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20 October 2021updated 25 Oct 2021 11:38pm

The vaccine business isn’t ready for the next pandemic

Curing infectious diseases is hard, expensive and the profits aren’t great. This is a problem not just for pharmaceutical companies, but for everyone.

By Will Dunn

In April 2018, analysts at Goldman Sachs produced a report on the emerging field of genomic medicine. Gene therapies may one day be able to prevent or cure diseases that medicine has only been able to manage, including heart disease and some types of cancer. But to an investment bank, such technology changes its view of the pharmaceutical companies in which it places its clients’ money. As the Goldman report all too bluntly asked: “Is curing patients a sustainable business model?” 

It sounds callous, but preventing or curing infectious diseases does not appear to be a rational thing for a private company to do. While pharmaceutical companies have sold hundreds of millions of doses to governments, these paydays have followed years or even decades of losses. BioNTech was the first company to complete successful clinical trials of a coronavirus vaccine in August 2020, but its losses since 2017 had reached almost £380m.

The business model for selling drugs, as with most other products, involves trying to sell and many units as possible for the highest price per unit. But antibiotics and vaccines are very cheap in comparison to other drugs: a five-day course of amoxicillin costs the NHS £1.03, while the AstraZeneca vaccine – sold at cost – is £2.17 per jab. Other products are designed to stimulate demand, but vaccines are designed in the hope that they will become redundant. 

The world had almost two decades of warning about the danger of novel coronaviruses, from the SARS outbreak that began in China in 2002 to the MERS outbreaks in 2012, 2015 and 2018, but a vaccine was not developed for either disease, partly because there was insufficient profit to be made in doing so. Can this model change before the next pandemic?


The economist Jim O’Neill has spent years looking at the danger of widespread infectious diseases, having led the government’s review into the threat of antimicrobial resistance (AMR), which reported in 2016 that without action, AMR could kill 10 million people per year by 2050. “A lot of pharmaceutical companies are primarily incentivised, by the structure of their ownership and remuneration, to focus on high-margin products – and most infectious diseases, including antimicrobial resistance and pandemics, are very low-margin businesses,” he says. Pharmaceutical companies “need a lot of incentives to appear on the scene”. 

Vaccines do become profitable once a pandemic develops: Pfizer has forecast $26bn (£19bn) in Covid vaccine sales for this year, while Moderna has forecast $18bn (£13bn). But researching vaccines before a pandemic is a financial gamble.

Laurence Roope, an economist at Oxford University’s Health Economics Research Centre, agrees that pharmaceutical companies are incentivised to invest in drugs to treat known diseases with predictable numbers of patients. Investors understand where the returns are likely to come from, and the public understands the need for new products. Research into treating something that currently only affects bats, for example, is “much less salient. It may seem a little esoteric”. 

What Covid-19 has exposed, Roope says, is a large-scale failure to recognise the importance of what economists call “option value” in health systems. Roope compares option value to an insurance policy – “although in contrast to some insurance policies, where you are insuring against a very low-probability event… in the case of biomedical research, you can be pretty sure that it is going to pay off. There’s a multiplicity of threats that investing in research can help to protect you from, and some of those threats will materialise.”

Roope points out that it was not only in drug development that this principle was overlooked. The shortages of PPE and ventilators, and the fact that health systems in the UK were already running at full capacity, show a failure to invest in relatively cheap insurance against an extremely costly situation.

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Roope’s concern is that even in the face of worldwide evidence, the long-term “option value” of research into infectious diseases is still being ignored. Microbiologists studying antibiotic resistance – which already kills 700,000 people a year – have told him that many researchers are leaving the field. “It’s a very difficult research environment that they work in, and it’s extremely competitive in terms of competing for funds. […] There’s a lot more funding available in cancer research.”

Understanding the world’s most dangerous diseases is not work that other scientists can simply pick up, should the need arise. “Those people will leave the industry, and that expertise will be lost, and we will lose the capability to make these new antibiotics in the future, when they’re most needed.”


The market failure in drug development is not just a matter of which diseases are more predictable, but of who gets them. Carl Klaxton, a professor at the Centre for Health Economics at the University of York, says much of the world’s drug research and development is skewed towards one country.

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“The amount that the United States is willing to pay for the benefits offered by new, branded pharmaceuticals or vaccines is higher than anywhere else in the world,” he says, which means that investment is “very much driven by the US market”. The drugs that get developed treat the diseases that affect Americans – or rather, the “slice of America” that can afford the most lucrative treatments.

Governments and health economists use a unit called a QALY – a quality-adjusted life year – to calculate how much a drug is worth, based on the amount of healthier life it buys a patient. Claxton says Americans pay around $100,000 (£73,000) per QALY, while in the UK, the NHS pays about £15,000; in Malawi, it’s about $100 (£73).

The most lucrative drug in the US – and therefore the world – is Humira, which is mostly used to treat arthritis. In the US market it costs more than $2,500 (£1,822) for two doses; the NHS pays £352 for the same amount.

