Paying for Pandemic Preparedness

Why preparing for pandemics is a global public good, how fast vaccine development was financed during COVID-19, and why preparedness is underfunded.

Pandemics are rare but enormously costly. Preparing for them, through surveillance, research, stockpiles and health systems, costs a small fraction of what a pandemic does. Yet preparedness is often underfunded.

A global public good

Pandemic preparedness is a global public good. When one country detects and contains a new disease early, every other country benefits. But no single country captures all the benefits of its own spending, so each has an incentive to spend too little and rely on others. This makes international cooperation essential.

Financing vaccines fast

During COVID-19, vaccines were developed far faster than ever before. Economic tools played a key role:

Advance purchase agreements: governments promised to buy large quantities of vaccines before they were proven, reducing the risk for manufacturers.
Funding manufacturing at risk: governments paid companies to build factories and produce doses while trials were still under way. The U.S. Operation Warp Speed programme spent billions of dollars this way.
Research funding: organisations such as CEPI, the Coalition for Epidemic Preparedness Innovations, founded in 2017, funded vaccine development.

Economists including Michael Kremer argued at the time that spending even more to expand vaccine capacity would have been highly worthwhile, since each month of earlier vaccination was worth enormous sums globally.

The value of speed

If a pandemic costs the world economy hundreds of billions of dollars each month, then speeding up vaccine production by even one month is worth a huge amount. Paying to build factories before a vaccine is approved risks wasting money if the vaccine fails, but the expected benefit of speed far outweighs that risk.

Vaccine equity

Rich countries secured most early vaccine doses, while many poorer countries waited months. COVAX, an initiative to share vaccines globally, delivered over a billion doses but faced supply shortages early on. India, home to the world’s largest vaccine manufacturer, the Serum Institute of India, played a major role in supplying doses. Economists argued that faster global vaccination would also have benefited rich countries, by reducing the chance of new variants and restoring global trade.

Why preparedness is neglected

Preparedness spending tends to rise after a pandemic and fade as memories do. Economists call this a cycle of panic and neglect. Sustained funding for disease surveillance, research and health systems is needed even when no crisis is visible.

Thinking pandemic preparedness is too expensive

The cost of preparing, estimated by various expert panels in the tens of billions of dollars a year globally, is tiny compared with the trillions of dollars lost in a pandemic like COVID-19. Preparedness is one of the best value investments available.

Key takeaways

Pandemic preparedness is a global public good that individual countries underfund.
Advance purchases and at-risk manufacturing speeded COVID-19 vaccine development.
Unequal vaccine access delayed protection in poorer countries.
Preparedness funding tends to follow a cycle of panic and neglect.