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Pricing the COVID-19 Vaccine: A Mathematical Approach

Published March 23, 2021

Are Pfizer and Moderna selling their Covid-19 vaccines at a fair price? Can the government negotiate the prices of these vaccines with the manufacturers, despite the very high production and distribution costs?

Pricing the COVID-19 Vaccine: A Mathematical Approach  Susan Martonosi, Banafsheh Behzad, Kayla Cummings March 2021

According to the World Health Organization, the development of the COVID-19 vaccine is occurring in record time. Administration of the vaccine has started the same year as the declaration of the COVID-19 pandemic. The United Nations emphasized the importance of providing COVID-19 vaccines as “a global public good”, which is accessible and affordable worldwide. Pricing the COVID-19 vaccines is a controversial topic. We use optimization and game theoretic approaches to model the COVID-19 U.S. vaccine market as a duopoly with two manufacturers Pfizer-BioNTech and Moderna. The results suggest that even in the context of very high production and distribution costs, the government can negotiate prices with the manufacturers to keep public sector prices as low as possible while meeting demand and ensuring each manufacturer earns a target profit. Furthermore, these prices are consistent with those currently predicted in the media.