An Evaluation of Price Determinants and the Economics of Supplying Vaccines: A Tradeoff Between the Wealth of Firms and the Health of Nations

Sammanfattning: This paper aims to investigate the price determinants of vaccines, using economic theory and multiple linear regression analysis. Due to uncertain returns of investment in research and development, the volatility of demand, and the winner-take-all element of patent races, supplying vaccines entails substantial risks. To stay in the market, firms need to be compensated for these risks. Expected costs are covered by charging a higher price than the vaccine’s marginal cost. Because of risks and high sunk costs, the vaccine industry is predominantly comprised of large firms with market power. The key finding of this paper is that an increase of suppliers of vaccines has a negative effect on vaccine prices. In addition, firms with market power were found to generally charge a higher price. The risk of supply shortages remains a consequence of a high market concentration. These results suggest that competition policy plays an important role in ensuring affordable vaccine provision.