A Theory of Social Impact Bonds

Tortorice, Daniel L.; Bloom, David E.; Kirby, Paige; Regan, John

doi:10.2139/ssrn.3643195

Cited by 1 publication

(1 citation statement)

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“…The GAVI model is effective because pharmaceutical manufacturers make substantial profits in high-income countries and then sell at discounts to lowincome countries. Moreover, financing from the International Finance Facility for Immunization may be an additional way to support vaccine financing along with nontraditional debt finance that conditions on outcomes 10 . Potentially, a developing country manufacturer may also sell a Strep A vaccine, at a substantially lower price, as has happened with pneumococcal vaccines.…”

Section: Discussionmentioning

confidence: 99%

Optimal global spending for group A Streptococcus vaccine research and development

2023

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Group A Streptococcus (Strep A) leads to 600,000 deaths and 600 million cases of pharyngitis annually. Although long a promising target for vaccine development, how much funding should be allocated to develop a Strep A vaccine is unclear. We aim to calculate the optimal amount of global spending for Strep A vaccine development, the resulting benefits, and the social rate of return on this spending. We develop a model of optimal spending, from a global societal perspective, on research and development (R&D) for vaccines and treatments. The model takes as inputs total harm from the disease, the probability an R&D project succeeds, the cost of a project, and the fraction of total harm a success alleviates. Based on these inputs the model outputs an optimal amount of spending and a rate of return. We calibrate the model for Strep A. Optimal spending is estimated to be 2020 USD33 billion. This spending leads to 2020 USD1.63 trillion in benefits and a real return of 22.3% per year for thirty years. Sensitivity shows an optimal spending range of 15.9 billion to 58.5 billion, a benefits range of 1.6 trillion to 37.9 trillion, and a return range of 18.0–48.2%. Investment in a Strep A vaccine could create enormous benefits for comparatively little cost. It represents one of the highest return uses of public spending. Policy can promote Strep A vaccine development through direct funding of projects and by promoting financial mechanisms that allow the private sector to diversify its R&D investment.

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Section: Discussionmentioning

confidence: 99%