could be a strong incentive to those companies that have a tax liability. Many smaller companies, however, in particular biotechnology companies have a relatively precarious financial position, and may be unable to take advantage of such a credit. These companies may be more receptive to investment tax credits. overcome one of the major bottlenecks in the development of the low-profit vaccines that are usually sidelined in the few facilities that exist, giving way to more commercially viable products. With its own vaccine research and development and pilot manufacturing capabilities, the entity would enable the public sector to share the risk of developing vaccines that have marginal profitability. The entity could draw on relevant expertise in government laboratories and agencies and the private sector, perhaps through visiting scientists. Nationals from developing countries would be trained in the facility by U.S. government and industry scientists. The entity would manufacture only those products for which a commercial partner has not been vigorously sought and identified. The entity would have the ability to enter into cooperative research and development agreements, license technology, and retain revenues from vaccines sales or licensing. In addition, it would require the ability to hire qualified staff at competitive salaries, purchase needed equipment, make facility renovations, and build new facilities with minimal interference from bureaucratic procedures and timetables. Finally, the center would need a mechanism for protection from vaccine injury-related liability. There are successful precedents for such federally chartered institutions that operate with a significant amount of independence, including the Henry M. Jackson Foundation at the Uniformed Services University of the Health Sciences and the Tennessee Valley Authority (see boxes). Because facilitating technology transfer of center-developed products and technologies would be one of the center's functions, perhaps matching grants could be solicited from bilateral and multilateral organizations such as the World Health Organization, the United Nations Children's Fund, the United Nations Development Program, and AID to assist in funding technology

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The Children's Vaccine Initiative: Achieving the Vision Box D-3 Henry M. Jackson Foundation Chartered by Congress to advance military medicine, the Henry M. Jackson Foundation was written into law on May 27, 1983. The foundation is modeled after the Smithsonian Institution, in that it is a federally chartered, nonprofit, nongovernmental organization authorized to receive federal or other funds; in return, it provides the government or other funders services on a contract basis. Typically, the foundation enters into cooperative ventures with the Uniformed Services University of the Health Sciences and other public or private entities to carry out projects in medical research, consultation or education. Flexibility is vital to the Foundation's strength, as it can employ both federal and nonfederal employees, receive patents, and negotiate licenses. In addition, it is not constrained by personnel ceilings and has flexibility in salary levels, and because it is a nonprofit foundation, its overhead rates are relatively low. There is continued congressional interest in the foundation's activities because the Chairmen and ranking minority members of the Senate and House Armed Services Committees serve on the foundation's Council of Directors. transfer activities. Among the potential concerns regarding the creation of a new entity are the requirements for funding and the view that it would only add to an already large number of organizations and institutions involved in vaccine-related activities in the United States. Contribution to the Global CVI A new center for CVI research and development and pilot manufacture could lend considerable support to the CVI Product Development Groups and developing-country vaccine manufacturers. Also, as in option 1, the technology would be transferred to the developing world, through both licensing agreements and visiting scientist programs. STRATEGY 3: EMBARK ON A PUBLIC-SECTOR MODEL Vaccines with a strong commercial market are developed in the United States by the private sector; those without such a market are not. Given

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The Children's Vaccine Initiative: Achieving the Vision Box D-4The Tennessee Valley Authority The Tennessee Valley Authority (TVA) was established in 1933 as part of the U.S. government's attempt to lift the country out of the Great Depression. The TVA was to be a unique entity—"a corporation clothed with the power of government but possessed of the flexibility and initiative of a private enterprise." This new federal corporation was made an independent agency, reporting directly to the President and the U.S. Congress. Rather than several agencies trying to deal with the variety of public needs in the region, one unified development body would serve the whole area. In 1959, Congress passed an amendment to the TVA Act that gave the TVA the power to issue its own bonds for money to construct its own power plants. Prior to the amendment, the TVA was forced to rely on congressional appropriations for new plants; the new legislation made the TVA power system "self-financing." In other words, the TVA could reach its own conclusions about when and where to build new facilities. It is important to note, however, that the amendment also defined the geographical boundaries of the TVA's power service area: there would be no more territorial expansion into areas served by private companies. Through today, the TVA's mandate remains the management of the Tennessee River and working with state and local governments in resource development programs. Current TVA projects include (1) electric cars and experimental batteries being tested on TVA facilities; (2) researching strategies to convert wood and farm products into alcohol for fuel; and (3) the operation of a pilot plant to test methods for burning coal more efficiently, causing less pollution while generating electricity. In addition, the TVA runs one of the nation's main training centers for nuclear plant personnel. Now a significant player in the electric utility industry, the TVA's electricity sale revenues were $5.1 billion on 112.4 billion kilowatt-hours, while its net income was $120 million in fiscal year 1992. Congress appropriated $135 million to the TVA for that same year, and as of September 1992, the TVA employed approximately 19,500 people.   Sources: TVA Annual Report, 1992; TVA Annual Report, 1953; A Student History of TVA, a TVA Information Office publication.

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The Children's Vaccine Initiative: Achieving the Vision that the development and manufacture of new and improved vaccines are critical to the health and welfare of children in the United States and abroad, it could be argued that the public sector should assume responsibility for public health needs that are not met by the private sector. (The Public Health Service Act of 1944 permits the government to produce vaccines and other products not available from licensed establishments [See Appendix E].) A public-sector agency could take on every stage of the vaccine life cycle: set priorities, generate requirements for vaccines, conduct basic and applied research, and engage in product development, full-scale manufacture of vaccines, and delivery. A public-sector vaccine developer and manufacturer would be responsive to the public health needs of the U.S. population as well as to those of the developing world. Vaccines manufactured by the public sector could be sold on a cost-plus basis to public health departments in the developing world, international agencies, and/or commercial distributors in developing countries. To use the vaccines for this purpose without being hindered by the cost of having to obtain licenses, the public sector must have a mechanism to ensure ownership of intellectual property rights of all antigens and technologies contained in the vaccines. Despite the potential attractiveness of a vaccine manufacturer that would respond to unmet public health needs, the public sector does not have the experience in the large-scale manufacture of vaccines. In addition, efficient vaccine production does not lend itself to government procurement policies and bureaucracy, and this strategy does little to capitalize on the research, development, and manufacturing capabilites that already exist in the private sector. Furthermore, it may be politically untenable to commit such substantial U.S. government resources to products with no demand in the United States. Most importantly, however, this model does not take advantage of the unique skills and capabilities in the private sector, including both biotechnology firms and commercial vaccine manufacturers. Contribution to the Global CVI The U.S. government would develop and manufacture CVI vaccines and sell them to UNICEF and developing countries at an affordable price. * * * Over the course of the study, the committee considered each of the major strategies and options outlined above—their contribution to the global CVI

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The Children's Vaccine Initiative: Achieving the Vision and the extent to which each takes maximal advantage of U.S. public and private sector expertise and resources. The committee's recommended strategy, which draws on elements of the strategies and options considered above, is discussed in greater detail in Chapter 7 of this report.