Challenges
Some of the biggest challenges in producing and delivering vaccines with
unassured prospects for profitability include the high costs and long time
horizons involved, substantial risk of R&D failure, potential
constraints on demand, the inherent difficulties of collective financing,
and issues of political economy.
Vaccine R&D and manufacturing are expensive. Estimates of total R&D
costs range from roughly $200 million to $500 million per successful
vaccine, inclusive of sunk costs for failures. Building and maintaining the
unique manufacturing facilities required to produce new vaccines at scale
could add another $500 million to $1.5 billion to the total (Plotkin and
others 2017).
In addition to being expensive, vaccines typically take many years to
develop, test, manufacture at scale, and distribute. It is not uncommon for
more than a decade to elapse between the inception of initial research and
the end of phase III clinical trials, which are typically the last step in
the development process before registration for use in the general
population.
Sometimes requirements for recommendation for inclusion in national
immunization programs delay population access to needed vaccines even
further. A 2013 study (Blank and others 2013) found that, on average, 6.4
years elapsed between marketing authorization for new vaccines and the time
at which population access was achieved in European countries.
These long time horizons and high investment costs are accompanied by
substantial risk of failure for any given candidate in development, and
often by considerable risk of unprofitability even for successful vaccines
against the types of diseases discussed above. In addition to the
constraint of low ability to pay in important markets, a vaccine may end up
not being profitable because of competition from other vaccine developers
and potential substitutes in the form of effective antimicrobials and other
biomedical countermeasures, such as monoclonal antibodies. For individual
vaccines against diseases of epidemic potential, demand clearly depends on
whether outbreaks occur, assuming no advanced stockpiling agreements have
been arranged. In recent years, growing vaccine hesitancy has also
threatened to suppress demand.
From an industry perspective, investing in a vaccine that meets these
challenges is a daunting prospect. As demonstrated in the economics
literature, private companies are inclined to delay investment in R&D
projects with uncertain returns until the expected profits from the project
exceed its cost plus the value of giving up the option to delay (Pindyck
1991). Consequently, when the value of a vaccine is particularly time
sensitive—as is often the case for vaccines against emerging
pathogens—governments or philanthropic organizations can speed development
by providing guarantees that de-risk investment in successive stages of
clinical trials and manufacturing capacity.
The challenge of motivating private investment in new vaccine development
is compounded by the fact that the necessary expenditures carry substantial
opportunity costs for big pharmaceutical companies. This is a result of the
fact that existing market structures allow for these companies to earn
patent-enabled excess profits by investing in their other product lines,
such as treatments for chronic diseases.
The knowledge produced by vaccine R&D (including any formulas for new
vaccines) is a global public good; in addition, immunization produces many
positive externalities, including interruption of disease transmission,
reduced rates of antimicrobial resistance, and potentially improved
macroeconomic performance. Collective public financing of vaccine R&D
and manufacturing capacity therefore represents an appealing alternative to
private financing incentivized by patent-enabled profits. But this too
presents difficulties. One important challenge is what is known in
economics as the free rider problem: If the knowledge produced by vaccine
R&D is openly available, then this will lower the incentive for
individual countries to invest in its generation. Another major challenge
has to do with the question of whether, relative to market forces, central
decision-making represents an effective way to identify promising vaccine
candidates.
Political realities also pose potential barriers to collective financing.
Democratically elected officials may lack incentives to approve investment
in projects such as vaccine platforms or reserved manufacturing capacity
for epidemics that are unlikely to yield visible returns while they are in
office. This disinclination may be heightened by a lack of public
perception that epidemic threats are “real” when novel infectious diseases
are not actively spreading. In many contexts, overall lack of trust in
scientific and political authority also threatens to diminish public
support for pandemic preparedness efforts, among other public health
initiatives.
