The Business of Making Vaccines

Why vaccines are a difficult business with high fixed costs and low prices, and how Indian makers built scale through tiered pricing and volume.

Vaccines save millions of lives, but making them is a tough business.

Why it’s hard

High fixed costs: complex factories and quality systems.
Long timelines to develop and license.
Few buyers: governments and agencies like UNICEF buy most vaccines and negotiate hard.
Unpredictable demand: outbreaks cause spikes, then demand falls.

Scale and volume

Indian makers such as the Serum Institute of India and Bharat Biotech built enormous production capacity. Selling huge volumes at low prices spreads fixed costs, allowing profitable business even with cheap doses.

Tiered pricing

Manufacturers often charge different prices in different countries: higher in rich countries, very low in poorer ones. This lets them serve poor countries while recovering costs elsewhere, a form of price discrimination that improves access.

Pandemic lessons

During COVID-19, capacity was scarce, and whoever could produce at scale became crucial. Advance purchase agreements and public funding reduced risk for manufacturers.

Innovation

New platforms like mRNA allow faster vaccine design. India has developed its own mRNA and other vaccine technologies.

The penny dose

A manufacturer sells a childhood vaccine to UNICEF for well under a dollar per dose. Because it makes hundreds of millions of doses a year, the low price still covers costs and earns a modest profit.

Thinking vaccines are hugely profitable

Many vaccines are sold at very low prices to public buyers; profitability depends on scale.

Key takeaways

Vaccines have high fixed costs, few buyers and uncertain demand.
Indian makers built huge scale to sell cheaply and profitably.
Tiered pricing charges more in rich countries and less in poor ones.
New platforms like mRNA speed up vaccine design.