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September 21, 2020

Governments Have Taken the Wrong Approach to Covid Vaccine Development

There is nothing that would be of more immediate value to the people of the world than a safe and effective Covid vaccine.

We want there to be even more incentive to invent this vaccine than there is to distribute the next killer social media app, to be the MVP of the Super Bowl, or to be a uniquely talented hedge fund manager.

“No problem,” say both the rightwing and leftwing socialists atop the governments of the world. “We’ll give billions of dollars of taxpayer money to drug companies to develop a vaccine so they don’t have to take any risk. Having a vaccine available is a good use of our tax dollars, all the more so because those same dollars pay for treating those who get infected.” Sounds good, right? No! This approach will result in waiting longer than we should for a vaccine, spending more taxpayer money than needed, and possible questions about the safety of the vaccines that are developed.

Government funding is increasing the time to success by reducing the number of parallel efforts. Suppose you run a drug development company which is not politically well-enough connected to get one of the megacontracts for vaccine development; are you going to spend your shareholders’ money or go out and raise new billions to compete with companies which did get government contracts? Of course not. You know that government won’t even look at certifying your vaccine if you manage to develop one until it has looked at all the vaccines it funded itself. You don’t expect government to be objective in comparing what you have funded to what it has funded. You know that new investors won’t want to compete against the regulator. The result of government funding is to reduce the number of teams looking for the needle in the haystack.

Even though our physical and economic health would benefit greatly from a vaccine, there is no need to use taxpayer dollars to fund the basic research. Watch the IPO market. Most new companies fail (I’ve started a couple like that myself). The potential for an outsized return motivates some investors more than fear of a complete loss of capital. Greed usually trumps fear. Any company with drug development creds (and many without any) would be able to raise money for Covid vaccine development. Much more private money would be available faster than government bucks – but private investors will not compete against free government dollars nor accept limits on how profitable their discovery is assuming there is such a discovery.

Safety. Russia says they have a vaccine which is almost ready to go. Do we trust the successors to the government which both operated and certified the Chernobyl reactor to tell us when a vaccine they have backed is safe? I don’t. Nor do I trust the US Government to be the watchdog for the safety of a product funded by an investment that very same government has made. Doesn’t matter which brand of politicians are in control; they are not about to admit that they poured zillions of our dollars down a rathole. We badly need government to be a watchdog; we need government to oversee trials, production, distribution, after-effects, and everything else needed to make sure a cure is not worse than the disease. Government cannot effectively police itself any more than corporations can.

Government should be the regulator of new vaccines and drugs, an initial customer for them, and should use taxpayer dollars to assure that safe and effective vaccines and ant-Covid drugs are affordable. Yes, if the first inventors are not government funded, they will be entitled to charge a very high price initially to reward the risk they took. That high price is not the responsibility of the essential and vulnerable populations who will be the first to receive vaccinations. Both governments and other insurers of health care will be willing to pay at least as much as it would cost them to treat the disease; governments also have dollars available that would otherwise be spent on limiting the damage from shutdown.  As more vaccines are available, the price will drop – unless vaccines are only developed by the very few who got government subsidies.

We want tens of billions of dollars to be invested in the expensive process of drug discovery and testing rather than in scooping up bankrupt shopping malls or investing in the financial markets the Federal Reserve is so relentlessly propping up. Most of the money invested in the search for new drugs is lost. Most potential drugs and vaccines turn out to be duds or dangerous. Funding each path towards a vaccine is more like buying a lottery ticket than making a calculated investment. Like Megabucks, the prize must be huge because the odds are so long.

In a sense this post is too late. Russia is announcing its vaccine. Despite my skepticism, some of the government funded efforts say they are close to results; we don’t want to throw these out. It’s not just Trump and Putin we need to be skeptical of, though. I am anything but an anti-vaxxer; but we do not want to damage the impressive safety record of vaccines with hasty approval by the governments which funded them.

We must somehow put aside our political divisions to assure that each new vaccine gets a thorough test and is reasonably safe (“totally safe” is an oxymoron). Government should not fund new development beyond what is committed nor cap the profits private developers can earn with success. If the government-funded efforts don’t result in success or are only partially successful, we’ll want to have a wave of privately funded research as backup and a source of improvement over whatever is first developed.

We don’t want to limit what inventors or investors can earn; we do want the first vaccine be safe and free to recipients for the sake of physical and economic health.

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