What A Free Market Vaccine for COVID-19 Would Look Like

Recently John Cochrane and recently Yaron Brook described what a free market solution for the COVID vaccine would look like. What is interesting is how when we have a free market for products and services that people love (BMW/Gucci/Crumbl Cookies-yes I an a fan) there aren't any complaints about their premium pricing. Generally if people don't like their pricing they just leave or don't do business with these establishments. However, if we apply the same concept to vaccines there tends to be public outcry. 

Allowing drug companies to directly auction off vaccines would make the allocation of vaccines much more efficient, would result in more vaccines for everyone else, would reduce the spread of COVID than otherwise would occur, would allow drug companies to continue to develop life savings vaccines and drugs (that would benefit even more people in the future). What is again interesting is how drug companies have been "greedy" for so many years, but if someone did a recent poll on drug/biotech companies I would be willing to bet the rent money their popularity has never been higher. To be able to develop a vaccine in less than a year is modern science miracle (also let's not forget it what private companies who were able to make this possible-if anything government agencies slowed this down). 

If drug companies had the ability to auction off the drug the people that would bid the most are people who are the most well off, older, and have the most to lose by contracting COVID. For instance, if there was a billionaire in their 80's and a vaccine could grant them 10 additional "quality years" of life you bet they would plunk down a substantial bid. If let's say the billionaire wanted to pay Pfizer or Moderna $1 million for the vaccine and Pfizer/Moderna would personally arrange for a nurse to come to the billionaire's home and administer it (for that price it should be thrown in!) who are we to get in the way? Also not only could individuals bid on the drugs but companies/charities/organizations could bid on the drug. Fortune 500 companies have a large incentive to make their top executives are well. These executives make decisions for multi-billionaire dollar enterprises. The executives are no spring chickens either. The median CEO of a Fortune 500 company is 58. Companies would have a large incentive to buy a vaccine for a CEO/executives (especially if the CEO/executive had any type of underlying health issues that could lead to adverse affects from contracting the coronavirus. Other people that would be interested in a vaccine are performers such as musicians, actors, actresses, comedians, and athletes. Some of these individuals earn millions of dollars per year and by becoming vaccinated they could go back to work without having to worry about getting COVID. Insurance companies would have a large interest in making sure it's policy holders didn't incur extraordinary expenses from coronavirus and would have an incentive to bid on vaccines. Health insurance companies would have an incentive to notify from their data who should get the vaccine first since they have a vested interest to perhaps pay $500 for a vaccine that could avoid $10,000 of hospital expenses. As I have said before regulation (more specifically medical loss ratios-thanks to Obamacare) insurance companies each year can't spend more than 80% of it's premiums on healthcare and only 20% on administrative costs (if the health insurance company fails to do this they must refund the policyholder). This regulation is foolish since health insurance companies should not be required to spend premiums every year as it induces them to overspend and not save for the future (life insurance companies often have to plan their cash flow for many decades to ensure they have enough reserves to cover people passing away). If health insurance companies didn't have to worry about medical loss ratios they could have save enough cash to bid on items such as vaccines. 

Conversely an individual/corporation/organization/entity could purchase vaccines and would obtain ownership (property rights) and could gift the vaccines to whomever they wanted. Pfizer and Moderna could set up an auction site to allow individuals to bid on vaccines. Pfizer and Moderna for the initial vaccine doses would receive large sums of cash flow. Right now the government (i.e. taxpayers are paying $20/dose so round trip costs with 2 doses is $40 per person (if I were on the board of directors at either of these companies I would ask if this was the true market price of a drug that could save so many lives-also who negotiated these contracts with the government).

Hospitals would also have large incentives to bid as some have surgeons who are super stars that earn millions of dollars per year and more importantly save tens of thousands of lives with their skills. Conversely if Pfizer/Moderna were allowed to sell the first dose for $1 million they could use that cash flow to plow back into manfacturing/development/allow the company to offer the drug free of charge to whomever it wanted/invest the money into research and development for the next drug/vaccine. The biggest benefit is this doesn't require any taxpayer money and would allow for vaccines to be allocated in a more efficient manner. Let's remember Amazon/FedEx/UPS ship billions of items per year and there is no question Pfizer/Moderna could directly contract with them (or whomever they wanted) to get vaccines to the right people. Why is the government in charge of distributing one of the most valuable vaccines? 

