Innovation policy and the market for vaccines*

Vaccines play a crucial role in improving global public health, with the ability to stem the spread of infectious diseases and the potential to eradicate them completely. Compared with pharmaceuticals that treat disease, however, preventative vaccines have received less attention from both biomedical researchers and innovation scholars. This neglect has substantial human and financial costs, as vividly illustrated by the COVID-19 pandemic. In this article, we argue that the large number of ``missing'' vaccines is likely due to more than lack of scientific opportunities. Two key aspects of vaccines help account for their anemic development pipeline: (1) they are preventatives rather than treatments; and (2) they are generally durable goods with long-term effects rather than products purchased repeatedly. We explain how both aspects make vaccines less profitable than repeat-purchase treatments, even given comparable IP protection. We conclude by arguing that innovation policy should address these market distortions by experimenting with larger government-set rewards for vaccine production and use. Most modestly, policymakers should increase direct funding—including no grants and public-private partnerships—and insurance-based market subsidies for vaccine development. We also make the case for a large cash prize for any new vaccine made available at low or zero cost.