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The government funding of the @moderna_tx vaccine provides an interesting discussion of the interaction between government and private industry in pharmaceuticals.
Traditionally, the purpose of NIH et al. is to to fund early stage research that otherwise wouldn't happen (1/5)
Traditionally, the purpose of NIH et al. is to to fund early stage research that otherwise wouldn't happen (1/5)
This early stage research wouldn't occur because it is much harder to protect and firms are worried others will capture value created by their investment.
For this reason we don't uondition use of such research on pricing constraints because we want to maximize its use (2/5)
For this reason we don't uondition use of such research on pricing constraints because we want to maximize its use (2/5)
This makes NIH funding and private investments complements.
That said, as government funding moves closer to commercialization, these investments look more like substitutes.
We first should ask: Why is the NIH undertaking this work? What market failure are they solving (3/5)
That said, as government funding moves closer to commercialization, these investments look more like substitutes.
We first should ask: Why is the NIH undertaking this work? What market failure are they solving (3/5)
If it is for products where commercial prospects are uncertain, as has often been discussed with sickle cell, then it makes sense.
But fully funding COVID trials is far less clear. Are they funding trials that otherwise would happen? If so, why? (4/5)
But fully funding COVID trials is far less clear. Are they funding trials that otherwise would happen? If so, why? (4/5)
That said, @moderna_tx is apparently having its efforts 100% funded by BARDA -- i.e. we've derisked the investment.
In that case, it is hard to see argument for not including some pricing constraints. Do we really believe @moderna_tx would not have funded these trials? (5/5)
In that case, it is hard to see argument for not including some pricing constraints. Do we really believe @moderna_tx would not have funded these trials? (5/5)
In some ways, for @moderna_tx we're doing even more. By undertaking this vaccine efforts it is learning more about its mRNA platform. If successful, it will certify their IP.
So we're doing more than derisking their investment -- which should influence contract structure (6/5).
So we're doing more than derisking their investment -- which should influence contract structure (6/5).
The @moderna_tx financing shows how important it is to consider the underlying economics for:
(1) Why is the government involved; and
(2) Is investment a substitute or a complement to development process.
If the NIH changes its purpose, the contracts should also change (7/5)
(1) Why is the government involved; and
(2) Is investment a substitute or a complement to development process.
If the NIH changes its purpose, the contracts should also change (7/5)
It is not to say that simply because a firm has used NIH funded research in development of a product that there should be future pricing constraints.
We want to make sure we get most for our money, that often includes leveraging private sector investments and expertise (8/8).
We want to make sure we get most for our money, that often includes leveraging private sector investments and expertise (8/8).
