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BILL GATES: Of all the products in the world, you don’t want to use market-based prioritisation. It’s got to be vaccines.

STEPHANE BANCEL: There’s no technology known to man now that is faster than mRNA.

SUERIE MOON: Because of this monopoly or duopoly position that the sellers are in, it tends to have a high amount of market power and ability to get higher prices.

VANESSA KORTEKAAS: Vaccines save two to three million lives every year. But bringing them to market involves huge investments, complex science, and secretive contracts. Before the COVID-19 pandemic, few people paid attention to the business models behind vaccines.

The global pharmaceutical market was worth $1.3 trillion in 2019. Vaccines made up just 3% of that, generating around $33 billion of revenue. That compared to $142 billion from cancer drugs. So how do the economics of vaccines work? Who funds them? How profitable are they? And will the COVID-19 pandemic and new technology disrupt the vaccine market forever?

Until recently, there have really only been four main players in the vaccine marker– GlaxoSmithKline, Merck, Pfizer, and Sanofi. They represented 90% of the vaccine industry revenues in 2019. Even for these market leaders, developing a vaccine is a costly and time-consuming gamble. The process often takes a decade.

BILL GATES: Work on infectious diseases is often very obscure because the burden is so much out of sight in the rich countries and where the deep scientific and manufacturing power is.

SETH BERKLEY: Government is the main funder of the science. And that’s critical. And in all of the benefits we have today, if you think about the sequence analysis, or the mRNAs, and the biotechnology, the new manufacturing, all of that came out of investments in basic science.

ANTHONY MCDONNELL: As you go into phase one trials, these are taken over by industry. Maybe one in every 10 vaccines and a phase one trial goes on to be approved, while 50% to 70% of vaccines in phase three trials end up being approved.

SUERIE MOON: They will only invest once the market and the chances of success are well known. This doesn’t mean there’s zero risk. But largely, what we see is that the public sector takes on most of that. But indeed, this is what allows the business of vaccines to operate.

VANESSA KORTEKAAS: The cost of creating a vaccine varies widely. On average, it ranges from several million to a few billion dollars. Supply, demand, and pricing for vaccines are determined by a small number of factors. On the buyer side, national governments and organisations like Gavi, the vaccine alliance, and UNICEF are among the biggest purchasers. On the seller side are the pharma companies.

Because the development costs and regulatory barriers for vaccines are high, companies can maintain their monopolies for longer.

SUERIE MOON: It tends to have a high amount of market power and ability to get higher prices then let’s say a generic small molecule drug, or even a vaccine for which you have lots of competitors.

BILL GATES: Up until GAVI was created, the Global Alliance for Vaccines, in the year 2000, there was no purchasing power to get those new vaccines to the kids who needed them most. So that was this great irony that, for example, rotavirus and pneumococcus vaccines that now save millions of young children’s lives, they weren’t getting out in these countries.

SETH BERKLEY: Normally, what happens is when vaccines come out, they come out at a high price in a low volume. And over time, as the yield goes up, as other manufacturers begin to produce it, prices come down dramatically. To give an example, our vaccines that are the WHO approved vaccines cost over $1,300 if you look at it in the US model. And we pay $27 for those. So it’s a pretty dramatic difference.

VANESSA KORTEKAAS: Gavi typically negotiates procurement on behalf of 60% of the world’s children. They try to ensure low and middle income countries pay significantly less for vaccines than rich countries do.

BILL GATES: If the disease in the rich world, one of the Western companies will invent a new vaccine with huge R&D investments. They’ll charge a reasonably high price as much as, say, $100 in Western markets. And then eventually, either they’ll make a cogs oriented version, or the Indian or other developing country manufacturers will come in.

VANESSA KORTEKAAS: By prioritising high volumes at low prices, the Serum Institute of India has become the world’s largest vaccine manufacturer by volume. It typically produces more than 1.5 billion doses of vaccines every year, which are used in 170 countries.

