Vaccine research underinvestment

Government support for pharmaceutical research and development (R&D) is critical, especially for vaccines, with considerable time periods between development and returns on investment, resulting in general underinvestment in this area. Consumers are generally more willing to pay for treatment than prevention (Kremer and Snyder 2015). So potential vaccine developers lack incentives to invest in R&D: few companies remain active e.g. Novartis' large vaccine division was sold to GSK in 2014 due to recurring losses.

However, although the world would be better off with public support for vaccine R&D, national governments tend to maximise domestic welfare, not global welfare. Vaccine R&D is a global public good – individual countries may be tempted to free-ride on research financed by other countries. These market failures have been potentially reversed for SARS-CoV-2, with billions demanding access to a vaccine, and a significant fraction of consumers willing to pay a significant premium.

Additionally, governments’ massive injections of research money have contributed to eliminating market failures e.g. the National Institutes of Health (NIH) alone has received $1.8 billion. Competition across countries to be the first to have a vaccine also mitigates the free-rider problem and strengthens R&D incentives.

So I have to ask, are we wasting public money?

In a world of limited human capital and scarce ideas, increasing funding will eventually lead to diminishing returns (Bloom et al. 2020)., and there are also current unmet needs for existing medical conditions to satisfy. Re-allocating vast amounts of funding to SARS-CoV-2-related research could be wasteful there are a wide range of innovations still needed to fight COVID-19, from vaccines and medical equipment to testing solutions: we are far from diminishing returns kicking in. Although the optimal level of SARS-CoV-2 public research support is unclear, there are ways to increase the returns to R&D investments by open, rapid sharing of data to limit duplication and discard unfruitful paths.

Not the time for mission-oriented R&D policy

The current innovation imperative of finding a vaccine very quickly and at any cost seems to represent a strong case for allocating resources according to a ‘mission-oriented R&D’ (MOR) policy, similar to the 1940s Manhattan Project, with a high level of centralisation and intentionality (and a well-defined technology target): the state being both funder and customer, and public agencies performing R&D operations e.g. UK COVID-19 testing. MOR is usually seen in defense/space sectors with some notable achievement in a relatively short time. However, MOR comes with a significant drawback: the lack of organisational diversity and freedom to experiment, a crucial engine for innovation (Rosenberg 1992). This may explain why life sciences have never thrived in this environment (Cockburn et al. 2011). Innovation has been driven by intellectual freedom, scientific openness and opportunities for experimentation at individual and institutional levels, combined with intense competition throughout the value chain.

Compulsory patent licensing as a credible threat to encourage broad access

The worry that patents may be a barrier in the fight against COVID-19 is a legitimate concern: a patent is a temporary monopoly right granted to the inventor to exclude others from exploiting the protected invention.

Right now, and more than ever, excluding others from using bright ideas may seem counterproductive. 

The issue is real. Gilead took steps suggesting they were ready to enforce their patents on remdesivir. Conversely, AbbVie is waiving exclusivity rights over Kaletra, an antiviral combination (lopinavir and ritonavir) currently being tested for coronavirus treatment. Pharmaceutical companies are under public pressure to act responsibly by not using their patents aggressively and governments can force patent holders to share inventions using so-called 'compulsory licensing' provisions.

Innovation may be the quickest, most effective way out of the pandemic, and substantial creative approaches and entrepreneurial forces are at play.