The world is right now in the middle of a global epidemic, and we are in a race against time. COVID-19 is mutating, with new strains appearing around the world, and billions of people around the world are waiting for a vaccine. Over 2 million people have died around the world, and the global economy continues to sputter.
Vaccines have been developed and are rolling out, but the biggest barrier to many seems to be the approval process.
Now everything seems to be great for the companies which have received FDA approval right now, they are in a classic oligopoly, and the main barrier seems to be the fact that they have limited manufacturing capacity. While this is true in their own personal laboratories, there are billions of dollars hanging in the air right now for each of these 4 firms for whoever can make enough vaccines the fastest.
The vaccines are all under patent protection, and this prevents other companies from coming forward and copying an existing vaccine. I initially thought this might be the biggest barrier to getting more vaccines out, but actually, there is another force at play. With only 4 vaccines approved for use right now we are looking at an oligopoly, but there are 6 more vaccines in early or limited use right now, and another 20 in phase 3 trials. This oligopoly market is going to become a competitive market over the next couple of months.
The companies which developed it the fastest now have a choice. This formerly oligopolistic market is going to have new entrants. This is going to push down the price of the vaccines, and the companies which currently enjoy approval in a very thin market are about to be just 2 in a suite of 30 competing vaccines. As soon as there are 10 vaccines for COVID-19 approved for use in the United States the profit margins for Moderna and Pfizer is going decline rapidly.
But they have a way to maintain their massive market share, without the cost of having to build more laboratories, and maintain massive profits for the remainder of this pandemic, and make this money faster.
The way to do this is a licensing deal. There are small laboratory companies around America which are able to make either vaccines, and the only thing stopping them right now is intellectual property laws. If one of these two major drug manufacturers chose to make contracts with 100 laboratories around the United States to ramp out production they would both make more money and make it so the need for other companies to enter the market will be greatly reduced. If Moderna were to do this, Pfizer would see both a significant reduction in potential revenue and likewise a massive crash in their stock price. The same obviously goes the other way around. As soon as more vaccines are approved for use in the United States they will see their potential profits decrease.
The wise business decision for both Moderna and Pfizer is to do a great race to get as many small and independent laboratories under contract to make as many vaccines as possible, and split the profit between themselves and the smaller laboratories.
Not only is it the only wise business decision, and their current power as a duopoly will go away very soon, it will also benefit the United States by making it so we have more vaccines available, which will help coronavirus dissipate faster, and millions of lives around the world will be saved.
They really have no choice.