Klaxton describes this as “a system that incentivises the creation of regret”. Because the market rewards the companies that produce the most expensive drugs, it also confronts most patients with the dispiriting knowledge that a drug has been developed for their condition, but they can’t have it. In terms of infectious disease, however, the unseen risk is that they also can’t have the scientists who would otherwise be working on a vaccine or treatment they might suddenly need. 

Even if businesses were committed to curing more infectious diseases, it’s likely that financial markets would dissuade them from doing so. Pharmaceutical companies spend huge sums on marketing, research and development (often in that order), and their ability to raise money through selling stock or issuing bonds depends on how they are perceived by investors, who appear more swayed by the promise of innovation than current revenues.

“The capital market seems to value companies with a wide pipeline of high price points, and to ignore volume,” says Klaxton. “Whereas really, the market shouldn’t care about how many products go in the pipeline… what it should care about is price-times-volume.”


The fact that the world quickly had vaccines – which typically take 10-15 years to develop – for SARS-Cov-2 is a combination of massive state intervention (the UK government pre-ordered 100 million doses of an unproven drug), publicly funded research (in the case of the Oxford Jenner laboratory), and luck. We were “extremely lucky”, says Jim O’Neill, that Sarah Gilbert, Uğur Şahin and other scientists had spent years researching technologies that could be developed rapidly into vaccines. But the vaccination effort is far from over, and new strains of coronavirus will continue to spread until every country reaches a certain level of immunity.  

But the project to vaccinate low- and middle-income countries is not progressing at speed. The COVAX programme, which relies on donated vaccines, has delivered fewer than 400 million doses so far. John Fulton is an executive at Biolyse, a Canadian company which signed a memorandum of understanding with the government of Bolivia to produce 15 million doses of Covid vaccine for the country in May. For five months, Fulton and his colleagues have waited for a manufacturer to grant them a license, or for the Canadian government to step in and award a compulsory license; neither has happened.

Fulton told me his company “could be pumping out millions of doses” by now. “We have three high-speed fill lines, which would take up to three years to have built, delivered and validated, and bio-reactors up to 2,500 litres, sitting idle.” Less than a third of Bolivia’s population is fully vaccinated.

Fulton also says Biolyse is not the only company with production lines standing unused, and that hundreds of millions more doses could be being manufactured now if compulsory licensing was used. But his five-month wait has made him sceptical that license holders “will ever allow the compulsory license genie out of the bottle”, because if Covid-19 becomes endemic, the need for regular boosters could mean pharmaceutical companies will have even less incentive to share their intellectual property. “Demand and opportunity to scale will be with us for many years”, he warns.


To improve our chances of having a vaccine for the next pandemic – or indeed one that keeps working in this one – O’Neill says “push and pull incentives are needed” – the “push” of research backed by public funding, and the “pull” of regulation that gets new drugs more widely distributed. “You need some mechanism to make sure this allows fast and equitable distribution into low income countries… You need some kind of change in the risk-reward matrix.” 

Laurence Roope agrees that alongside publicly funded research, governments could consider “offering an amount of money that reflects the social value of producing a new drug; a reward, if you like”. The UK government is now trialling a “subscription-style model” for two new antibiotics, which will pay pharmaceutical companies in advance for developing the drugs rather than based on how much they are used, which Roope calls taken “a small but welcome step in the right direction.”

The government has also pledged to increase spending on research and development from £15bn a year to £22bn by 2025, but this funding will come with greater political control, in the form of a new Office for Science and Technology Strategy, and it remains to be seen how this increase will be counted against other expenses, such as the estimated £2bn a year it will cost the UK to continue its association with the EU’s Horizon programme.

So far, funding has headed in the opposite direction. Roope points out the government recently cut £120m from the development assistance budget that UK Research and Innovation gives to universities, where – in facilities such as Oxford’s Jenner Lab – much of the work towards drug discovery takes place. “It’s not only the case that they’ve decided to spend less next year, or over the next five years,”, says Roope, “it’s funds that have already been approved for current programmes that have been cut. So that makes you wonder what’s going to come further down the line.” 

Carl Klaxton also highlights cuts to the Global Challenges Research Fund, which had supported research on healthcare and other issues in low- and middle-income countries, as the most dangerous element. “It is destroying capacity that will not be replaced quickly or easily in the future… It’s an act of vandalism.” 

O’Neill and Roope both point out that the next pandemic – antimicrobial resistance – is already happening. It may be doing so more slowly, and mostly to people in other countries, but it is growing beneath the headlines. In 2018, the World Health Organisation confirmed that extensively drug-resistant tuberculosis (XDR-TB), a virulent disease that is resistant to potent treatments, had been found in more than 13,000 patients across 78 countries. The current pandemic is making this worse, as doctors and nurses in India who lack access to the right medications for Covid-19 use powerful antibiotics instead, inadvertently breeding newly resistant microbes.  A global pandemic should have forced governments to face up to the perverse incentives that keep public and private money away from research into infectious diseases, but this has not happened. In the next pandemic, we may not be so lucky.