The first patient/organization/entity could have bid on the first dose that was administrated in March 16, 2020-in actuality if there wasn't bureaucratic red-tape the first dose could have been bid on as early as January 13, 2020 (this was the date Moderna designed the vaccine-only 2 days after the Chinese started sharing information). In July 1, 2020 the results of interim data were published in the New England Journal of medicine which was a complete waste of time since all it showed was safety information and didn't had any useful information regarding immunity. Frankly, given the pandemic a more efficient way to run the trial would have been to allow the companies running the clinical trials to release real time data as it became available regarding how many patients contracted COVID. This would have sped up the knowledge and understanding if the vaccine had worked. 

The Phase III clinical trial for the Pfizer vaccine included 43,000 patients which is utterly insane given most Phase III clinical trials only requires 3,000 patients. The more number of patients adds an enormous amount of data that must be analyzed and approved by regulators. The early stages of the vaccine showed it was safe with very mild side effects. Dr. Marty Makary a doctor/researcher at John Hopkins University who has run over 100 clinical trials argues that Operation Warp Speed is actually Operation Turtle Speed. He says that for clinical trials his team analyzes data for millions of patients and the data on the COVID vaccine (remember only 43,000 patients) would only have taken his team an hour to review (even worse he says the data for reviewing the FDA manufacturing data would have taken hours to review not months). Let's remember that out of the trials for the COVID vaccine (as I write this) no one has died from taking the vaccine. 

I compare the current state of regulation of healthcare to one of yesteryear. For example back in 1953 Michael DeBakey and Denton Cooley (who would end up becoming world famous surgeons) had a patient with an abdominal aortic aneurysm. DeBakey told the patient he never had performed this type of surgery before (although the surgery was successful on animals. The patient who was at death's door went elected to take a chance and have the surgery and went on to live another 15 years. Today this would never happen. The surgery today would have to go through so many different hospital board reviews/intuitional board reviews/committee review boards/meetings before it could even be performed (by then the patient would have been dead too). The state of current regulation of healthcare is literally killing many countless lives in the name of "science". Pfizer submitted data on the safety and effectiveness of the COVID vaccine on November 22, 2020 yet the FDA didn't even schedule a meeting until 3 weeks later on December 10th. In the meantime roughly about 2,000 people per day passed away. As anyone who has studied economics knows there are no perfect solutions only trade offs. 

What is sad is currently Pfizer has millions of doses of the vaccines in warehouses but have not received any additional shipping instructions from the government. Every day that passes allows fewer people to get vaccinated which from a public health perspective is not a good thing.  Amazon/UPS/FedEx/Uber/even Domino's Pizza could work the logistics of ensuring that these vaccines get to the right destination. A free market system would allow vaccines to be allocated much more efficiently/provide cash flow for Pfizer and Moderna to then be able to produce more vaccines which would then allow more people to receive the vaccine at a lower price. Most importantly more people would be vaccinated faster and decrease the risk of people becoming hospitalized or possibly passing away. The government should unleash the power of the free market to make a safer and better world. 

R.I.P. Dr. Walter E. Williams and The World Mourns His Loss

Unfortunately I recently learned that Dr. Walter E. Williams passed away on December 2, 2020 at the age of 84. He died suddenly in his car not too long after teaching the final class of the semester for economics PhD students (the course ended at around 9:30 P.M) and then passing less than 12 hours later. His medical history would show that Walter had a history of hypertension and obstructive pulmonary disease. What many people may not know is that he drove two and half hours (each way) from his home in Valley Forge, Pennsylvania (Walter would fill his drives with recorded scientific lectures from The Teaching Company). Walter got his wish of wanting to be able to pass away after teaching his final course. Walter liked to remind people that he had been around for nearly a 1/3 since the country started in 1776 (which is mathematically accurate). Walter was an intellectual giant that had a profound change in my way of thinking of economics (Walter was actually tall too standing at 6'5). According to life long friend Thomas Sowell Walter was a black belt and did kick some butt in real life. Walter would spend most of his career trying to explain basic principals of economics to the masses and explaining why things like minimum wage, affirmative action, and other government policies while all sounding good didn't make any sense when examining the results. 

