Why don't we have more vaccines? By Matthew Yglesias

Why don't we have more vaccines? By Matthew Yglesias

(Sven Hoppe/Getty Images)

SlowBoring.com

Hey guys. Today, after many long months of closure plus a surprise day off yesterday for the snow, my kid is finally back in school for in-person kindergarten. I’m a little nervous, but fundamentally it feels good.

But of course, what I really want is for myself and my wife and all of our friends and family to get vaccinated, which raises a simple and somewhat underplayed question: Why aren’t we making way more vaccine doses?

Nobody is asking the most obvious question

Of course, we know that the reason Pfizer and Moderna aren’t making more is that they “can’t.” In other words, it’s not like they’re just forgetting to run the assembly line or something.

But you can search The New York Times, Washington Post, Wall Street Journal, FT, Stat, Politico, Axios, or whatever else you like in vain for a detailed, specific explanation of why they can’t make more. Or in other words, you won’t see a detailed, specific explanation of what would have to be the case for it to be possible to make more. You can’t take a taxi from Ohio to Austin, but when I was in Austin I met a driver who claimed to me that he had a client who was, in fact, going to pay him a very large sum of money to drive to Ohio, pick someone up, and then drive him back to Austin.

Now suppose you wanted to make that Ohio/Austin drive next week without stopping for gas. Well, you can’t do that because there’s no car for sale with a big enough gas tank. But if you really wanted to, you could get a bunch of jerrycans full of gas and load up the trunk of the car with them. That’s all getting pretty absurd, but it’s actually quite doable if you’re willing to spend the money.

But if you want to make the drive in an electric car without stopping to recharge, you’re out of luck. There’s no car that can make that drive. You can’t just put spare batteries in the trunk. You’d need a whole new custom vehicle built from scratch. But even if you could design a vehicle that could carry a battery that heavy, the timeline to actually construct it would be way longer than a week regardless of your budget. You run into Mythical Man-Month problems in which you can’t parallelize the design or construction work. And beyond that, cars are a heavily regulated industry — you can’t just build weird shit and then take it out onto the highway.

My point is simply that “we can’t do X” is something people say (honestly and truthfully) all the time without it being literally true. What you mean is that you’re up against some kind of constraint. And what we don’t have in the media is a clear description of what the constraints are exactly.

And from talking to a bunch of people who aren’t in the media and policy domains, they’re frustrated because the coverage won’t describe the constraints to them. What makes it especially frustrating is that one of the things mainstream media organizations are bad at is writing stories about their own inability to explain certain things. “Here’s what it would take to increase vaccine production fivefold” would be a great headline, and anyone would run it. But, “Our most qualified reporters can’t explain to you what it would take to increase vaccine production fivefold” is not a story that runs, even though it’s true and interesting.

It probably costs a lot of money

The fact that we don’t really know means that Pfizer and Moderna don’t particularly want us to know. That in turn means (I think) that considerations like “well the regulatory approvals on a new manufacturing facility will take a long time” can’t be the key issue (even if they’re true). Companies lobby for regulatory forbearance all the time, and obviously in this case they’d have a strong argument.

For roughly the same reason, I don’t really think the explanation can be that the capital costs of building more factories are too high; you could just ask for the money, and it would seem like a very reasonable thing to do.

My best guess based on pre-pandemic reporting on pharmaceutical lobbying and prescription drug pricing is that for whatever reason (likely a scarcity of some relevant components), increasing production by a large amount would require a higher unit price per dose. Right now, the US government is paying Pfizer $20/dose. Maybe Pfizer could increase production fivefold, but to do this while maintaining their margins, they’d need to start charging $80/dose. But they don’t want to come out and say that because it sounds like an extortion threat: “I know we agreed to $20/dose, but if you really want enough to vaccinate everyone we’re going to need to make that $80.”

After all, to a perhaps underappreciated extent, the vaccine developers are not actually great businesses. Note that a company like Hilton has experienced much more sustained stock gains related to the good news about mRNA vaccines than Pfizer has. Pfizer’s business wasn’t really hurt that much by the pandemic, but curing it isn’t particularly profitable either. It’s Hilton (and airlines, and restaurants) who really make money off a successful vaccine.

Though that of course raises the question of why Pfizer doesn’t charge more.

