Designing Markets for Faster, Better Vaccines

When COVID hit, it was immediately clear that vaccines would be essential not only to save lives but to fully restart the global economy. Despite the obvious humanitarian and financial benefits, it wasn’t clear how governments and nongovernmental organizations should structure investments in vaccine development and procurement.

To help tackle this problem, Susan Athey and a group of economists and statisticians founded Accelerating Health Technologies, which has provided guidance to stakeholders and helped quantify the costs and benefits of an unprecedented expansion of vaccine capacity.

What were some of the economic challenges of getting COVID vaccines produced as quickly as possible?

A two-year time frame for getting vaccines out to the public at scale was so different than past experience that even the most knowledgeable experts in the world were faced with risks that were hard to quantify. The success probabilities for each particular vaccine candidate were relatively low. If you think about it from the perspective of a vaccine manufacturer, everything has to go right for you to recover your investment.

In the past, emergency vaccines had been developed, but government funding was pulled after the epidemics waned. So it’s pretty amazing, actually, that in the face of all of those challenges that several companies succeeded on a fast time frame. We got lucky — not just that we found something that worked, but that for a couple of these companies, the first darts hit the board, and that they managed to create vaccine capacity for entirely new technologies as quickly as they did.

What kinds of incentives and models have you and your colleagues proposed to speed up vaccine production?

Vaccines are different than a lot of other products because they are primarily purchased by governments or NGOs. There was an enormous gap between the social benefit of vaccines and what you might reasonably pay to a manufacturer. That’s where the government can come in and say, “OK, we’ll bear the risk of upfront investment.” We showed that it was more efficient to fund at-risk capacity construction directly than to try to incentivize companies by promising higher prices per dose later.

One of the most important things we showed was that even when taking into account the risk of failure, it was still worthwhile to invest in a huge amount of vaccine manufacturing capacity in advance of the resolution of uncertainty about which candidates would work and what the need would be. The expected benefits are like a thousand times bigger than the costs. We also advocated that the government think of it as a portfolio problem: You bet on 10 things, one of them pays off. The citizens will be happy as long as something works, and hopefully they won’t be upset that you lost on these others. Because frankly, this is a case where you needed to get it done.

We were trying to reduce as much as possible the magnitude of the gap we faced in much of 2021, where you have things that work, but we still don’t have enough to vaccinate the world, even the parts of the world that have the money to pay for it. Every day counts when people are dying, economies are operating below capacity, and new variants are potentially emerging.

To what extent was the approach advocated by Accelerating Health Technologies adopted?

We talked to everybody who would listen — dozens of governments as well as NGOs. The people we met with did get the idea, and the ones who were nimble moved quickly. I think the U.S. got this early. The impediments were not necessarily high-level understanding; they were political and bureaucratic, where key people in a country advocated the ideas but sometimes met obstacles in carrying the ideas through. The political decision-makers definitely worried too much about wasting money or only delivering after the pandemic was over, while they probably underappreciated how much their populations would benefit if they succeeded, or how difficult it would be to scale up quickly later.

In a recent paper, you wrote that with enough capacity, we could have vaccinated the whole world by this fall. What were the missed opportunities to scale up?

One thing we haven’t touched on yet is the inefficiency in the science. Many vaccine trials had on the order of 30,000 people in them. Given the stakes, if you ran a trial that was much bigger and running simultaneously in multiple countries, you would learn much faster. In the time when we were vaccinating millions of people per day in the early days of the rollout, some of those people could have been in trials for spacing and dosing and so on. We could have followed more of the people closely, testing them regularly. We really missed an opportunity to learn all of those things. From the social perspective, there’s a huge value to learning and continuing to optimize, and in every aspect of this pandemic, governments, especially the U.S., have underinvested in gathering information and using that to optimize our response.

Does the vaccine manufacturing capacity that’s already online leave us better prepared for future pandemics?

New pandemics are going to come. Creating the overall capacity throughout the supply chain seems like a no-brainer. We should, in my view, create larger-scale capacity and keep it warm making flu vaccines or other kinds of vaccines. It’s not that expensive. Then, if a pandemic comes along, you have capacity, you have supply chains, and you can repurpose them relatively quickly. We can keep them warm and serve the world, while insuring ourselves against the massive costs imposed by pandemics when they do arrive.