Insights on enhancing affordability and profit in a global non-cooperative coordinated pediatric vaccine market

Abstract This study considers a hypothetical global pediatric vaccine market where multiple coordinating entities make optimal procurement decisions on behalf of countries with different purchasing power. Each entity aims to improve affordability for its countries while maintaining a profitable market for vaccine producers. This study analyzes the effect of several factors on affordability and profitability: the number of non-cooperative coordinating entities making procuring decisions, the number of market segments in which countries are grouped for tiered pricing purposes, how producers recover fixed production costs, and the procuring order of the coordinating entities. The study relies on a framework where entities negotiate sequentially with vaccine producers using a three-stage optimization process that solves an MIP and two LP problems to determine the optimal procurement plans and prices per dose that maximize savings for the entities' countries and profit for the vaccine producers. The study's results challenge current vaccine market dynamics and contribute with novel alternative strategies to orchestrate the interaction of buyers, producers, and coordinating entities for enhancing affordability in a non-cooperative market. Key results show that the order in which the coordinating entities negotiate with vaccine producers and how the latter recuperate their fixed cost investments can significantly affect profitability and affordability. Furthermore, low-income countries can procure vaccines more affordably while satisfying their demand by negotiating through entities handling a higher number of market segments, each with a smaller group of countries. In contrast, upper-middle and high-income countries increase their affordability by procuring through entities with fewer and more extensive market segments. A procurement order that follows entities based on the descending income level of their countries offers higher opportunities to increase affordability and profit if producers offer volume discounts.