Vaccines, drugs, and Zipf distributions
Michael Kremer, Christopher Snyder, Natalia Drozdoff 29 January 2016
▻http://www.voxeu.org/article/vaccines-drugs-and-zipf-distributions
Many observers believe that pharmaceutical firms prefer to invest in drugs to treat diseases rather than vaccines. This column presents an economic rationale for why such a pattern may emerge for diseases like HIV/AIDS. The population risk of such diseases resembles a Zipf distribution, which makes the shape of the demand curve for a drug more conducive to revenue extraction than for a vaccine. Based on revenue calibrations using US data on HIV risk, the revenue from a drug is about four times greater.
A Zipf distribution with two consumer types is bad enough for the vaccine monopolist, but matters can be even worse if the Zipf distribution involves a continuum of types, illustrated in Figure 1. Drug revenue is proportional to the whole area under the curve, because this can be shown to be equal to disease prevalence. Vaccine revenue is proportional to the area of a rectangle inscribed underneath. This shape minimises the ratio of the rectangle to the area underneath the curve and thus minimises the ratio of vaccine to drug revenue. Kremer and Snyder (2015a) show that the revenue ratio for any distribution of disease risk can be decomposed into two factors: how much the distribution resembles one of these Zipf curves, and how prevalent the disease is (with less prevalent diseases being relatively worse for the vaccine monopolist, as the figure suggests).
#pharma #santé #vaccins #traitement #profits
