Regulate us — please.
That’s what big pharmaceutical companies are implicitly begging the Trump administration to do, because of a public crisis of confidence in any forthcoming COVID-19 vaccine. The plea is surprising on its face. It also rebuts the GOP’s entire understanding of regulation — specifically, that regulation is necessarily bad for businesses, consumers and economic growth.
Since the spring, the administration has hyped miracle cures for COVID-19, regardless of what’s known about their efficacy or risks: hydroxychloroquine, bleach, convalescent plasma, whatever that MyPillow guy is hawking lately. Recently, President Donald Trump suggested that a vaccine could, conveniently, come to market just before Election Day.
Meanwhile, his Food and Drug Administration commissioner said he was prepared to authorize a vaccine early.
Americans are understandably apprehensive.
Six in 10 Americans worry political pressure from the administration will lead the FDA to rush vaccine approval before confirming it’s safe and effective, the Kaiser Family Foundation has found. And only about 4 in 10 would get the vaccine, even if it were free, if the FDA approved it before the election.
Fearful that these suspicions might reduce the market for a drug tremendous resources have gone into developing, Big Pharma took an unusual step Tuesday.
The chief executives of nine drug companies publicly pledged to “make the safety and well-being of vaccinated individuals the top priority in development of the first COVID-19 vaccines.” Moreover, they vowed not to seek FDA approval before vaccine safety and efficacy had been established in Phase 3 trials — the industry standard — implying that they would do this even if the Trump administration allowed (or encouraged) them to cut corners.
This pledge reflects several notable developments.
One is how much damage Trump has inflicted upon the perceived credibility of public health institutions, as he has upon the National Weather Service, Census Bureau and other independent agencies.
Another is that drug companies — which historically have sought fewer restrictions and faster approval from the FDA — once complained that the bar for bringing new drugs to market was too high. Now they worry that bar appears too low.
This is not the first time the Trump administration has sought to lower the regulatory bar in the name of helping industry and boosting economic growth even when industry objected. See, for example, its rollback of rules regulating methane emissions, automotive fuel-efficiency standards and mercury pollution. These actions were opposed by companies the administration claimed to be helping.
Recent vaccine regulatory jockeying underscores the flaw in the GOP narrative that regulation and economic activity are inversely related — that is, less regulation always means more economic growth.
When there are information asymmetries, market participants need some minimum level of assurances — provided and enforced by a credibly independent arbiter, such as the government — for markets to function. If you don’t trust the party on the other side of a transaction not to cheat or otherwise harm you, you’ll be less likely to engage in the transaction. (This observation is not original to me; an economics Nobel was awarded for it two decades ago.)
Regulation, in other words, can be pro-market. It can facilitate the trust necessary for more economic activity to occur. After all, it would be virtually impossible for consumers to independently assess whether the beef at their local grocery store is untainted; whether a used car is fatally defective; or whether their local bank will keep their deposits safe. Yelp stars alone are no substitute for capital requirements.
Alas, the administration’s response to the pandemic has included rolling back more rules and relaxing enforcement of rules still on the books — including those related to public health. Lax government oversight threatens to hold back not just the market for vaccines but other industries affected by the pandemic, too. For instance, airlines say they’re requiring masks aboard. But absent a government-enforced mandate, customers who see, say, viral photos of disobedient passengers might question whether the policy is actually enforced. And they might just stay home.
There’s a libertarian-friendly alternative to this worldview, one that also happened to win a Nobel Prize: Rather than using strict regulations to ensure honorable behavior, strong property rights and the frictionless ability to sue over those rights could theoretically achieve the same end.
That is, if companies know consumers will win redress for fraud or injury, that threat should sufficiently incentivize quality and safety.
Presumably, McConnell and Trump believe such policies help the economy. But the fewer consumers who trust either government or corporations to “do the right thing,” the longer it will take for public health — and the economy — to recover.