A Victory for Vaccine Market Design

(and a scoop for a well-designed newspaper as well)

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I often struggle to explain why I consider the Financial Times the best newspaper that I read. My conviction begins with the consideration the FT shows for my time and attention, as if it expects I have other things to do (in my case also reading The New York Times, The Washington Post and The Wall Street Journal). There are no “jumps,” all stories in the daily report end on the page where they begin. The front page displays just two stories (along with many teases of stories elsewhere in the paper); then come three pages of general news from around the world, followed by several pages of company and markets news; two pages of market data set in small type; a page of arts criticism, and  one full-page story (“The Big Read”); an editorial and letters page with four columns opposite; and, of course,  the second most widely-read page of the section, the “Lex” column of edgy newsy tidbits on the back. It is a thrifty package.

My deeper admiration, however, has to do to with the knowledgeable news values the paper displays throughout. Last week presented a prime example. It takes a good deal of self-confidence to run out a story under the headline, “Trump vaccine chief proves critics wrong on Warp Speed: Industry veteran navigated political hurdles to boost drug companies’ fight against virus.”

But reporters Hannah Kuchler and Kiran Stacey had delivered a persuasive story. Since the article itself remains behind the FT paywall, I quote more extensively than I might otherwise to convey the gist. They began:

 Sitting in the shadow of the brutalist health department building in Washington, with only a leather jacket for protection against an autumnal breeze, Moncef Slaoui cuts a defiant figure. Six months after the former GlaxoSmithKline executive left the private sector to become President Donald Trump’s coronavirus vaccine tsar, Mr Slaoui feels his decision has been vindicated, and critics of the ability of Operation Warp Speed to develop a vaccine in record time have been proved wrong.

“The easy answer for experts was to say it was impossible and find reasons why the operation would never work,” he told the Financial Times. But the vaccine push is now hailed as the bright spot in the Trump administration’s Covid-19 response, as products from Pfizer and BioNTech, Moderna, and AstraZeneca and Oxford university move closer to approval.

The next day, Karen Weintraub, of USA Today, produced an in-depth profile of Slaoui, a Moroccan-born vaccine developer and retired drug company executive. It is fascinating reading.  But the authority of the FT account derived from the three experts the reporters quoted zeroing in on the management tool Slaoui used to achieve his results, known as advance market commitments. or AMCs (and from a little Reuters sidebar that listed some of the spending on pre-approved doses by the US  government’s Biomedical Advanced Research and Development Authority (BARDA):

 The central achievement of Operation Warp Speed had been accelerating investment in manufacturing, said Angela Rasmussen, a virologist at the Columbia University School of Public Health. “Normally, that would be a huge investment for a vaccine manufacturer to make, and potentially be a huge loss for them if they developed a vaccine that never went on to the market,” she said.

Even Pfizer, which did not take direct investment from Operation Warp Speed, benefited from having a $2bn pre-order for when its vaccine gets approved, said Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering. “Even if J&J or someone else beat them to the punch, they were going to get paid,” he said.

Stéphane Bancel, chief executive of Moderna, the lossmaking biotech which took about $2.5bn in government funding from different bodies, said the money was “very helpful”, covering the costs of trials and helping it to buy raw materials. “The entire planet is going to benefit from it,” he told the FT. “We are going to file [for approval] in the UK based on the US data paid for by the US government. We’re going to file in Europe and hopefully have a vaccine available in France and Spain and Italy, all paid for by the US government.”

Part of the charm of the story turns on its rarity; it hadn’t been easy for mainstream media to find nice things to say about the Trump administration. The road to Slaoui’s hiring probably leads back to Vice President Mike’s Pence’s appointment in February as head of the White House Coronavirus Task Force.  As former governor of Indiana, Pence’s connections with the pharmaceutical industry are tight; Indianapolis is home to major firms, including Eli Lilly and Purdue Pharma. Much remains to be learned.

But the mechanism known as advanced market commitment is of comparatively recent origin. It is the discovery, if that is the word, of University of Chicago economist Michael Kremer, in a series of papers he wrote while teaching at the Massachusetts Institute of Technology and Harvard University some twenty years ago, culminating in the publication, in 2004,  of Strong Medicine: Creating Incentives for Pharmaceutical Research on Neglected Diseases, with his wife, Rachel Glennerster, in 2004.

The new mechanisms they advocated were similar to those that in the eighteenth century gave rise to the development of the naval chronometer, necessary to determining longitude at sea. Governmental “pull” methods could complement the inherently risky “push” of private research and development.  AMCs – legally binding commitments to buy specified quantities of as yet unavailable vaccines at specified prices – were the most promising of the lot for bringing into existence medicines that otherwise might not pay.  EP wrote in 2004, the general line of argument of the book was “one more example of why, more than ever, governments today need talented and sophisticated regulators. Technology policy has become as important as monetary policy – in some respects, maybe more so.” (I am told that governmentally guaranteed long-term purchase contracts were the backbone for the creation of the Indonesia-Japan LNG trade, and the development of so-called private power generation in the US.)

I asked Kremer last week if he had been involved in the Warp Speed journey, The answer was no.  He and co-authors had spoken to staff at the Council of Economic Advisors in the run-up to the creation of Operation Warp Speed. They had co-authored an op-ed article in the NYTimes in May. But they had not met with Slaoui. He seems to have imbibed the basic idea as long ago as 2013, when he organized a session on the industry’s stock of common knowledge for the Aspen Ideas festival

Kremer was recognized with a Nobel Prize in economics, with two others, in 2018, for work on policy evaluation, including the work on vaccines. But I was struck when Wall Street Journal editorial-page columnist Daniel Henninger suggested last week that the scientists at the pharmaceutical companies who developed vaccines against Covid-19 were “the obvious recipient for 2021’s Nobel Peace Prize.”

There’s no doubt that we owe a considerable debt of gratitude to the scientists. But it was the administration’s Operation Warp Speed that organized their successful quests. A Peace Prize for the swift development of vaccines is a very good idea, not for President Trump or for Vice President Pence, nor even, to make a needed point, for Moncef Slaoui. It is a pretty thought, but remember that Russian and Chinese scientists also produced vaccines. Let the Norwegian Parliament figure it out!