Why is There No AIDS Vaccine?

This is a 54 page working paper from the Center for International Development at Harvard University.

Abstract:

We argue that differences in timing of drug and vaccine consumption will lead firms to be
biased against developing vaccines. Vaccines are sold before consumers are infected, when they still have
private information regarding their infection risk, whereas drugs are sold after consumers are infected,
when those with positive valuation have no private information on infection risk. Calibrations suggest
that, for sexually transmitted diseases, for which infection risk is highly heterogeneous across consumers,
producer surplus from drugs may exceed that from vaccines by a factor of four. Consistent with the model,
empirical tests suggest vaccines are particularly unlikely to be developed for sexually transmitted diseases.
Biases against vaccines are exacerbated by the durability of vaccines and by the interaction between the
timing of vaccine and drug consumption and the temporary protection of intellectual property rights. We
extend the analysis to allow for government procurement and for income heterogeneity among consumers.
Given that antiretroviral drugs are difficult to deliver in the poor countries where most people infected
with HIV/AIDS live, biases against developing a vaccine raise enormous public health concerns.