The COVID-19 pandemic is in its early stages but that has not stopped some commentators from claiming the U.S.’s unsteady early response proves they were right all along about what is wrong with health care in this country. The tendency to see the crisis as validating a pre-determined agenda can be found among both advocates and detractors of stronger governmental control over the health system but it appears to be more pronounced among the former. As an example, an opinion writer at the New York Times recently pinned the blame for the U.S.’s stumbles on a profit-seeking medical-care system that is driven by market incentives.
It’s a weak argument. What has occurred so far is mainly a story about how effectively governments acted in response to a public health threat. The capacities of health systems to take care of sick patients is important, of course, but the primary reason some countries have fared better than others is because they deployed virus containment strategies aggressively and quickly. No country with widespread infection rates has avoided a high level of mortality. The U.S.’s response was not strong initially, which needs to be remedied, and is discussed below. But “market incentives” had nothing to do with these problems and may be instrumental in getting the country, and the world, out of its current mess.
Among large high-income countries, South Korea and Germany stand out for their exemplary responses. The U.S has been hit much harder than South Korea, even though the countries recorded their first cases on the same day. Similarly, Germany has a much lower death rate than the U.S. The U.S. fares poorly in comparison because federal officials did not act as swiftly as their South Korean and German counterparts to ramp up testing and impose social distancing protocols (Germany’s large supply of ICU beds also may be helping in the care of very sick patients). It is certainly a failure that the U.S. did not properly lay the foundation for widespread testing years ago, or act more quickly to impose social distancing requirements, but the blame for these failures lies with public policy decisions and public officials, not the private sector.
Even with its missteps, the U.S. is not underperforming many of the larger countries in Europe that have also experienced large outbreaks. Belgium, Spain, Italy, the U.K., France, and the Netherlands all have higher death rates per 100,000 people than the U.S., and most have been scrambling to acquire supplies too. These countries have health systems that are under the direct control of their national governments, with less room for market incentives and private sector initiative. It is not at all evident that placing resource allocation decisions for the health system with the government left them better prepared than the U.S. for the pandemic.
It is also possible, and perhaps likely, that the U.S.’s vast private sector will prove to be a major advantage in the coming months and years. Already, U.S. companies have been instrumental in rapidly scaling up testing capacity, and in ensuring other supply shortages are starting to be filled. Early concerns about a severe lack of ventilators have largely passed because of rapid production of new machines and the avoidance of the worst projections of peak infection rates.
Further, the first treatment for COVID-19, remdesivir, is now coming to market under an emergency use authorization and is expected to produce modestly better clinical results for patients. It is manufactured by a profit-driven, shareholder-owned, U.S.-based pharmaceutical company. Scores of potential new treatments are in the pipeline as well, with the prospect that a better therapy could be available later this year. All of this is possible only because the U.S. is fertile ground for a vibrant biotech and pharmaceutical industry. The federal government sponsors substantial research that is highly relevant to the productivity of these firms, but without the commercial sector, there would be no therapies anytime soon. These firms are motivated both by working on the front lines of important medical challenges and by the financial returns real breakthroughs can generate.
Of course, what the world is really eager to see are safe and effective vaccines. Dr. Anthony Fauci of the National Institute for Allergy and Infectious Diseases (NIAID), with five decades of experience, says public-private partnerships are essential to producing vaccines because government alone cannot get the job done. Only the private sector has the wherewithal to convert scientific advance into a viable product that can be produced at scale to meet worldwide demand. If and when a vaccine is deployed globally, it will be because large drug companies, many based in the U.S. but also in Europe and elsewhere, played crucial roles in the research, design, and production processes.
None of this means a robust private sector is sufficient for protecting public health. It isn’t. Public health is a governmental responsibility, and needs to be financed by taxpayers. The private sector will not build, on its own, adequate surveillance systems and produce sufficient stockpiles of supplies to deploy in an emergency because there is no market return for such activities. The government can contract with the private sector to assist with these essential tasks, but it is the government that has to take the initiative.
There will be time in the future, after the immediacy of the crisis abates, to more fully explore how to strengthen the U.S.’s public health preparedness. However, it is possible even now to identify some necessary changes in current practices.
