If our objective is to stop the Covid-19 pandemic and restart the world’s economies, we urgently need entrepreneurial innovation to deliver vast quantities of effective tests as soon as humanly possible.

Containment, which has helped our developed economies to slow the spread of the virus, is hugely costly and, in any case, will not be realistic in emerging countries where overcrowding is a common feature of daily life. If there are no reliable tests for the virus and its antibodies, the virus is likely to continue spreading and could well return to advanced countries.

Containment has huge economic costs. An estimated $350 billion is lost in production each month in the U.S. alone, as economist and Nobel Laureate Paul Romer and President of the Rockefeller Foundation Rajiv Shah recently wrote in the Wall Street Journal. The quickest and most effective method to shorten the duration of containment is through the regular testing of a large part of our population on a daily basis. If done in the right way, there is a good possibility that such tests can be developed and supplied within a matter of months. For health regulatory reasons, tests are likely to become available well ahead of effective medication and vaccines. According to Romer and Shah, $100 billion spent on testing would be equivalent to just ten days’ cost of containment in the U.S.

Mobilizing a massive and urgent effort is necessary in order to boost innovation, create the appropriate number of Covid-19 tests, and finance this supply in huge quantities.

One way to achieve this is through a Pay-for-Success Covid-19 initiative. Building on the advance market commitment successfully used to supply pneumococcal vaccines in 2009 and taking a leaf out of the impact investing playbook, private investment can be attracted to fund much-needed innovation, while remunerating investors only when effective tests have been supplied.

Achieving international coordination at this crucial time faces great difficulties. It makes sense, therefore, for the European Union, the U.S., and individual countries across the world to announce separate advance market commitments aimed at providing a combined $10 billion to purchase tests at a preagreed rate. Appropriate government agencies would sign contracts with interested companies. Prices would rise with more proximate delivery, greater quantity supplied, and the speed and accuracy of the tests. Governments could purchase all available production at the prices agreed, within a maximum time frame and quantity. Surplus tests available in any country would be sold across the world.

Innovative companies currently working to develop tests, both young and established, will enter into these contracts and race to ramp up their activity. The investment they require will be funded by $10 billion-worth of Covid-19 Innovation Bonds, guaranteed by the relevant governments and supplied by private investors on a nonrecourse basis, with a return that would rise from zero to 10% a year according to the number of government-purchased tests. Recipient companies would repay this investment with a variable return out of payments received.

Read the rest of Ronald Cohen’s article here at Barron’s