
In the US, more than 800 people a day die of Covid-19, and the curve is beginning to trend upward again. Clearly there would be a substantial benefit from having a vaccine, just in terms of lives saved. In addition, Covid-19 imposes an enormous cost on the economy, especially sectors such as travel and entertainment.
Many pundits have suggested that “challenge studies” would speed up vaccine development. In the past, when I’ve advocated this approach some have argued that it wouldn’t make much difference. But a recent article suggests that vaccine development is indeed being slowed by a lack of infections:
On Tuesday, front-runner Pfizer revealed in an earnings call that the first interim analysis in its Phase 3 clinical trial has not yet occurred. That means there hadn’t yet been enough Covid infections among the trial participants to take a first stab at analyzing whether the people randomly assigned to receive vaccine were infected at a lower rate than people who were assigned to get a placebo injection.
So the Pfizer vaccine is being held up by a lack of infections, something that could be addressed with challenge studies. Some medical ethicists oppose the idea.
A vaccine is not the only possible way to get our economy back on track; an effective treatment for Covid would also make people more willing to go out engage in economic activities. Another article in the same journal suggests that policy mistakes also played a role in slowing the availability of treatments. Here Scott Gottlieb discusses the shortage of monoclonal antibodies, a highly promising new set of drugs:
“It is deeply unfortunate that we head into fall without enough doses of this drug,” Scott Gottlieb, the former commissioner of the Food and Drug Administration, tweeted after Regeneron released its news. “Many of us were talking about this as early as March. Regeneron did extraordinary work to secure their own manufacturing, but we needed a concerted industrial effort to get the supply we needed.”
Indeed, Gottlieb penned op-eds in the spring and summer calling for a government-backed effort to manufacture the antibodies in large volumes — akin to the massive effort to develop experimental, and still unproven, Covid-19 vaccines. He reiterated that action needs to be taken now to accumulate sufficient supply to treat high-risk patients.
In the spring, I criticized the program that gave $1200 to almost all middle class families, even those with jobs. Some people argued that budget deficits are almost costless at near-zero interest rates. But even in the unlikely event that interest rates stay at zero forever, any given government program has an opportunity cost—the money could have been spent elsewhere. If these funds had instead been used to fund a crash program in drug manufacturing, we’d likely be much closer to a solution to the Covid recession.
[Sure you can argue, “do everything”. But politicians are not willing to spend unlimited amounts of money, nor should they.]
In mainstream economic textbooks, there are actually relatively few industries where there is a strong theoretical argument for government intervention. Most of those cases involve some sort of “externality” or “public good”. And yet we see real world governments spend literally trillions of dollars on programs where there is little theoretical justification, and still fail to fund the one area where there seems to be a very strong “public good” argument. Based on what I’ve read, this problem is even worse in many other countries, including places like Italy, where the government spends over 50% of GDP and yet provides substandard services in many areas.
I worry when I hear pundits suggest that government spending is not costly in a world of near-zero interest rates. That’s a recipe for waste, and for misallocation of resources.
PS. The benefits from solving the Covid-19 problem goes beyond lives saved and an improved economy, there is also evidence that the disease causes brain damage:
Researchers at the Baylor College of Medicine reviewed 84 studies involving more than 600 patients who had been diagnosed with COVID-19. The median age was 61, and two-thirds of the patients were men, while one-third were women. The study’s authors examined the results of patients’ electroencephalograms — known as EEGs, the tests detect abnormalities in brain waves, according to Johns Hopkins Medicine — and found that brain abnormalities in COVID-19 patients were “common.”
HT: Tyler Cowen
READER COMMENTS
Thomas Hutcheson
Oct 30 2020 at 8:17pm
The media has not been bad about identifying errors — too little testing, only diagnostic testing rather than screening testing, early DIScouragement of mask wearing, no challenge trials, no investment in monoclonal antibody production — but they have seem rather uninterested in finding out why those rather than other decisions were made.
Alan Goldhammer
Oct 31 2020 at 1:34pm
I don’t know what your sources are for ‘media.’ I’ve been doing a daily newsletter since mid-March and routinely link articles of interest. I’ve seen solid reporting on all the issues you point to. Papers that appear on pre-print servers or in scientific/medical journals are quickly picked up.
Dylan
Oct 30 2020 at 8:56pm
I’m a bit of a broken record here, but when it comes to the pharma world I always highly recommend Derek Lowe. He covers the latest antibody data from Lilly and Regeneron and, as always the takeaway is that “this is why we run clinical trials.” It’s pretty impossible to predict which products are going to have an effect before you do the RCTs, and the unfortunate reality is that under those scenarios most won’t have an effect. Regeneron has now halted dosing of their drug in hospitalized patients with high oxygen requirements given safety signals and lack of efficacy.