Nobody likes a price gouger

This one, though, is not a big mystery. If Pfizer totally blew off government purchasing programs and just sold vaccines through private retail channels at $100/dose, they could obviously sell a lot of doses at that price. Paying $200 for a two-shot vaccination course would be a large sum of money for vaccines, but it’s not a particularly gargantuan sum of money in the scheme of things.

I bought a MacBook Air for $999 when the new M1 chips came out, and like everyone who got one I think it’s an amazing value. That said, I would very gladly trade it for immunity to COVID-19! Which is just to say that to be real, Pfizer could charge way more than $100/dose. I’d try maybe $5,000/dose for early access with the price tapering down over time once the most eager customers already have the shot. Instead of the promise that by July, anyone who wants a shot can get a shot, it could be that by July, nursing homes are able to buy doses in bulk for $40 a pop.

But of course Pfizer would have to be crazy to try that pricing strategy — they’d be inviting something in between having all the relevant patents invalidated and just outright nationalizing the company. Even the current modest levels of profit they’re looking at have come in for criticism thanks to the basic intuition that it’s wrong to reap windfalls from human tragedy.

Moderna is in an even weirder position in terms of vaccine revenue. Unlike Pfizer, they have seen a huge boom in stock price, because also unlike Pfizer, they’re not a big established pharmaceutical company at all. They’re essentially a startup based on the promise of mRNA technology. So, the vaccine is a boom to them not so much because of its direct revenue implications, but because it seems to validate their whole pitch deck that this is great technology and good things will happen with it. That’s even more reason to avoid making people angry.

Now note, I am not saying it would be better if we had vaccine companies price gouging. What I am saying is that it’s easy to see how fear of being perceived as price gouging could lead an executive to look at a situation and decide to say “we can’t increase production” when the real answer is “I could increase production, but to do so without losing money I’d need to triple the unit price.” After all, they already agreed to a price. And it’s clearly not possible to increase production at the agreed-upon price.

We should really find this out

There are about 210 million American adults, so buying them all two shots of the mRNA vaccine at $100/dose would cost $41 billion. That’s a healthy sum of money, but in a world where the cheapskate Republican offer for a new COVID-19 relief bill is $500 billion and the Biden administration is asking for $1.9 trillion, I don’t think $41 billion would be too much to spend. The inflation-adjusted yield on a 10-year treasury bond is about negative 1% right now, and obviously the economic value of ending the pandemic faster is very high.

Regulators use a $9 million statistical value of human life for most cost-benefit calculations, by which standard the $41 billion expenditure would need to save fewer than 5,000 lives. That means that even if the $41 billion only speeds things up by a few weeks, it easily clears the bar.

In other words, it’s easy to understand why prudent companies might not want to ask for $41 billion or to be paid $100 per shot. But if it’s true that giving them that much money could speed things up, we really ought to do it.

Of course, maybe I’m totally wrong. My assumption through all this is that increasing vaccine output is like taking a taxi from Ohio to Austin without stopping for gas — it would probably take a little time to get it organized since it’s so unusual, and it would definitely cost you a bunch of money, but it’s absolutely doable if you sit down to do it. But maybe it’s really like trying to drive a car that accelerates so fast it will crush your eyeballs. If I’m right, it would be a great service to the country for a congressional committee to call in some executives and get them to explain what it would take. And if I’m wrong, it would be useful for that very same committee to obtain a clear explanation of what exactly the insurmountable obstacles are.

Vaccinating next time

It’s still not really clear where COVID-19 came from.

But whatever it was, between this and SARS and MERS, there’s a worrying possibility that the world will be seeing repeated novel coronavirus outbreaks of various kinds. We can hope that’s not the case, but given how bad COVID-19 has been, it would make sense to spend a fair amount of time and energy worrying that something similar might happen again and how we can do better next time.

There are a lot of elements to that, but clearly one of them is that we want to be better at producing mRNA vaccines at large volumes on a short timescale.

So even if the answer is that you really truly can’t ramp up production more rapidly at this point, finding out in detail why that is would still be extremely valuable. After all, perhaps it’s something that could have been done with more advance planning. For now we just don’t really know. It’s all shrouded in a level of mystery that seems frankly unwarranted, and our lack of answers isn’t because reporters have been too lazy to ask. Political authorities with more clout than mere journalists need to bear down on this question and help us all figure out what’s going on.