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Some research, however is very targeted, and funding mechanisms such as Cooperative Research and Development Awards, sponsorship of centers for clinical trials such as the Vaccine Treatment and Evaluation Units, or support for acellular pertussis vaccine trials are used. Other NIH institutes, such as the National Cancer Institute and the National Institute of Child Health and Development, and other federal agencies, such as the Centers for Disease Control and Prevention (CDC) and the U.S. Department of Defense, also fund research related to vaccine R&D. Private philanthropic organizations such as the Rockefeller Foundation, the Burroughs Wellcome Fund, and the Josiah Macy Foundation also support basic and applied R&D related to vaccines.

Although private industry supports basic research, the most important role it plays is to assume the costs of applied R&D. The impetus for a company to invest in the development phase of a vaccine begins with the establishment of proof in principle, which is evidence that the vaccine could protect against disease. Such proof in principle results from the basic research findings of researchers funded by either public or private money. Another impetus is the potential of a return on investment by a company, which depends on the likelihood of product licensure, the market for that product, and the predicted costs of development and production. Manufacturer’s profits from the sales of existing vaccines contribute approximately twice the amount of money to R&D as the federal investment in R&D. Another important source of funding is risk capital invested in small biotechnology firms. Once private industries invest significant amounts of money in the development of a product, they stand to make or lose money on the basis of the quality of the product, the size of the market, the purchase price of the product, and the profit associated with the sale of the licensed product.

However, R&D opportunities frequently come to fruition only if the government or other nonprofit organizations leverage their resources in partnership with private, for-profit organizations to develop products or gather data in phase III clinical trials to support efficacy and safety claims sufficient for approval of the products by the Food and Drug Administration (FDA). Program staff at NIAID, for example, work to stimulate creative and targeted research and collaborations at critical periods in the natural life cycle of some products to keep the R&D cycle moving until private sponsors are prepared to take on the project.

Many of the challenges to commercial interests in vaccine R&D are fairly well documented (IOM, 1995; Mercer Management Consulting, 1995). It is widely believed that vaccines do not generate large profits—either as a percentage of revenue from the sales of an individual product or as a percentage of the total profit of the parent pharmaceutical firm. In contrast to many pharmaceuticals, which are sometimes taken several times a day for years, most vaccines are used only a few times in each person’s lifetime. Because of these market forces, the committee has heard compelling arguments that federal investment in vaccine R&D—as well as in fields such as health services research and health communication, which are necessary to understand how to



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