This year, it has increased capacity, and is aiming to manufacture at least one billion doses of COVID-19 vaccines alone after signing deals with AstraZeneca and Novavax.

ADAR POONWALLA: It is more expensive to make a vaccine in the US and Europe. Traditionally, those companies haven’t had large facilities because the volumes that they sell at are much lower, but at a very high price.

BILL GATES: But these are proprietary products that the companies have spent lots of money in high risk in order to go through trials. They have to recover all of those and make their profit from the rich world market and the middle income market knowing that those Gavi markets are not going to give them any meaningful margin.

VANESSA KORTEKAAS: But returns on investment are not straightforward. The lack of transparency around each company’s production costs makes it difficult to assess a vaccine’s profitability. We do know that at the top end, Pfizer’s pneumococcal vaccine, Prevnar, which works against pneumonia, generated $5.8 billion in revenue in 2019.

SUERIE MOON: If you’ve invested maybe a few hundred million dollars the R&D 10, 15, 20 years ago, and you have a captive market, then you’re going to make a pretty good profit. A very, very healthy profit. Some would even say an excessive profit.

VANESSA KORTEKAAS: At the other end of the spectrum are well-established, low cost children’s vaccines, like measles. Low profits drove several producers out of the market in the 1970s and 80s. In the past decade, an increase in vaccines for adults and those taken annually, like the flu vaccine, have helped make the market more profitable.

But for governments, the health, societal, and economic returns are much greater. Gavi estimates a $21 return for every dollar invested in vaccine programmes for the 73 countries it typically supports.

BILL GATES: Well, the most salient number is that in the year 2000, over 10 million children under the age of five died every year. By 2016, that number was under 5 million per year. That’s per year. That’s millions.

VANESSA KORTEKAAS: This is the way things work. Then came the pandemic.


The outbreak of COVID-19 brought China and then Europe to a standstill. As the novel coronavirus spread to the US and across the globe, it wasn’t long before governments were betting billions of dollars on developing vaccines to fight the pandemic. A new vaccine market was about to emerge where demand was unlimited, and governments would do everything in their power to secure doses.


BILL GATES: The total amounts involved relative to normal vaccine R&D, it’s tens of billions of dollars. Maybe a total of $25 billion or so. That’s gigantic in the world of vaccines. Now relative to the economic damage of the pandemic, which is in the trillions, it’s truly a rounding error. This is the best money that’s been spent by governments during this pandemic.

SUERIE MOON: The public sector, governments collectively, have really de-risked and subsidised the R&D process every step of the way from the earliest stages of R&D, oftentimes to the scale up of manufacturing and, of course, purchasing.

VANESSA KORTEKAAS: Other big funders include the Bill and Melinda Gates Foundation and CEPI. The Coalition for Epidemic Preparedness Innovations is a public private partnership that supports vaccine development to stop future epidemics. One recipient of a small grant from CEPI at the start of the pandemic was Moderna, a biotech company that had yet to bring a product to market.

By the end of 2020, US Federal funding for Moderna’s vaccine had swelled into the billions, and it was approved for use.

HANNAH KUCHLER: So Moderna took a huge amount of public money– up to $4 billion from the US government. And that helped them build this proof of concept.

VANESSA KORTEKAAS: The vaccine uses messenger RNA technology, which the company spent a decade developing.

STEPHANE BANCEL: We invested around $3 billion in the last 10 years to get the technology to this place. The pandemic has accelerated the company turning into a commercial company by three to maybe four years.

VANESSA KORTEKAAS: The first vaccine approved in a Western country also used mRNA. It was made by US pharmaceutical giant Pfizer and Germany’s BioNTech. While Pfizer did not take public funding to develop and manufacture its vaccine, it did have an initial $1.95 billion advance purchase agreement through Operation Warp Speed.

