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The Economics of The Vaccine Market

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The market for vaccines has come under the spotlight for both its efficiency and moral considerations during the pandemic.

The market has been praised for developing and distributing rapidly, but also criticized for its tendency to cater to higher-income countries. In high-income countries, one in four have been vaccinated. In low-income countries, it’s merely 1 in 500.

How is the vaccine market structured?

The vaccine market has several distinctive properties due to its unique role in supporting the wellbeing of the general population. Firstly, it is difficult to raise funding for developing vaccines.

Developing vaccines often involves the use of the latest technology, and can take a significant amount of time, making it a costly process. Thus, universities and public health institutes engage in the initial research, which is usually funded by the government.

Next, pharmaceutical companies can use the knowledge and their expertise to produce the vaccines, run clinical trials, and finally distribute them as well. Governments not only fund the research (push funding) but also buy vaccines in large amounts at the end of the process (pull funding).

Government funding and purchasing is necessary as there are positive externalities associated with the consumption of vaccines. In layman’s terms, when someone gets vaccinated, not only do they benefit, but society also benefits as they lower transmission rates and public healthcare burden. Thus, the government encourages vaccine production through push and pull funding.

Who sells vaccines, and who buys them?

There are only a handful of firms that produce vaccines globally, and prior to COVID-19, 4 firms dominated the vaccine market: GlaxoSmithKline, Merck, Pfizer, and Sanofi. The firms are concentrated due to the high barriers to entry in the vaccine market, including high R&D costs, production expertise and a long turn-over time.

Purchasers of vaccines also tend to be highly concentrated. These large-scale orders are made by governments in accordance with their society’s needs and financial capabilities.

Countries with the largest COVID-19 vaccine contracts (in million doses) as at March 2021. Credit: Statista

Key buyers also include major organisations such as Gavi who works with low and middle-income countries to procure vaccines and increase immunisation rates. Gavi also co-leads COVAX which is ‘a global collaboration for speeding up the development, manufacture and equitable distribution of new vaccines.’

High-income countries account for 82% of global vaccine revenue, despite only representing about 15% of the population. This creates a strong incentive for vaccine producers to cater to high-income countries, who can pay higher prices to secure vaccines.

Thus, this brings to light the need for organisations such as Gavi. The recent pandemic serves as an example demonstrating the difficulty for poorer countries to gain access to vaccines : 23% of the global population has received a first dose of the COVID vaccine, however, only 0.9% of people in low-income countries have received the first jab.

Should COVID-19 patents be waived

As the discrepancy in vaccine procurement between high- and low-income countries has come under the spotlight, there are calls for the COVID-19 vaccine patents to be waived in a bid to increase accessibility of the vaccine.

The Joe Biden Administration and prominent politician Bernie Sanders have both shown support to waive the patents associated with the vaccines. However, there are important issues to consider when we evaluate if this would be effective.

Firstly, it sets a dangerous precedent to waive a patent. Patents arguably support innovation by allowing innovators to profit from their inventions. If vaccine patents are waived, it may discourage innovation in the future as there would be concerns over future patents being waived.

Marco Verch / Flickr

Secondly, it is a bold assumption to claim the patent waiver would increase access to vaccines. In fact, Moderna has already stated it would not pursue infringements of its COVID patents.

Despite this, due to the complex technology involved in producing the vaccines,many companies are still unable to replicate the technology. Due to the complexity, even if patents were waived, the ability for companies to replicate the manufacturing process is merely another barrier to production.


Overall, the vaccine efforts during COVID-19 have highlighted the efficiency and speed with which funding, research and distribution can be carried out. Throughout history, no vaccine development has been nearly as rapid.

However, the distribution of these vaccines has been unequal, and this serves as a symbol as to the discrepancies in healthcare systems around the world. Perhaps greater effort is needed to ensure low-income countries are able to access vaccines as well.

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