Arnold Kling  

Would a Cancer Vaccine Pay?

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One of my favorite web sites, Edge.org, recently posed a question to famous thinkers: What is Your Most Dangerous Idea?. There are many interesting ideas on a variety of topics.

Paul Ewald said that it may be possible to find a vaccine against a major disease, such as cancer.


The goals of the interventions do not mesh nicely with the profit motive of the free market. Vaccines, for example, are not very profitable.

Pharmas cannot make as much money by selling one vaccine per person to prevent a disease as they can selling a patented drug like Vioxx which will be administered day after day, year after year to treat symptoms of an illness that is never cured.


Non-economists frequently make arguments of this sort. One hears that the auto companies really know how to build cars that will deliver 100 miles per gallon, but they are holding them back. The classic myth is that General Electric knows how to build a light bulb that will never burn out, but they want to keep selling light bulbs, so they are keeping the secret hidden.

Economic theory would suggest that it is highly unlikely that firms would hold back miraculous inventions. A monopolist could find a way to profit from the invention by selling it at a high price. In a competitive market, a firm would develop the invention to avoid being beaten out by other firms.

I had lunch with Tim Harford last week, and he pointed out that the problem with vaccines is that they are so valuable that governments cannot resist taking them. It is safer to develop something like Viagra, whose patent the government is unlikely to violate, than a cure for AIDS, because the latter is likely to be appropriated by government.


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TRACKBACKS (6 to date)
TrackBack URL: http://econlog.econlib.org/mt/mt-tb.cgi/423
The author at The Liberal Order in a related article titled Planned Obsolescence writes:
    Let’s put some numbers to Arnold Kling’s argument that planned obsolescence is not a profit [Tracked on January 3, 2006 11:59 AM]
The author at Vaccines for Development in a related article titled Would a Cancer Vaccine Pay? writes:
    There is an interesting discussion at EconLog about the economics of vaccines. This follows a suggestion that some firms might not want to develop a vaccine for diseases such as malaria and AIDS because it is more profitable to sell... [Tracked on January 3, 2006 7:45 PM]
COMMENTS (10 to date)
T.R. Elliott writes:

You make it sound as if economists are in the know, the special priesthood. This statement that you make is similar to your earlier post or article--TCS perhaps--that describes two types of people: economists, and non-economists.

Here's the truth. The people who make statements like that are the ones who don't understand a domain. E.g. the statement about cars that will go X MPG or the light bulb example. Similar to your incorrect statements about shale. It's not non-economists who make arguments like that. It's people who are ignorant of the specifics of the domain. Economists make a lot of statements that are pure nonsense. You're continual attempts to put yourself into the "know," into the select group with the "truth" is breathtaking.

Pretty much all you've given us in this post is umsubstantiated generalities.

I'll give you another incomplete. Keep trying though. Someday perhaps you'll get a grade back. Or finally give up find a real job.

Ian Lewis writes:
It is safer to develop something like Viagra, whose patent the government is unlikely to violate, than a cure for AIDS, because the latter is likely to be appropriated by government.

Holy Crap, I never thought of it that way. That is disgusting and, unfortunately, I believe it.

rakehell writes:

I've only begun to skim the surface of those Edge mini-essays, and though many are quite solid, I note that there were a lot of natural scientists making fanciful speculations about the social sciences. There were a fair number of anthropologists and psychologists, but I didn't note any economists, political scientists or geographers represented. Too bad.

daveg writes:

In general I agree with your premise. There are not easy solutions.

In some cases, however, the private sector will prevent government from solving a problem that it can do well.

For example, the patent office ran an experimental program to put patents on line for free. At the conclusion of the program database companies like lexis lobbied to kill the program even though it was quite successful and cheap.

In the end, the data remained on line, but it was close.

The utility industry constantly spends money to prevent the public sector from getting into the energy business. We note that in Los Angeles, the price of electricity stayed low and was not interrupted because there utility was public owned.

Makes you think....

daveg writes:

Just want to say sorry for all the typos in my posts. I really should edit them a bit more.

Lord writes:

The problem is vaccines are profitable but uncertain, and after having made money in it, businesses realize it is so much more profitable and so much more certain to create drugs for chronic conditions. It will always be so; it is the nature of business.

How ironic someone might think government might expropriate their invention when it is in fact, only government that protects it from expropriation from others.

Owen Barder writes:

The Center for Global Development looked at just this issue - and the problem is exactly as you describe it. There is a problem of time inconsistency: Governments want new vaccines to be developed, but once they are, they want them available at the lowest possible price.

Our report, Making Markets for Vaccines, proposed that Governments should precommit themselves to pay a higher price for vaccines, by making a legally binding commitment to buy them if and when they are developed. This might be particularly important as a way to create incentives for the development of vaccines for malaria, HIV and tuberculosis, as well as ensuring rapid access to vaccines that have been developed but which are not yet available for the developing world, such as pneumo, rotavirus and HPV.

You can read the full details at the CGD website: www.cgdev.org http://www.cgdev.org/section/initiatives/_active/vaccinedevelopment

Dezakin writes:

This is a dumb idea.

Never seems to occur to anyone that making an AIDS vaccine is immensely difficult while designing viagra is in comparison trivial.

As has been pointed out before since this is an economics blog: You have the skills to do both vaccines and treatments, which one is the surer bet. Lets assume they are equally difficult and no one will violate your patent. Unless you are a real gambler in a saturated market, you will still make the treatment because you have vastly longer rent on it and even if a competitor develops a vaccine, they only sell one dose while you have repeat customers who havent yet been vaccinated.

How many companies have produced yet another proton pump inhibitor just a little different than all the others for your antacid because its easy and marketable. Or yet another anti-inflamitory like celebrex when ibuprofin has been out for years.

For a more succinct illustration then lets say you do develop a vaccination for HIV, somehow, and government doesnt just seize the patent. Now how much can you charge for a vaccination of someone and how much are they willing to pay. You can bet that the monopolistic profit on the vaccine isnt going to be nearly as high as a treatment because people wont be willing to put down a lump sum of any significant fraction of their income to immunize themselves from a disease that they believe they aren't likely to get anyways versus people on treatment regimes they must pay for or they die.

JD writes:
I had lunch with Tim Harford last week, and he pointed out that the problem with vaccines is that they are so valuable that governments cannot resist taking them. It is safer to develop something like Viagra, whose patent the government is unlikely to violate, than a cure for AIDS, because the latter is likely to be appropriated by government.

Can you provide a link to an account of a seizure of this sort happening in the past? My initial searches haven't turned up anything.

-JD

Lord writes:

Considering this further, if you really want to increase the return on vaccines compared to prophalactics, you would eliminate patent laws. Patents are what provide the long term profits that prophalactics offer while they are almost irrelevant with respect to vaccines since once is enough. Trade secrets would be enough to protect vaccines for the short duration of their lifespan.

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