]]> Last March Dr. Fauci explained to a Senate committee that “a vaccine … will take at least a year or year and a half” until it is administered to the general public. In his next testimony, he added, “I don’t give advice about economic things.” If Dr. Fauci had paid more attention to economics, at least what had reached his own inbox in the prior year via the White House Staff Secretary, he would have understood how different vaccine development during a pandemic would be, and should be, from that in normal times. Dr. Fauci was refering to the lengthy process that the Food and Drug Administration (FDA) has for approving drugs, vaccines, and medical devices for use in the United States. Long ago a wide range of economists had concluded that the FDA process was too cumbersome.
[email protected] (Casey B. Mulligan) considers the following as important: CEA, covid19, Health economics, Regulation
This could be interesting, too:
Eric Crampton writes Cleansing the Twitters
John H. Cochrane writes FDA vs. Astra-Zeneca; bureaucracy vs. evolution and exponential growth
[email protected] (Casey B. Mulligan) writes White House Attitudes toward “Screening Agencies” (looking at you FDA)
Eric Crampton writes Afternoon Roundup
Last March Dr. Fauci explained to a Senate committee that “a vaccine … will take at least a year or year and a half” until it is administered to the general public. In his next testimony, he added, “I don’t give advice about economic things.” If Dr. Fauci had paid more attention to economics, at least what had reached his own inbox in the prior year via the White House Staff Secretary, he would have understood how different vaccine development during a pandemic would be, and should be, from that in normal times.
Dr. Fauci was refering to the lengthy process that the Food and Drug Administration (FDA) has for approving drugs, vaccines, and medical devices for use in the United States. Long ago a wide range of economists had concluded that the FDA process was too cumbersome. In 1973, the University of Chicago’s Sam Peltzman concluded that the FDA cure was worse than the disease, “consumer losses from purchases of ineffective drugs or hastily-marketed unsafe drugs appear to have been trivial compared to their gains from innovation” delayed or forgone entirely due to the costs of getting FDA approval.
M.I.T. professor Peter Temin said that there should be “less [FDA] surveillance at the premarket level” because the approval delays were too long. Even 25 years ago, as Emory professor Paul Rubin put it, scholars had “long been aware that the agency causes unnecessary deaths and suffering by” its “inexcusable delays in approval.”
During those 25 years, Congress took some stepsto reduce approval delays, especially in 1997. However, the FDA “steadily disregarded many of the law’s provisions.” The tide started to change in the Trump administration, where there were at least some staff who suspected that government regulation is part of the problem rather than the solution.
Early battles centered on President Trump’s campaign promise to lower prescription-drug prices. He appointed FDA commissioner Scott Gottlieb, who had been critical of FDA delays. Trump’s economic team (where I participated as part of the Council of Economic Advisers or “CEA”) predicted that deregulation would reduce drug prices because reduced FDA barriers would result in more new drugs and more manufacturers of existing drugs competing for consumer dollars. On the other side was Health and Human Services (HHS) Secretary Alex M. Azar II, who proposed a “drug-pricing blueprint” that would add regulations on everything from television advertisements to business-to-business price controls.
As Gottlieb’s boss, Secretary Azar had an advantage in that he could exclude Dr. Gottlieb from Oval Office meetings and potentially prevent the president from hearing how well the deregulatory approach was going. But Larry Kudlow and others invited Dr. Gottlieb anyway and, more important, the data were on Dr. Gottlieb’s side.
CEA got the first progress report on January 10, 2019, with the confidential advance release of the Consumer Price Index (CPI) report for December 2018. It showed that 2018 was the first year since 1972 that retail prescription-drug prices actually fell (even while consumer prices generally were increasing). We composed a message to be posted on the President’s twitter account the next day. But this message had to be approved by HHS, which was loathe to release something so contrary to its perceived “need for regulatory action” in the face of [purported] “prices of existing drugs [that] have been rising in the United States much more rapidly than warranted by inflation or costs.”
I convinced the President’s communications team that the CPI is reliable and is telling us something important. The President would brag about the result in everything from impromptu press briefings to his State of the Union address. Being results-oriented rather than ideological, he was noticing what administrative manuevers could remove FDA barriers to consumer welfare.
Although COVID-19 would not arrive in the U.S. for two more years, the National Security Council’s biodefense team asked the CEA to look at the economics of vaccine innovation during pandemics. CEA concluded that “improving the speed of vaccine production is more important for decreasing the number of infections than improving vaccine efficacy” and emphasized the need for large-scale manufacturing and the possible advantages of public-private partnerships.
The CEA vaccine report prompted an executive order, also before the pandemic, noting that “viruses emerge from animals … that can spread efficiently and have sustained transmission among humans.” President Trump concluded that “vaccination is the most effective defense.” As two of Trump former senior staff members put it, “when COVID-19 emerged, the White House was ready and expeditiously applied the report's deregulatory and fiscal lessons to streamline FDA approval for vaccines and their parallel manufacturing on a large scale.”
I was in the Oval Office with the president and his economic team in February (when COVID-19 cases were beginning to spread). His staff was worried that the FDA would not be interested in removing any more approval barriers. But the President was confident, telling us that “I’ve done it before and will do it again … bring the FDA management in here.” President Trump initiated his Operation Warp speed, led by HHS, to give many private companies incentives for “speed and scale” of vaccine production and to give all companies the opportunity for streamlined FDA approval.
COVID-19 vaccines are now being administered to the general public at least six months earlier than Dr. Fauci expected. The economists were correct that accelerating medical innovation is both possible and worth trillions of dollars to Americans.