How Should Vaccines Be Financed?

Professor Andrew Lo, founder of MIT’s Laboratory for Financial Engineering, specializes in innovative financing models for difficult drug development problems such as how to finance vaccine development, manufacturing and distribution. Vaccines are an especially risky proposition for pharmaceutical manufacturers since the costs are higher than for other types of drugs and demand could drop drastically once a crisis is over. 

This issue is at the forefront in the midst of the COVID-19 pandemic.  In a recent New Yorker article, The Case for a Coronavirus-Vaccine Bond, Lo shares a novel method to finance drug development.

In this article, Lo suggests a global vaccine bond. “There are over a dozen late-stage vaccine developers, right?” Lo said. “What if the Administration announced that the U.S. Treasury would issue a thirty-year government bond?” It would invest in every vaccine-development program that exists, and “for any one vaccine that’s developed, we sell a billion doses.” The portfolio”, Lo added, “would just be incredibly profitable.”
 
Please see the New Yorker article for Lo’s history of innovative modeling for pharmaceutical financing and details on his thoughts on vaccine development for the current pandemic. If you prefer a podcast (or in addition), on this NPR Freakonomics episode Lo is joined by former FDA commissioner Peggy Hamburg and Tal Zaks, Chief Medical Officer of Moderna Therapeutics. For more information on financing vaccines, see Lo’s May 2020 paper, Financing Vaccines for Global Health Security.