First, the U.S. needs to build and maintain a rapidly-scalable testing capacity to track the prevalence of infectious diseases in a nationwide emergency. That means testing tens of millions of people in the early stages of a crisis, not thousands. Building this capacity will require federal leadership and funding, working with the nation’s private and public networks of labs and diagnostic companies.
Second, the federal government’s approach to financing the national stockpile of public health supplies needs rethinking. Despite much effort over two decades, the U.S.’s stand-by reserves were inadequate for the COVID-19 pandemic and the system for ramping up production was chaotic and unreliable. A major problem is the annual appropriations process. Even when funding was requested to pay for resupplying the stockpile, Congress often cut back on what was made available and diverted resources to more popular programs.
Readiness for the unexpected is a necessary responsibility of government, but its political payoff is low because, in most years, nothing happens. Funding for this activity needs to be steady and reliable on a continuous basis. That can be accomplished by authorizing mandatory funding for this purpose, which would pull it out of the annual appropriations process, or by designating a minimum amount of appropriated funding that would be exempt from binding limitations on total spending by the appropriations committees. Either way, the goal should be to ensure the budget process automatically provides the necessary funding to maintain a high-quality reserve of supplies that can be deployed quickly in an emergency. In relative terms, this is not an expensive proposition.
Third, hospital and state and local public health readiness must be re-established as priorities of federal funding too. After 9/11, the federal government created new programs to increase readiness for health emergencies from bioterrorism or naturally-occurring diseases. By all accounts, this funding had the intended effect of substantially improving the resilience of the health system to handle all manner of emergencies. Unfortunately, funding for these programs has been cut rather substantially and is now well below the levels provided nearly two decades ago, with predictable results in eroded readiness. Like the stockpile, this funding needs to be provided on a steady basis, either through a permanent and mandatory appropriation or through budget process adjustments that hold the appropriations committees harmless for providing a minimum amount of funding each year.
Fourth, and perhaps most importantly, the U.S. needs to re-invest in an on-going medical countermeasure program. The federal government has made major investments in improved influenza vaccination production, which has diversified the number and type of vaccinations available to the public. And the aggressive schedule planned for a COVID-19 vaccine is evidence that a strong private-sector is in place for meeting the challenge. Still, the U.S. would be in an even better position for producing a vaccine if more investments had taken place years ago. For instance, research into a vaccine for the original SARS virus stalled when the threat faded and both government and private-sector funding was shifted to other priorities. If funding for a vaccine for that virus had been provided to ensure a private company had an incentive to produce a safe and effective product, it may have helped prepare the way for producing a follow-on vaccine for today’s coronavirus problem.
The remedy, again, is federal funding, as there is no natural market for therapeutics for unpredictable pathogens. In the early 2000s, Congress approved a Bush administration program — Project BioShield — that made available $5.6 billion over ten years to procure treatments and vaccinations for bioterrorism threats. The idea was to provide strong financial incentives to researchers and drug companies to do the hard work of developing effective therapeutics for which a natural market does not exist. Over time, that funding was subsumed within the mandate of the Biomedical Advanced Research and Development Authority (BARDA) in the Department of Health and Human Services, with a focus on natural threats as well as bioterrorism, and financing the effort was shifted to the annual appropriations process. In recent years, BARDA’s resources have fallen below the levels necessary to entice sufficient private-sector engagement.
Congress needs to resurrect a program like BioShield to build a permanent and strong private-sector manufacturing base for threats like SARS-CoV-2. There are multiple ways to go about this, but the key is to ensure funding is available to reward companies that go through the hard work of researching and commercializing products to address known public health threats, even if the risk at a given moment is low or has faded. The U.S. has the most robust biopharma industry in the world, but it could be made an even stronger partner in the public health arena if given the right incentives.
The COVID-19 pandemic is a crisis unlike anything experienced in recent memory, and is testing the resilience of governments all over the world. The U.S.’s initial public health response fell short of what should be expected of a wealthy country, but the problem was the government’s response, not “market-driven” health care. Public health is a governmental responsibility, and needs to be strengthened. With better public policies, the private sector can help the government meet the current challenge, and the next one.
James C. Capretta is a Contributor at RealClearPolicy and holds the Milton Friedman chair at the American Enterprise Institute.