Why is There No AIDS Vaccine?

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Why is There No AIDS Vaccine?

Kremer, Harvard University, The Brookings Institution, The Center for

Global Development, National Bureau of Economic Research

M. Snyder, Washington University

CID Working Paper No. 111, October 2004

The Center for International Development at Harvard University (CID)

Available online as PDF file [54p.] at:

http://www2.cid.harvard.edu/cidwp/111.pdf

" ..We argue that differences in timing of drug and vaccine consumption will

lead firms to be biased against developing vaccines. Vaccines are sold before

consumers are infected, when they still have private information regarding their

infection risk, whereas drugs are sold after consumers are infected, when those

with positive valuation have no private information on infection risk.

Calibrations suggest that, for sexually transmitted diseases, for which

infection risk is highly heterogeneous across consumers, producer surplus from

drugs may exceed that from vaccines by a factor of four. Consistent with the

model, empirical tests suggest vaccines are particularly unlikely to be

developed for sexually transmitted diseases.

Biases against vaccines are exacerbated by the durability of vaccines and by the

interaction between the timing of vaccine and drug consumption and the temporary

protection of intellectual property rights. We extend the analysis to allow for

government procurement and for income heterogeneity among consumers. Given that

antiretroviral drugs are difficult to deliver in the poor countries where most

people infected with HIV/AIDS live, biases against developing a vaccine raise

enormous public health concerns.. "

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