Explaining Variation in Medical Innovation: The Case of Vaccines, and the HIV AIDS effort

This paper highlights two variables, neglected by economists, that I argue are important in explaining patterns of innovation seen in vaccines and perhaps in other parts of medicine too. They are: firstly, the extent to which it is safe to experiment on humans; and secondly, whether good animal models can be identified and used, with the latter especially important if there are strong constraints on experimenting with humans. To consider the argument, the paper discusses the case of vaccines, where the political economy of R&D appears to explain only part of the observed variation. I focus on HIV vaccine development and find that, together, these two variables not only make up a large part of how I would characterize ‘difficulty’ in the HIV R&D process, but they also seem to go a long way towards explaining why 31 other diseases have – or have not had vaccines developed for them. In characterizing these variables, I discuss what might happen if we choose to persist in difficult R&D domains, finding that development may be forced into trajectories that yield lower quality products. Counter intuitively, such lower quality products are typically more expensive because they are harder to pass through clinical trials. Implications for theory and policy are discussed, chief of which are that the technical difficulty of R&D is not fixed and can be shifted by policy, and that difficult R&D trajectories need not be pursued when alternative trajectories can be developed.