The US government’s COVID-19 investment programme has surpassed $10 billion, most of which has been spent on vaccines. It’s not the only country that place huge bets on vaccines. China and Russia funded their own vaccine candidates. And the German government gave BioNTech $445 million. The UK government contributed 65.5 million pounds to Oxford University. And its vaccine manufacturing partner, AstraZeneca, received up to $1.2 billion for trials in manufacturing from the US government.

SUBJECT 1: You get 11 doses out of this.

SUBJECT 2: We do.

SARAH GILBERT: Well, there was no point in us generating a vaccine in January of last year if it wasn’t going to be able to take it all the way through clinical development and into emergency use licensure. And as a University, we are able to do much of the early clinical development and get that taken quite a long way, but we were never going to be able to manufacture a vaccine that was going to be used as a licenced product.

VANESSA KORTEKAAS: The unprecedented public funding helped these companies develop vaccines in less than a year. Until now, the fastest vaccine ever created was a mumps vaccine developed by Merck in four years. The pandemic demanded an urgent response, but that also led to questions about the prices of COVID-19 vaccines.

SUERIE MOON: We have a high degree of secrecy. We have governments really desperate for access to vaccine supplies and willing to sometimes pay very, very high prices. And things are happening very quickly under emergency conditions. So it’s unfortunately a perfect storm where the risk of abusive pricing or unfair pricing is quite high.

HANNAH KUCHLER: I think pharma did hold a lot of power in this negotiation. But I also think that they could have gone higher. Plenty of investors actually would have liked them to go higher and didn’t make a secret of that.

VANESSA KORTEKAAS: Prices for COVID-19 vaccines very widely. The Oxford-AstraZeneca vaccine is about $3 to $4 a dose. Along with Johnson & Johnson, they have committed to selling their vaccine on a non-profit basis during the pandemic. AstraZeneca say they will do so in perpetuity for low and middle income countries. Moderna said it has charged the US government as little as $16.50 per dose to return some money to taxpayers. But smaller orders for other customers range from $32 to $37 per dose.

STEPHANE BANCEL: We invested $3 billion in this technology since the beginning. We’ve never made a penny of profit. We thought it was not appropriate not to make a small profit. The value that we are asking for the product is way undervalued to the health care system. If you just look at the saving in just hospitalisation costs, they run much, much higher per EBITDA.

SUERIE MOON: It’s very difficult to actually come up with an evidence-based judgement on the fairness of any price or the fairness of any profit margin.

ANTHONY MCDONNELL: Companies want to play countries off against each other, and so aren’t very incentivized to want to make these contracts transparent. And Democratic governments often don’t want their public to know that they’ve gotten a bad deal, or they don’t want rival countries to know that they’ve gotten a good deal. And so there’s not very much incentive for making these public.

VANESSA KORTEKAAS: Before the pandemic, US pharma companies were under pressure over high prices for drugs. The industry looked ripe for reform.

HANNAH KUCHLER: So then we come into the pandemic, and you have a situation where some companies say, look, this shows how important it is to invest in innovation. So you should pay us a good amount of money. But then the other hand is some companies said, ah, this is our opportunity to make a contribution by saying we’ll offer these vaccines on a non for profit basis.

SARAH GILBERT: I think it’s reasonable to allow companies to make a profit from the high income countries having put such a huge effort into this work, and also make sure that it will be available for low and middle income countries in perpetuity without profit.

VANESSA KORTEKAAS: Moderna said it expects to make $18.4 billion from its COVID-19 vaccine sales this year. It has not revealed the profit margin for its COVID-19 vaccine. Pfizer said it expects to make about $15 billion, with a profit margin of more than 20%. The profits will be split 50/50 with BioNTech. These forecasts have partly shaped the company’s varied share price performances in the past year.

In previous pandemics, including SARS, the outbreak ended before companies could develop a vaccine. Those who invested in the endeavour made a loss. But COVID-19 is widely expected to become andemic. Analysts predict the annual vaccine market for the virus could reach $10 billion a year, or more as producers tailor vaccines for new strains.

