I’m sure everyone saw the news that Moderna had some positive early results on its vaccine prospects. As an aside, if the vaccine doesn’t make it to market, prepare for a limit loss on their D&O given they raised over $1B of equity the day of the news.

However, let’s be more positive for the moment and assume Moderna is successful. This would be the best news we could hope for, right? Perhaps, but with an asterisk attached.

Moderna is hoping to make 1B doses a year. This means it would take eight years to vaccinate the world (global population should reach 8B by 2024). And that’s if all goes according to plan.

Recall Moderna’s vaccine uses mRNA which is an unproven approach. While there will be pressure for the FDA to approve it quickly, it will be harder to have confidence in its efficacy and lack of side effects compared to a traditional vaccine.

Additionally, while mRNA vaccines are believed to be easier to produce, Moderna plans to outsource much of the production capacity which brings risk of mistakes that could result in lower efficacy or even harm.

But again, let’s be positive and assume Moderna not only successfully develops the drug, but can produce 1B doses annually. Now the challenge really begins. We have replaced a medical problem with a political one.

Who Gets It First?

This is the big unknown. There is the simplistic view that the crisis ends when we find a vaccine. No, the crisis ends when we have 8B doses. Finding an effective vaccine is only the beginning of the end.

Now, a parochial take would be to say, well, there’s 1/3 of 1B Americans. Thus, in four months, we can vaccinate all of us and tell the rest of the world to get in line. Maybe, but even then, who gets it on day one and who has to wait four months?

And after those four months, how do we decide which foreign countries get it first? Or what if China is secretly developing a vaccine and won’t give it to us until they have dosed 1B Chinese?

There are a lot of difficult decisions to be made here with giant economic, societal, and geopolitical tradeoffs. I’ve come up with four potential ways to queue people for dosing: risk based, economic based, free for all, and lottery style.

Risk Based

One obvious solution is to assess who is at greatest risk for death or severe illness and vaccinate those people first. That’s likely the most logical solution, but it also requires a lot of infrastructure to identify people by their relative risk.

Given we can’t even figure out how to contact trace or produce adequate testing supply or anything else required to segregate the at risk population from the low risk population, I have little confidence we can accurately identify who deserves to be at the front of the line.

Free For All

This is a close cousin of the risk based approach and more closely resembles what we use today for testing. Individual doctors and nurses make decisions on who should be tested and you have to hope your local medical facility has a better procurement department than the one in the next county so that you can beat the odds.

The biggest problem with this approach is obviously the inefficiency and “unfairness” of it. There will certainly be cases of VIPs cutting to the front of the line. And there is a good chance of serious social unrest when the unemployed find out a friend of their governor got to cut the line while they remain under effective house arrest.

Out of all the options available, free for all has the most negative consequences. And yet, I daresay it is the betting favorite to be the chosen approach.

Economic Based

Another option would be to vaccinate people in order of their potential economic contribution. This could mean one of two things. On one hand, it would suggest first vaccinating those with the highest potential productivity gain from leaving a home based work environment. For example, if you work in a semiconductor plant, you would be near the front of the queue.

The other option is to make a public policy decision to prioritize reducing unemployment. Thus, the vaccine would first go to people on unemployment allowing them to return to work.

There are obvious merits to this idea but there need to be jobs to go back to. If, for example, we vaccinate all the waiters and cooks first, then we can re-open every restaurant…but there would still be few customers.

The Lottery

Now we get to the most interesting idea. I have a feeling we will have a national lottery. Think of it like the Vietnam draft in reverse. This time, you want a low number. If your number gets picked, you get vaccinated. If not, you have to wait until production picks up.

The merits of this approach are it is completely random. Nobody gets favorable treatment because they know somebody in power. The negative is it may mean the initial recipients, by chance, end up being those with low mortality risk and who can comfortably work from home.

The risk based and economic based methods are clearly more optimal solutions. However, they require government competency (to administer) and effective communication (to effectively persuade the populace that it is the best solution). Raise your hand if you have confidence the government can pull that off. So yeah, we’re left with punting the ball to a lottery.

Geopolitical Concerns

It’s also worth mentioning in more detail what I hinted at earlier. Once we vaccinate all Americans, how do we decide who gets it next? Does it go to our political allies? Do we give a little bit to each country? Do we punt the decision to the UN?

Or do we use it as a political weapon? I can’t be the only one wondering will Trump tell China they can’t have any vaccine unless they give him everything he wants on trade.

Before you say, he can’t do that, Moderna can sell to whomever they like. Yes, but the President can set tariffs. Could he put $1M/dose tariff on all vaccines to China? In theory, he could.

And let’s not ignore the other direction. If China beats us to a vaccine, are they going to put us second in line? Or will they prioritize their Belt and Road friends? What better way for them to “replace” us as the leader of the Free World than to hand out vaccines to countries who choose to enter their sphere of influence while cutting us off?

Like I said upfront, a vaccine isn’t the end. It may be a very scary beginning.

A Final Caveat

Of course, one thing could make this analysis largely moot. A number of companies are working on vaccines. If they are all successful, the cumulative capacity may be enough to serve the planet.

Of course, the odds of them all working are very low (if eight candidates are each 50/50, then the odds of all eight working are 0.4%). There would still be risks of the US extracting political concessions in return for vaccine, but that threat would diminish with increased capacity.