1. The put could cover ~90% of the cost of the accelerated production, taking into account the additional costs.
2. Sales are likely to be higher if they move more quickly: the company with the first billion vaccines is likely to sell a lot more items than the company with the second, and this could more than offset any additional costs. (The second may not sell any, even if it’s a good product, if the first can meet all needs quickly enough.)
3. Some variants outlined in the brief, such as declining payouts, can further incentivise haste.
4. I’ve nothing against academic/PPP efforts, especially if they are under existing arrangements (since they normally take ages to negotiate), and put options will not always be the best approach. But in the current situation we need as many teams on this as we can get, and options-based guarantees may help generate new ideas or get existing ones to market more quickly.
Thanks for your response! I think this is a really promising idea. Just a few minor points
1/ I agree that if set up right could incentivise pace if it includes accelerated cost esp. if it erred on the side being overly generous. Though just sceptical it will do this to a large extent, as some costs for haste are hard to quantify, eg. moving best/more staff onto this project at the detriment of other projects, and I doubt would be covered in a politically feasible payout structure (eg. 1% a month).
2/ I think the market incentive to coming first to market is quite small, as there is large social pressure to sell these products at low margins and the market for some of these products (esp. vaccines) are so huge, compared to manufacturing capability, so seems small first mover advantage , though this certainty on size of market if the put options are not used will not apply to all products.
Re: #2 -For vaccines, that seems unlikely given that companies with the highest probability of success are already pouring money into this. A clear benefit of the proposal is to reduce risk that if they fail, which is very plausible, or are less effective than at least some alternatives, which is even more likely, the competition will be months and months behind. And for other equipment, it seems even less likely.
Thanks for the comments!
1. The put could cover ~90% of the cost of the accelerated production, taking into account the additional costs.
2. Sales are likely to be higher if they move more quickly: the company with the first billion vaccines is likely to sell a lot more items than the company with the second, and this could more than offset any additional costs. (The second may not sell any, even if it’s a good product, if the first can meet all needs quickly enough.)
3. Some variants outlined in the brief, such as declining payouts, can further incentivise haste.
4. I’ve nothing against academic/PPP efforts, especially if they are under existing arrangements (since they normally take ages to negotiate), and put options will not always be the best approach. But in the current situation we need as many teams on this as we can get, and options-based guarantees may help generate new ideas or get existing ones to market more quickly.
Thanks for your response! I think this is a really promising idea. Just a few minor points
1/ I agree that if set up right could incentivise pace if it includes accelerated cost esp. if it erred on the side being overly generous. Though just sceptical it will do this to a large extent, as some costs for haste are hard to quantify, eg. moving best/more staff onto this project at the detriment of other projects, and I doubt would be covered in a politically feasible payout structure (eg. 1% a month).
2/ I think the market incentive to coming first to market is quite small, as there is large social pressure to sell these products at low margins and the market for some of these products (esp. vaccines) are so huge, compared to manufacturing capability, so seems small first mover advantage , though this certainty on size of market if the put options are not used will not apply to all products.
Re: #2 -For vaccines, that seems unlikely given that companies with the highest probability of success are already pouring money into this. A clear benefit of the proposal is to reduce risk that if they fail, which is very plausible, or are less effective than at least some alternatives, which is even more likely, the competition will be months and months behind. And for other equipment, it seems even less likely.