The only thing that appears capable of defeating the coronavirus epidemic in the end was the development of vaccines. Not just one but several vaccines employing different technologies appear to be effective.
Assuming the pharmaceutical companies are charging full cost plus profit on their products — and there is no reason not to — the development of these drugs has been astonishingly cheap.
Of the £11.7bn that the UK expects to spend on its vaccination programme, £2.9bn buys vaccines, securing 267 million doses of five different types, according to the National Audit Office.2
Even the priciest vaccines repay their cost many times over in economic growth from a reopening economy. Affluent governments could well be tempted to bid higher if supplies tighten.
Compared to the trillions that lockdowns and quarantines have cost the vaccines are chump change.
The EU financially supported the development of the BioNTech and Pfizer vaccine and has obtained a lower price per dose ($14.70 than the US ($19.50). The Moderna vaccine’s development was subsidised by the US government, and it will cost the US about $15 a dose, while the EU is paying $18.
The Oxford-AstraZeneca vaccine is much cheaper, although neither the UK nor the US can match the EU’s $2.15 deal: they are expecting to pay about $3 and $4, respectively, per dose.
The Johnson & Johnson vaccine, expected to announce phase III results imminently, is also much cheaper, costing the EU $8.50, with each dose going twice as far as the other brands, since it is a single shot vaccine.
Yet ironically the reason the vaccinations are proceeding so slowly is that there shortages because there aren’t enough production lines. Arguably if we knew in mid-2020 what we know now the rational decision would have been to spend more on vaccine production lines than on lockdowns, quarantines and masks. Then we wouldn’t be short on the only thing that actually stops the epidemic: vaccines.
Moral hazard may have played a role. Politicians had more to gain by instituting measures that were dramatically visible, enhanced their power and signaled virtue. In mid-2020 when nobody knew for sure a vaccine was even possible, it would have been political suicide to accept what Admiral Nimitz, on the eve of Midway, termed a “calculated risk”.
When success is less than a sure thing but through analysis of the salient aspects of the problem, including costs and consequences of failure, a commander decides to proceed nonetheless, we can say that he is taking a “calculated risk.”