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Time for vaccine market positioning
Otherwise we are heading for a distribution mess
Welcome to Plugging the Gap (my email newsletter about Covid-19 and its economics). In case you don’t know me, I’m an economist and professor at the University of Toronto. I have written lots of books including, most recently, on Covid-19. You can follow me on Twitter (@joshgans) or subscribe to this email newsletter here.
We are starting to get a portfolio of vaccine options. That is great news in terms of production capacity but presents some problems with respect to distribution.
Here are the current outcomes of Phase 3 trials.
The new mRNA vaccines lead the pack and are significantly better in protecting people than the more traditional vaccines.
But the traditional vaccines are very good. The J&J vaccine whose results were released last week prevented 85% of severe Covid-19 cases and 100% of hospitalisations. That last part is very important but we do have to worry about severe cases too as these may have long-lasting health effects. Suffice it to say, had this vaccine appeared first we would have been celebrating it as an unprecedented achievement. Now, it is one of the pack.
There are other trade-offs when it comes to these vaccines. Importantly, J&J and Astra Zeneca do not need the same cold supply chain and for J&J only a single dose is needed. What we don’t know is whether another dose might increase its efficacy. But that makes J&J very desirable if we are thinking of distribution to all ends of the planet.
The other useful thing to note is that vaccine diversity is a really good thing. Put simply, new variants may get around some vaccines. So you don’t want to put all of your eggs, population-wise, in the mRNA basket.
Herein lies the problem. From a public health standpoint, you want to spread these different vaccines around. But what is going to complicate these things are private incentives.
It does not take a genius to work out that if you are offered your choice of these vaccines you will take the ones with 95% efficacy. I would. Now we have to take those incentives and extrapolate. Normally, when you have products that have a perceived quality difference for consumers, the price of the ‘good’ product goes up and the price of the ‘bad’ product goes down. In the end, the market clears.
However, we have, sensibly, adopted to give these vaccines away for free. Normally that isn’t an issue. When you are offered a flu vaccine, you tend to assume it is THE flu vaccine and don’t ask too many questions. Alas, Covid-19 is not working that way. People know the different efficacies. They know the names of the vaccines. And they are going to want to know what they are getting.
That is going to inject market like forces into it whether you like it or not. People are going to potentially try and opt to wait until their preferred vaccine is available. Again, there isn’t necessarily anything wrong with this as the vaccine doses that are not taken up can be given to others. However, the at-scale logistics systems being used here are very unlikely to play nicely with such consumer-side substitution. This is especially so since any on-line booking systems are not likely to have the ability to select appointments for your preferred vaccine. Without that, consumer-side substitution will occur in a messy way. Rumours, missed appointments etc. It has big, fat mess written all over it.
Now apparently, I am a professor of management so I can tell you how you avoid such messes. The way you do it is to embrace it. You admit that people will have preferences and you position your products to take those into account. A top tier restaurant isn’t going to offer crappy wine and then lament the fact that their customers won’t take it and walk out. No, they understand their customer’s preferences and select a stock to meet them.
Herein lies a big opportunity. We are already giving our top-shelf vaccines to the elderly and those most at risk from Covid-19 complications. Absent other criteria it is those people who are most likely to want the better product and also potentially be willing to wait for it.
Given this, what if we allocate the other vaccines to other people? We should give it to the young and mobile. The chances are that it will do lots of good reducing the spread of the disease that way. For them, you say, get the vaccine now or wait another year. I suspect that will get incentives going in the right away.
In other words, good old fashioned market positioning is needed and you want to do that in a deliberate and planned way rather than the mess we are heading to. Do you want the old person vaccine or the young person vaccine? See, it’s easy.
In the commentary on the J&J vaccine, I already see that health officials are trying to hype it up and claim it is as good as you would want. Good luck with that. My fear is that is the path to a mess and complications.
As usual, I prefer to default to more information and the clearly explained truth. I think the J&J vaccine is likely great. I would probably get it tomorrow if offered it rather than waiting months for something better. Also, I might feel good about having the “youthful” vaccine. But if both are there at close to the same time, my preferences become different. We need to clearly explain options and plan for these things. Sadly, if I had to bet, I would bet on the mess happening.