Mathias Dewatripont - Contribution to workshop

FRANCE STRATÉGIE & OECD WORKSHOP ON NEW INDUSTRIAL POLICY TOOLS Paris, 17 October 2022

Lessons from the covid vaccine experience-(based on Dewatripont,-2022) Mathias Dewatripont Professor; Université libre de Bruxelles

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Distinguish R&D phase from purchasing phase.

R&D (see also Aghion et al., 2020) US is the clear leader here. It has a very impressive ecosystem: research universities, NIH, BARDA, biotechs (with very effective financial markets), big pharma.

Benefits of centralization in crisis time (cf Bolton-Farrell 1990): Operation Warp Speed, Defense Production Act, even US Army. (see : https://i3health.eu/developpement-des-vaccins-covid-19/).

The US did contribute to global common good: BARDA funded non-US projects too, and accelerated innovation: 1. 1.95 bill. $ to BioNTech/Pfizer (Germany/US).* 2. 2.48 bill. $ to Moderna (US).* 3. 1.46 bill. $ to Johnson & Johnson (US).** 4. 1.20 bill. $ to Oxford/AstraZeneca (UK/Sweden).** 5. 1.60 bill. $ to Novavax (US).*** 6. 2.07 bill. $ to Sanofi/GSK (France/UK).*** (**mRNA, **viral vector, ***protein subunit) •

So, three technologies, with dual sourcing each time.

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Big success: first five vaccines have been authorized in EU and/or US, only sixth has not!

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Contrast with identity of top 4 vaccine producers pre-covid 19 in the West - GSK, Sanofi, MSD and Pfizer.

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mRNA technology developed by biotech firms Moderna and BioNTech (which then teamed up with Pfizer).

General lesson for industrial policy: •

Do not just fund big incumbents. Do promote competition (see also Aghion et al., 2015).

Note: •

World was lucky to have technology ‘available’ by 2020, after long, difficult journey (see Veugelers, 2021).

Europe: •

UK, EU and Switzerland have strengths too: research universities, biotechs, big pharma.

Need for more cooperation to emulate NIH (general problem: EU is a regulatory giant but a budgetary dwarf). Similarly for BARDA: will HERA be up to the job?

And what about a European Operation Warp Speed or Defense Production Act?

Purchases Israel shows you don’t have to be involved in R&D (or production) to ‘get ahead’: the price simply needs to be right. Israel also allowed Pfizer/BioNTech to analyze in detail the impact of vaccination on the Israeli population, thereby contributing to global knowledge.

UK and US benefited from close links with AstraZeneca and Pfizer and Moderna in particular to accelerate purchases also.

The EU achieved intra-EU equity, but coordination led to delay. Understandable that EU Commission was criticized for slow delivery of covid vaccines because it insisted too much on low prices while recessionary cost of delay was huge.

|3 This being said, it is a wise idea to coordinate bargaining at EU level, to counter pharma companies’ strategy of playing countries against one another, using speed of access as a way to extract higher prices (Kyle, 2007), beyond improving intra-EU equity.

So, would be worth replicating, e.g., for rare diseases, so that EU has more bargaining power to improve innovation/access trade-off. And would build on alliances between Member States: Beneluxa, the Valetta group, the Visegrad group and the Nordic Pharmaceuticals forum (see also Dewatripont et al., 2022).

References Aghion, P., S. Amaral-Garcia, M. Dewatripont and M. Goldman “How to Strengthen European Industries’ Leadership in Vaccine Research and Innovation”, VoxEU, September 1.

Aghion, P., J. Cai, M. Dewatripont, L. Du, A. Harrison and P. Legros (2015), “Industrial Policy and Competition”, American Economic Journal: Macroeconomics 7: 1-32.

Bolton, P. and J. Farrell (1990), “Decentralization, Duplication and Delay,” Journal of Political Economy 98: 803-826.

Dewatripont, M. (2022), “Which Policies for Vaccine Innovation and Delivery in Europe ?”, International Journal of Industrial Organization 84.

Dewatripont, M., A. Fischer and M. Goldman (2022), “Improving the Innovation/Access Tradeoff for Rare Diseases after Covid-19”, VoxEU, September 29.

Kyle, M. (2007), “Pharmaceutical Price Controls and Entry Strategies,” Review of Economics and Statistics 89: 88–99.

Veugelers, R. (2021), “mRNA Vaccines : a Lucky Shot ?,” Working Paper 13, Bruegel.