Scott Sumner
Oct 31 2020 at 1:45am
Thanks for the link. It’s hard for me to interpret what he says about the Regeneron, as he doesn’t provide data. But I don’t doubt that these are not cure-alls.
Alan Goldhammer
Oct 31 2020 at 11:55am
Regeneron have not published any trial data. They have only communicated by press release.
Dylan
Oct 31 2020 at 2:10pm
Alan is right about Regeneron not publishing their data. The broader point I was trying to make though was that these are drugs where there is a strong theoretical foundation for why they should work in this indication yet, when we run clinical trials, the benefit is much less than expected and often zero.
I can see the advantage of ramping up production on vaccine candidates even before trials are done in these unusual circumstances we find ourselves in, vaccines at least have a higher success rate in the clinic than almost any other drug candidate. I’m not sure that strategy carries over to the MAbs, there’s a lot of them, chances of success are a lot lower, and even the ones that are successful are a lot less of a game changer than even a partially effective vaccine would be.
More fundamentally, I think it is useful for people who otherwise don’t pay attention to drug development to understand how essential running large RCTs are for figuring out if a drug works, and the answers are often surprising. David Henderson and Charley Hooper have written on this site many times about wanting drugs to be approved based on PhI safety data. I’m not sure if you agree with them on this point, but I like to point out that even drugs that have been used for decades and were on the market before RCTs became a requirement, often don’t hold up to the scrutiny of an RCT.
Market Fiscalist
Oct 30 2020 at 9:18pm
‘ If these funds had instead been used to fund a crash program in drug manufacturing, we’d likely be much closer to a solution to the Covid recession’
For someone who opposes “industrial policy” its odd to see you advocating that hundreds of billions of dollars should go to drug-manufacturers who surely are highly incentified to produce valuable drugs during a time when the world is facing the worst pandemic the modern would has know without the need for government subsidies.
There is probably not much a government can do in the face of a supply-side shock to stimulate the economy but a case can be made for using fiscal policy to alleviate suffering by redistributing money to those affected by the shock. While the $1200 handouts (and the $600 additional UI paid earlier this year) were far from optimal they were correctly aiming to solve a different problem than the fact that drug companies may be too inefficient (probably due to previous industrial policy ?) to respond appropriately to a public health crisis.
Mark Z
Oct 30 2020 at 10:25pm
I think the case for subsidizing vaccine/treatment production is that the benefits of consumption of these are largely external (i.e., everyone around me benefits from my vaccination), so without subsidies they’ll be underpriced. And what you’re describing isn’t really fiscal policy – in the Keynesian sense of the word. It’s welfare. ‘Suboptimal’ is a charitable description of a policy of welfare for people making 75k a year. I think solving the problem of the virus is arguably much more important than redistribution right now, and giving fully employed people big checks doesn’t solve any problem at all.
Market Fiscalist
Oct 30 2020 at 10:41pm
The positive externality argument is valid, so thanks for that (but to be nit-picky: would the required subsidy for that be anywhere close to the cost of the stimulus checks?).
My daughter who is a full -time student had a minimum wage job lined up for the summer. It was canceled due to Covid and her prospective employer advised her to apply for benefits. She ended up getting in Covid -related benefits more than double the minimum wage she would have had to work for. Incentives, anyone ?
Mark Z
Oct 31 2020 at 12:49am
Good question, I’m not sure, but thinking about it, I could see it being possible. If the average infected person infects 3 people after being infected, and the vaccine is 100% effective, then 3/4 of the value of the vaccine is external. If one has a 1/4 chance of getting infected in the next year, then the expected number of infections stopped by vaccination is 1. If we say that saves ~.01 lives, multiplied by an average of $1 million worth of life-years lost, with 75% of the value being external, the ‘social value’ of a vaccine, at the margin, could be worth ~$7,500 Of course there are rapidly diminishing returns, but even vaccinating everyone and reducing infections for the next year to almost 0 prevents 1/4 infection per vaccine. All of these numbers are sort of made up for convenience of course, but they’re in the ballpark I could see the expected external value of a vaccine being several hundred to several thousand dollars depending on effectiveness. That completely ignores the cost side, but at least as far as it being worth it to spend that much, I think it’s plausible.
Thomas Hutcheson
Oct 31 2020 at 7:59am
@ MF
What did your daughter not do that she would have done without the payment? What waa the disincentive?
