The Simple Economics of Vaccine Quality in Competitive Markets

Abstract

The world’s leading pharmaceutical laboratories are racing to complete trials and begin marketing an effective SARS-CoV-2 vaccine. International Health Organizations and National Public Health Agencies are charged with setting standards for successful completion of Phase 3 trials. Brand licensing is contingent on meeting these standards. Vaccine uptake, however, depends upon people’s perceptions of the quality of the licensed vaccine. We ask four questions: What are key dimensions of vaccine brand quality relevant to their marketing? Why should we distinguish between pre-licensing and post-licensing quality? What impact does the structure of the competitive market for vaccine brands have on post-licensing brand quality standards? What incentives or disincentives exist in post-licensing markets for quality improvement? We address these questions by revisiting a strategic quality choice model from decision economics. It is the nature of vaccines that they are subject to problems of market failure. This paper’s main contribution is to highlight two problems that result in lowered brand quality: the free rider problem and the commons problem. New vaccines in competitive markets suffer both problems unless there are specific interventions by public agencies to mitigate their impacts. These interventions are urgently needed to raise quality and ensure maximum uptake of vaccination.