The Economics of Vaccine Nationalism
In today’s newsletter, we talk about Vaccine Nationalism and explain why it might not help stem the pandemic.
The Story
A couple of days ago, the United States government signed a $1.95 billion agreement with Pfizer Inc. and BioNTech, securing 100 million doses of their coronavirus vaccine for its citizens.
In ordinary circumstances, this move would have been unusual. After all, governments seldom bet on vaccines that haven’t yet received regulatory approval. But these aren’t ordinary circumstances and we aren’t developing a regular vaccine. Covid-19 has shown no signs of abating and governments are being forced to expedite the process of vaccine development.
And in a bid to market a working vaccine by the end of this year, governments across the world are setting up incentive structures that could entice manufacturers to go all in. This idea forms the basis of advance purchase agreements i.e. in return for the right to buy a specified number of vaccine doses in a given time-frame, governments will finance part of the upfront cost faced by vaccine producers.
This way drug-makers protect their downside and governments can gain access to a vaccine if trials are successful. It’s a win-win scenario for everyone involved and many countries are adopting this approach.
The German government is investing €300 million in CureVac for a 23% stake in the company. UK, France, Germany, Italy, and the Netherlands have all reserved doses of AstraZeneca’s promising vaccine. Serum Institute of India has indicated that it will distribute half the vaccines in India. And this rising vaccine nationalism is offering us a glimpse into the future — any successful vaccine will have limited supply, and governments will stop at nothing to ensure their citizens get the first crack.
However, while the approach does make intuitive sense, there is a problem with the logic deployed here.
For starters, there’s no saying which vaccine candidate is likely to succeed at this point. Although there are hundreds of vaccines currently in development, there’s only a 7% chance that a candidate vaccine in the preclinical stage will receive FDA approval. Meaning, even if you are backing a handful of vaccine candidates, they could all turn out to be duds.
Also, competing for resources inevitably means depriving others of the same. Even if you back a vaccine candidate and it turns out to be a winner, you will have cornered most of the supply leaving other more vulnerable countries in a soup. Despite the obvious moral implications involved here, it is also a sub-optimal solution since with infectious disease, no one is safe until everyone is safe.
As an article in the Fortune notes —
Given that many governments are now in bilateral negotiations with manufacturers to secure the doses they need, even before it is known whether the vaccine will succeed, we are now at a critical juncture. Governments have a duty to make the protection of their citizens their first priority, but with infectious diseases like COVID-19 that can only be achieved by protecting others too. By taking a purely “me-first,” bilateral approach, not only do those governments risk ending up with no vaccines at all, but they also expose their citizens to the risk of resurgence by leaving the majority of the world to go without it.
And that means we need a more global approach to truly stem the pandemic. As Bill Gates, wrote, “During a pandemic, vaccines and antivirals can’t simply be sold to the highest bidder. They should be available and affordable for people who are at the heart of the outbreak and in greatest need. Not only is such distribution the right thing to do, it’s also the right strategy for short-circuiting transmission and preventing future pandemics.”
Enter, GAVI (Global Alliance for Vaccines and Immunization) — a public-private partnership that aims to bring vaccines to everyone in the world. Last month, they launched their latest initiative — the COVAX Facility.
The premise is extremely simple. GAVI pools resources from multiple wealthy countries and then signs advance purchase agreements with several vaccine manufacturers. The countries that pledge money gain access to all the vaccines COVAX has under the agreement and once a successful vaccine candidate is identified, they aim to produce enough doses to help both donor governments and lower-income countries that don’t have the resources to back a vaccine candidate right now.
Think of it this way. For donor countries, GAVI is an insurance policy. Even if their vaccine bets fail, they’ll have access to enough doses of a successful candidate that could, in theory, protect at least 20% of their population. For low-income countries, GAVI is a lifesaver. It’s perhaps the only way they can protect their people without having to commit to advance purchase agreements right now.
So far 75 countries have submitted EOIs (Expression of Interest) but we need more countries to back this initiative. As Dr Seth Barkley, CEO of GAVI noted —
The disease’s cost to global GDP has been estimated by the International Monetary Fund to reach $375 billion per month. Moving the availability of a vaccine forward by just five days will pay for the entire global effort — and we are trying to move it forward by six to eight months. There’s still no guarantee that any of these vaccines will work, but if we want to end this crisis and the suffering, and get global economies back online any day soon, then they are our best hope. That means pooling our resources to invest in as many vaccines as possible, and if successful, ensuring that we have enough doses to secure global impact. Ultimately, this is a global problem that needs a global solution.
And we couldn’t agree more.
Until next time…