JonB
Oct 30 2020 at 9:39pm
Brain damage. Just stop. Please. Post viral infectious brain-based chronic fatigue syndromes have been described for centuries and are quite common in community practice predating COVID. Most resolve with time. Some do not. There is no good data yet to estimate the relative risk of this virus in terms of long-term “damage” relative to prior viral infections. Selection bias in this study is likely massive, making it difficult to extrapolate to a reliable community risk. You didn’t need the PS. to support the argument and if you are not careful you will start similar speculation on the well-documented (but rare) risks of brain damage from inadequately AND adequately tested vaccines.
Scott Sumner
Oct 31 2020 at 1:48am
OK, I’ll defer to your greater expertise on this question. I will say that CFS can be a surprisingly debilitating (and long lasting) illness.
Alan Goldhammer
Oct 31 2020 at 1:30pm
@Jon B – while what you note is correct, there are more things going on with SARS-CoV-2 than other viruses because of its mode of entry into the body. ACE2 receptors are in more areas than just the lungs and pathologies are observed in both the intestinal tract and also kidneys. There are papers that have described neuropathic events both in patients that are convalescing as well as in those who have died. I’ve read a good German path study that was done in maybe 30 patients at autopsy that demonstrated brain involvement. Of course we don’t know the true percentage of these types of effects nor do we have an inkling about the number of ‘long-haul’ cases that are being reported (other than they seem to affect females to a higher percentage).
The fundamental problem right now is that the therapeutics, other than dexamethasone, seem to be marginal in efficacy. Great hope was put on the monoclonal antibodies but they don’t seem to help at all in severe COVID-19. We won’t have enough to be able to treat mild hospitalized patients because of production limitations. I hope the Merck antiviral that is in trial right now can be a game changer. It has the advantage of being an oral formulation.
Thomas Hutcheson
Oct 31 2020 at 8:06am
Why single out the (poorly targeted) relief as the opportunity cost of not investing in actual infection suppression like massive screening of the asymptomatic or better ventilation in public places, especially schools?
Michael Pettengill
Oct 31 2020 at 12:21pm
False.
The pandemic has slashed benefits as the mostly wealthy, high cost people cut their costs, slashing the benefits to a number of sectors from the costly consumption expected.
Since circa 1980, economists have sold most on the benefits of cutting costs.
So, we have seen the decline in benefits from the mostly privileged cutting costs collectively. The biggest decline in benefits have been in the high cost leftist urban areas, places conservatives attact for having high costs, mostly from high income professionals incurring high personal costs in lavish consumption.
The places that have been least affected are conservative more rural areas which have often lost population in real terms, but in relative terms for sure, to the high cost leftist urban areas.
But low cost means low benefits, ie, jobs with higher incomes, increasing customers with increasing, high incomes.
This pandemic was widely predicted. Obama pleaded for Congress to pay higher costs to minimize the risk of deadly disease in December 2014, stating a deadly airborne disease would threaten in 5, or ten years.
The GOP argued the benefits would be great if costs were cut, and the restocking of medical supplies was the easiest cost to cut.
The benefits of costly spending in grants to, for example, public Texas university researchers, and private drug companies, kept investment in drugs and vaccines going so organizations were able to switch to SARS-CoV2 drugs and vaccines in January before Trump decided to do the opposite of Obama in 2009, and several other times, and focus resources on public health responses.
Much as economists have tried to deny it, economics is zero sum. Benefits minus costs equals zero. Cut costs, you cut benefits.
Mark Z
Nov 3 2020 at 12:48am
“Much as economists have tried to deny it, economics is zero sum. Benefits minus costs equals zero. Cut costs, you cut benefits.”
Ah, I see, so that explains why there’s been no economic growth in human history.
DeservingPorcupine
Nov 2 2020 at 10:31am
How long will these brain symptoms last?
How were the patients chosen for the study? For example, were they people who were already hospitalized for COVID so that your sample is clearly not representative of the population?
What fraction of people show similar abnormalities for other URIs?
How many of these patients had abnormalities prior to COVID?
Come on, people.
Michael Pettengill
Nov 2 2020 at 11:48am
Scott, are you signing up for an RCT SARS-CoV2 vaccine challenge trial? You are in the ideal cohort, male, age 65+. How much would you demand for being exposed to virus after give a randomly selected SARS-CoV2 vaccine candidate dose or most likely a seasonal flu shot as a control?
Challenge trials do not eliminate the need for controls to measure the effectiveness and safety of a candidate drug or vaccine.
Your price for intentionally being put at risk of Covid-19 which requires expensive medical treatment, as well as lost time for work and income, and possible premature death is the best possible estimate of the value because you are well informed, and practice the economic art/science of assigning value to individual production of things of value, in this cases, a data point.
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