I first learned about Walter Williams back on February 7, 2007 when I was in college and I can clearly remember working out (I was in college at the time on an elliptical and it was a Friday afternoon) and I use to watch Kudlow and Company and Walter came out and debated Gary Gensler who was a former Treasury undersecretary and I can remember Dr. Williams explaining in a clear manner why labor unions weren't good and why the minimum wage didn't make any sense either. What I recall was how unique Dr. Williams was compared to anyone I ever heard before. After this I spent more time following the work of Dr. Walter Williams and then learned about other economists such as Thomas Sowell and spent more time studying Milton Friedman (I was somewhat aware of Milton Friedman after his passing back in late 2006). At the time YouTube wasn't as big as it currently is but I remember going to Dr. Williams website and reading his syndicated columns. What was clear was that Walter could take economics a seemingly and boil it down into digestible and understandable pieces. I took micro and macroeconomics as an undergraduate back in the fall of 2005/spring of 2006. What I recall was the classes were mostly either graphs/math/memorization which lead me to believe economics was more difficult then it was. I realized after reading more from Dr. Williams how easy economics really is when you get to the basics. 

What many people have not been aware of is Dr. Walter E. Williams put into practice his free market philosophy regarding his own personal wealth. Dr. Williams was able to command a $20,000-$30,000 speaking fee (at one point he was getting on a commercial flight 2-4 times per month which would say that just from speaking fees he was earning Walter could have been earning $600,000 to $1.2 million per year! The reality is the amount is probably substantially less because given he was teaching economics between September to December and January to June would reduce the ability to market his services. This doesn't include his income from teaching, his regularly published syndicated columns, or any fees from published books. His professorship was fully paid for my an endowment of the John M. Olin Foundation (Walter according to this video never met and he earned $175,000 per year towards the later end of his career. It should be pointed out that Walter also lived well as in 2010 he purchased a brand new Lexus LS 460 that was $70,000 at the time (it was published in an article in which he was trying to describe international trade. In addition to a all this he is was actually on the board of directors of Media General (for over a decade (from 2001-2011) and was the chairman of the audit committee. I am honestly surprised he was on more boards given he could run rings around most corporate board members when it comes to logic and reason. 

I can recall Walter in a speech one time saying "You know if I don't tell you these things you may go the rest of your life not knowing them". The name of this blog is in some ways an ode to his saying of pushing back the frontiers of ignorance. Back in 2003, some friends of Walter had a toast/roast for him that was captured on video. In the video (around the 33 minute mark) Charles Koch discussed how he had at the time known Walter for nearly 20 years and their friendship. This video I was lead me to my curiosity of Charles Koch and Koch Industries which then lead to my fascination and lead to this blog posting more on Koch Industries than any other source available. In a way you could say this blog really was inspired my Walter Williams and created many positive things. 

Walter turned out to live a good, rich, and fulfilling life, he lived 84 years on this earth (also especially true since he was a smoker/however he did work out). He lead a very productive life as a professor, economist, public figure, and no question woke up countless numbers of people to how economics truly works. What is even more interesting is that Walter who grew up in the Richard Allen housing project would lead a life as someone in the top 1% and in the year he was born (1936) the average life expectancy was less than 57 years old! My only wish is that Walter could have lived for another 184 years. Dr. Williams was one of the few defenders of personal liberty, individual rights, railed against the welfare state, and was against good sounding policies and was one of the few people I know that had the courage to do the right thing. His intellect, charm, wit, and take no prisoners' approach was rare and most likely won't ever be repeated again for many generations. You can look at the passing of Walter Williams as inspiring given that on the day he passed he taught his last course and just a few days before had his final syndicated column published which shows he maximized his marginal productivity.