ANTHONY MCDONNELL: If the vaccines aren’t very successful but they do provide a very meaningful contribution to the fight against COVID, then we’re likely to move to something like a flu model where we sell more vaccines for the flu than we do for every other vaccinated illness in the world.

HANNAH KUCHLER: Then the question will be, are there so many competitors in the market that the price falls? Or the price may go up because it will be more of a natural normal market where people will perhaps choose a particular vaccine because it has a higher efficacy rate rather than a market where it’s controlled by these gigantic government contracts.

VANESSA KORTEKAAS: One big question is whether governments should have demanded more in these deals for subsidising development and guaranteeing sales.

HANNAH KUCHLER: It does feed into a larger debate that was already happening about what happens when governments fund science, especially really basic research. It goes on into the private sector, and it makes the private sector a lot of money, but not much of that flows back to the government.

VANESSA KORTEKAAS: For governments of low and middle income countries, the return on investment calculation is entirely different. They are battling just to secure supplies of COVID-19 vaccines amid a flurry of bilateral deals between rich countries and vaccine producers, and global disputes about controls over vaccine supply chains.

BILL GATES: Of all the products in the world, you don’t want to use market-based prioritisation. It’s got to be vaccines because if you went that way, the rich people in the rich countries would buy all the output for quite a while, and it wouldn’t be assigned according to who’s at risk of dying, for example, getting to the elderly and the health care workers.

VANESSA KORTEKAAS: Gavi, the World Health Organisation, and CEPI set up the COVAX programme to mitigate this and provide equitable distribution for COVID-19 vaccines. The COVAX advanced market commitment, or AMC, has raised $6.3 billion, and aims to distribute 2 billion doses this year, with 2/3 of those subsidised for 92 lower income countries.

SETH BERKLEY: We also hope that by having global supply, it would reduce the number of bilaterals. And it looked like that might have helped for a while. But there really has been a global panic seeing doses being rolled out, people hoarding doses, and also the new variants have made people nervous.

SUERIE MOON: There are some governments that have said, yes, we politically support COVAX, we will put money into COVAX, we will subsidise other countries through COVAX. They are the very same governments that have turned around and said, we are going to basically eat up most of the world’s existing volume through advanced purchase commitment.

SETH BERKLEY: Any head of state is going to think about, I have to protect my people. That’s the natural instinct. And that may be true in a normal situation. But in a global pandemic, you’re only as safe as everyone is safe.

VANESSA KORTEKAAS: COVID-19 has turbocharged normal market forces, from funding to the speed at which vaccines were developed, and the subsequent international scramble to buy them. But are there more fundamental ways the virus will change the vaccine market?


HANNAH KUCHLER: I think the COVID-19 pandemic will completely shake up the vaccine market. And that’s because of these new technologies like messenger RNA and viral vectors. By accelerating them so fast, they’ve completely shaken up who’s on top, who has the potential to create the next vaccine.

SETH BERKLEY: The fastest vaccine ever had been for years. The Ebola vaccine was around five years. And the fact that this happened in 303 days is extraordinary.

VANESSA KORTEKAAS: The pandemic was an opportunity to prove that mRNA, or messenger ribonucleic acid technology, could work. The synthetic mRNA delivers instructions to cells in the body to produce the viral protein, which stimulates an immune response. The success of Pfizer, BioNTech, and Moderna’s mRNA vaccines mean the technology could be applied to a wide range of other vaccines and drugs.

BILL GATES: The mRNA platform, we’re going to push that to the limit. And we should get a lot more vaccines. And malaria vaccine, or an HIV vaccine, or a TB vaccine are miraculous things. That’s measured in saving millions of lives, not some economic thing. That is about life itself.

VANESSA KORTEKAAS: The speed at which mRNA vaccines can be tweaked to respond to new variants and then mass produced could also make vaccines more profitable.

