Economics of vaccines

Vaccine development and production is economically complex and prone to market failure. Development is unprofitable in rich and poor countries, and is done with public funding. Production is concentrated in the hands of a small number of powerful companies which acquire key legal monopolies and make very large profits.

Many of the diseases most demanding a vaccine, including HIV, malaria and tuberculosis, exist principally in poor countries. Pharmaceutical firms and biotechnology companies have little incentive to develop vaccines for these diseases because there is little revenue potential. Even in more affluent countries, financial returns are usually minimal and the financial and other risks are great.^[1] Most vaccine development to date has therefore relied on "push" funding by government, universities and non-profit organizations.^[2] In almost all cases, pharmaceuticals including vaccines are developed with public funding, but profits and control of price and availability are legally accorded to private companies.^[3] Proposed solutions include requiring results from publicly-funded research to be public-domain.^[4] Past efforts along these lines have failed by regulatory capture.^[5]

In contrast to research and development, the vaccine production market, even for out-of-patent vaccines, is highly concentrated. 80% of global production is in the hand of five large companies, which hold key patents.^[6][7] This reduces competition and allows high, uncompetitive prices, often more than 100 times the cost of production.^[8][9]

Many vaccines have been highly cost-effective and beneficial for public health.^[10] Vaccine effort that is beneficial to society is vastly in excess of that which is beneficial to vaccine producers.^[11] The number of vaccines actually administered has risen dramatically in recent decades.^[12]