Table 1 APAs and AMCs
From: “No Regrets” Purchasing in a pandemic: making the most of advance purchase agreements
Advance Purchase Agreements | Advance Market Commitments | |
|---|---|---|
Description | Buyer agrees to purchase a fixed volume of a specific product from a specific seller at an agreed price, often in advance of firm demand materializing and sometimes before the product has come to market or manufacturing capacity has been established | Buyer commits in advance to purchase a volume of qualifying products at an agreed price or to subsidize purchases of these products by eligible countries |
Examples | Buyer A commits to purchasing 10 million units of Product X from firm M at $10/unit, if the product is approved by specified regulatory authorities | a) Buyer B commits to purchase 10 million units of products of type Y at $10 from any firm with a qualifying product, OR b) Buyer C [in this case either a Proxy buyer (e.g., international organization buying on behalf of multiple countries) or donor] commits to “top up” to $10 all purchases of qualifying products of type Z by eligible countries paying a lower price, up to 10 million units |
Uses | Incentivize R&D or supply by reducing demand risk to suppliers, notably in disease outbreaks. Reduce supply risk to buyers by tying up supply | a) Incentivize R&D or supply by reducing aggregate demand risk, while retaining a competitive dynamic, OR b) Incentivize R&D or supply by creating a subsidized market without insulating firms from demand uncertainty |