STEPHANE BANCEL: We’re going to end up having technologies like mRNA enabling a new vaccine that is going to be best in class and first in class. They’re going to be able to maintain the kind of a high profitability.

SARAH GILBERT: I think platform technologies for the future of vaccine development, and messenger RNA is one of them. We haven’t really seen messenger RNA vaccines widely used at all before 2020. And in the last year, they’ve gone from being something of a niche research area into having massive impact.

STEPHANE BANCEL: I believe we will end up with Moderna having the vaccine that will have a combination of a seasonal boost for flu and the new variant for SARS-CoV-2 And it’s going to be one shot. So how is that going to compete with a vaccine that’s only the seasonal flu? I believe those vaccine will have no future.

VANESSA KORTEKAAS: There are also reasons to be cautious about the future of mRNA.

HANNAH KUCHLER: Just because MRSA and the viral vector vaccines have been pretty successful for COVID doesn’t mean they’re going to be successful for everything else. And so I think that there will still be a debate inside some of these big vaccine players, like GSK, Sanofi, and Merck about to what extent they should rush towards this new shiny object, and to what extent they should rely on their own reliable proprietary platforms.

BILL GATES: I do think for the next pandemic, we will be able to solve the problems of the mRNA platform. That is, we’ll fix the thermal stability, we’ll fix the scalability, and we’ll fix the cost. We kind of caught mRNA halfway to prime time.

VANESSA KORTEKAAS: Analysts predict that 2021 vaccine sales from Moderna and Novavax will outpace those from three of the biggest vaccine producers who dominated the market before COVID-19– Merck, GSK, and Sanofi. All three have yet to bring a COVID-19 vaccine to market.

HANNAH KUCHLER: With new players in charge, they’ve got a lot of capital, Investors. Are really backing them, and they can go into new markets– most obviously, flu.

SUERIE MOON: The big question, the billion dollar question is, how many of those firms are going to find a business model that allows them to scale up production and global distribution?

VANESSA KORTEKAAS: Could the pandemic propel the vaccine segment into becoming a much bigger part of the global pharmaceutical market?

BILL GATES: Vaccines probably saved more lives than any other tool. If we can take vaccines and apply them more in the area of cancer, then that just changes the numbers completely because the cancer market, it’s over 10 times the R&D, over 10 times the spend, Potential for growth.

HANNAH KUCHLER: I do not think that we’re going to see the entire pharma industry switch to focusing on vaccines. It’s still a business where you often sell to governments, where they’re often very large contracts and not that much competition, and not that much growth.

VANESSA KORTEKAAS: With more than 113 million cases of coronavirus confirmed globally and 2.5 million known deaths, vaccines are widely seen as the key to ending the pandemic. Public investment in vaccines are dwarfed by the economic costs of this global health crisis. An estimated $6 trillion in economic output was lost to 2020, and another $4.4 trillion will be lost this year.

HANNAH KUCHLER: Public health experts have been telling governments and politicians for years that vaccine supply is a huge global strategic priority, and that you should protect it. I think they’ve finally woken up.

ADAR POONWALLA: Traditionally, when governments have tried to invest in that infrastructure, it’s not worked out very well. It’s always been the private players in the private sector that’s been able to succeed, scale up because of the entrepreneurship and freedom that a private sector company would have.

SETH BERKLEY: Obviously, if you want to have manufacturing facilities ready to go that are there in case of an outbreak, you’re going to need to make sure that there’s financing for that because from a for profit company, the idea that you would have facilities that are available that are not being optimally used might not make business sense, but they may make public health sense. So I see this as a partnership between government and the private sector.

BILL GATES: I’m very enthused that vaccines, all the standby capacity that we will have on for the next pandemic, we may be able to use that when there’s not a pandemic going on to create lots of low cost supply capacity for the entire world. Imagine that you’d have a vaccine you know back in the summer, you would have saved millions of lives.

VANESSA KORTEKAAS: COVID-19 has already changed the vaccine market, potentially irreversibly.

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