The drop-off [in expected vaccine deliveries] is a product of manufacturing problems, bottlenecks in the supply of raw materials and other hurdles in ramping up clinical-trial production of 5 liters of protein-based vaccine at a time to commercial-scale fermentation of 2,000-liter batches, the companies and the Trump administration said.
Note that Operation Warp Speed, for all its wonders, creates some bad incentives. A pre-purchase, whatever other advantages it may bring, is also a kind of indirect price control. And when price controls are present, quality declines ex post, as in many other procurement problems. But the companies do not wish to lower the quality of their vaccines, so instead they have “slack” incentives to boost quality along other parts of the supply chain.
Here is a simple analogy. Let’s say the government did a pre-purchase of left shoes, at the price of a left shoe/right shoe combination. But to get the upfront money the company only had to produce a left shoe. There might be a relative shortage of right shoes.
So there is pre-purchase for “the vaccine,” but not for “all of the complements to the vaccines.” (Listen to Alex!) The companies are getting paid for the vaccines no matter what. So their incentive to be speedy with the complementary infrastructure — whether producing it themselves or contracting for it in Coasean fashion — just isn’t as strong as it would be for a social optimum.
The more you rely on pre-purchase, the more you have to worry about what is happening on the fringes of that activity. And you can expand pre-purchase to the initial complements, and probably should, but of course in doing so new fringes arise as well.
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