Why we still don’t have vaccines that could save millions | Rachel Glennerster

Operation Warp Speed Financial Analysis: The US spent $12 billion to accelerate COVID-19 vaccine development; cost-benefit modeling suggests this was efficient if the acceleration achieved even 12 hours, as delaying a vaccine by a week or few days can cost billions of dollars in lost lives and economic activity.

Pandemic Valuation of Vaccines: The estimated social value of a single course of a COVID-19 vaccine in January 2021 exceeded $5,000, whereas market prices were between $6 and $40, highlighting a massive market failure where firms could not charge prices commensurate with social value during the crisis.

Pneumococcal Vaccine Acceleration: A $1.5 billion Advanced Market Commitment (AMC) for pneumococcal vaccines in low-income countries resulted in immunizing 150 million children, estimated to save 700,000 lives, and accelerated rollout by approximately five years compared to the rotavirus vaccine.

Universal COVID-19 Vaccine Potential: A universal COVID-19 vaccine is estimated to generate $1.5 trillion to $2.6 trillion in economic benefits specifically for the US compared to variant-specific boosters, with a proposed AMC cost of roughly $6.4 billion to cover half the US population.

Climate Resilience Crop Targets: A 2022 study projects a 28% decline in Sub-Saharan African crop yields by 2098; sorghum, a staple for over 100 million people in West Africa, faces imminent collapse due to heat stress, necessitating market shaping to incentivize resilience.

Indoor Air Quality Failure: Respiratory infections cause 400,000 deaths annually in high-income countries; market failures prevent firms from investing in R&D for air purification because they cannot capture the full social benefit of reduced transmission, despite high private utility for employers.

Generic Drug Repurposing: Existing off-patent drugs often show efficacy for new diseases, but firms lack incentives to fund costly clinical trials for repurposing since competitors can freely sell the drug for the new indication once trials succeed.

Climate-Resilient Air Conditioning: Approximately 4% of global emissions stem from cooling; market shaping is required to incentivize efficient AC units in low-and-middle-income countries where high upfront costs and behavioral biases (underestimating future energy savings) prevent adoption.

Broad-Spectrum Antivirals: Unlike antibiotics, broad-spectrum antivirals are underdeveloped due to the complexity of viruses and the lack of immediate commercial incentive, leading to a "post-pandemic" psychological bias where preparedness is deprioritized despite high long-term risk.

Market Shaping Principles:

• Pull vs. Push: "Pull" mechanisms reward outputs (e.g., vaccines delivered, carbon removed) rather than inputs (R&D grants), incentivizing innovators with private information about success rates to self-select projects and ensuring products are actually used by consumers.
• Patent System Flaws: Traditional patents encourage high prices and low quantities to recoup R&D costs, which is inefficient for vaccines and global public goods; market shaping aims to reward high-volume, low-price distribution.
• Time Inconsistency: Governments and funders have incentives to drive down prices after innovation succeeds (once R&D costs are sunk), which discourages initial investment; Advanced Market Commitments (AMCs) legally bind buyers to pay in advance to solve this.
• Information Asymmetry: Pull mechanisms are superior when the central planner lacks knowledge of private success probabilities among multiple innovators, allowing those with the highest confidence to pursue specific paths.

Implementation Challenges and Design Details:

• Pricing Mechanisms: Determining the correct price for AMCs requires balancing top-down social value against bottom-up R&D costs and failure probabilities; pricing must be high enough to attract marginal innovators (e.g., 1% success probability) but not excessive.
• Anti-Copying Design: Mechanisms must balance rewarding original innovators against allowing copycats to improve products; some designs allow original innovators to retain subsidies even if a superior "me-too" or improved version is adopted.
• Government Budgeting: Accrual accounting can help governments manage AMC budgets by recording expenditures based on the probability of the event occurring, rather than waiting for the actual payment year.
• Near vs. Far Targets: Political pressure often favors "near-term" innovations with known success probabilities, potentially neglecting far-term, high-impact problems like malaria vaccines that have higher failure rates.

Education Intervention Findings (GEEP Panel):

• Great Buys: Providing information on the benefits of education (e.g., earnings potential) is highly cost-effective; "Structured Pedagogy" (lesson plans, textbooks, and mentoring) yields significant gains; "Teaching at the Right Level" (grouping by learning ability rather than grade) effectively catches up struggling students.
• Good Buys: Early childhood development programs show high long-term economic returns, particularly when integrated into existing healthcare systems, though scaling remains a challenge.
• Bad Buys: Generic inputs like computers, textbooks, or increased teacher salaries without structural changes have shown no impact on learning outcomes; systemic reform is necessary but individual effective interventions can be deployed immediately.
• Equity Concerns: "Teaching at the Right Level" differs from historical tracking by focusing on temporary, part-of-day grouping to accelerate learning for lagging students rather than permanent social stratification.

Operational Updates:

• Market Shaping Accelerator: The Center for Global Development has awarded prizes to 39 ideas and is advancing seven specific projects (including indoor air quality, drug repurposing, and clean AC) to develop implementation templates.
• Climate Frontier: Frontier has committed $1 billion to purchasing carbon removal, paying different prices to different firms based on technology maturity to drive down costs over time.
• US Advisory Committee: The US Advisory Committee on Vaccines functions as an implicit AMC by signaling a willingness to buy cost-effective vaccines, providing market certainty for pharmaceutical firms.