Vaccines where they’re needed

Vaccines where they’re needed

McKinsey Quarterly

Summary:

People in the developing world often do not get acces to the vaccines they need. In the first place, vaccines for the diseases that afflict them are too expensive for countries with annual health care spending of less than $10 a head. Moreover, the development of vaccines for these diseases is usually a risky and unprofitable enterprise for pharmaceuticals companies.

However, by making demand more certain, governments, private donors and international organisations can help reduce the risks borne by developers and marketers of vaccines, thereby making vaccines and medicine cheaper and more plentiful. Sometimes, these entities would advance funding; in other cases, they would have to commit themselves only to purchasing a vaccine once it was produced. As a result, drug companies would be more willing to take on what had previously been commercially unpromising vaccine projects and might even be able to reduce prices per unit. The shifting of costs to the party that is in the best position to bear them would leave a greater sum of value to be divided between buyer and seller. In the language of investment banking, this would be an “arbitrage opportunity.”

Arbitraging risk is just one mechanism for getting more vaccines more quickly to more of those who need them. Governments and health care organizations are quite often better suited to the task of reducing the risk-associated costs of vaccines than are their producers. But identifying the risks that actually matter and the best way of containing them is going to require tight collaboration among governments, manufacturers, and international bodies dealing with health care questions. Such collaborations will eventually promote a keener understanding of the economic issues and market failures that continue to prevent vaccines from reaching the people of the developing world.

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