Operation Warp Speed Saves U.S. Economy $1.8 Trillion

Operation Warp Speed was worth $1.8 trillion dollars in terms of getting the economy back to normal, according to an analysis written using the work of the famed free-market University of Chicago economists.

Greeted with skepticism by the medical establishment and the national media when it was launched in April 2020, Operation Warp Speed – the Trump administration’s $10 billion initiative to accelerate the development and mass manufacture of anti-COVID-19 vaccines – appears to have exceeded the expectations of even its most ardent proponents.

Seven months after Project Warp Speed was unveiled, Pfizer-BioNTech announced that their vaccine was 90 percent effective against the coronavirus. In short order, other drug companies – Moderna, Johnson & Johnson, and AstraZeneca – rolled out their offerings. By mid-March of this year, 18.8 percent of the U.S. population had been vaccinated, with over 2.1 million shots being administered daily, according to federal data.

Regulatory Capture Theory

As it turns out, according to former Trump White House economic advisor Casey Mulligan on a March 2 blog post, the intellectual foundations of Operation Warp Speed were laid decades before COVID-19 became a household name.

Drawing on earlier work by fellow University of Chicago economist George Stigler that showed how industry teamed up with regulators to limit competition, Sam Peltzman, in a 1973 paper, applied the “regulatory capture theory” to the regulation of drugs, vaccines, and medical devices. Peltzman noted that the U.S. Food and Drug Administration’s (FDA) approval procedures amounted to industry entry barriers, concluding that “consumer losses from purchases of ineffective drugs or hastily-marketed unsafe drugs appear to have been trivial compared to their gains from innovation.”

This assessment of the FDA’s drug-approval process became a constant refrain of the agency’s critics over the ensuing decades but led to no meaningful changes in FDA procedures – until 2017. It was then, Mulligan explains, that a new generation of University of Chicago economists and alumni came to the Trump White House determined to get the FDA to change its ways.

Setting the Stage for Reform

The Chicago economists, concentrated in the Council of Economic Advisers (CEA), joined forces with FDA Commissioner Scott Gottlieb, a longtime critic of FDA delays.

In a little-noticed 2018 report, CEA laid out and updated Peltzman’s case that FDA regulations are entry barriers that limit competition and raise prices. Despite encountering stiff resistance from Secretary Alex Azar’s Department of Health and Human Services (HHS), CEA and Gottlieb scored a major success in their deregulatory efforts. In early 2019, the Consumer Price Index (CPI) reported that 2018 was the first year since 1972 that saw retail prescription drug prices fall, even though consumer prices generally were up.

Although COVID-19 would not arrive in the United States for two more years, Trump’s CEA had been asked by the National Security Council’s biodefense team at the beginning of 2018 to look into the economics of vaccine innovation during pandemics. This was seen by Trump’s CEA as an opportunity to unite the Chicago tradition of deregulation with findings in epidemiology and advances in medical innovation. In a report published in September 2019, CEA concluded that “…improving the speed of vaccine production is more important for decreasing the number of infections than improving vaccine efficacy” and emphasized the need for large-scale manufacturing and the possible advantages of public-private partnerships.

Missteps and Triumph

Any balanced assessment of the Trump administration’s response to the pandemic will likely conclude that it was ill-served by its reliance on the federal public-health bureaucracy.

The Centers for Disease Control and Prevention (CDC), the National Institutes of Health (NIH) through Dr. Anthony Fauci, and the FDA combined to sow confusion on testing, masks, vaccine allocation, and school reopening.  Furthermore, the FDA and NIH discouraged the use of readily available treatments that could have helped patients in the early stages of the disease.  The resulting confusion served to justify lockdowns that were economically destructive and created their own health-related problems.

But when it came to developing vaccines, the administration had already put a regulatory structure in place that enabled vaccines to emerge in record time. Mulligan puts the savings to the U.S. economy at $1.8 trillion.

As two Trump economic advisers, Joseph Grogan and Tomas J. Philipson, told Newsweek in December 2020, “when COVID-19 emerged, the White House was ready and expeditiously applied the report’s deregulatory and fiscal lessons to streamline FDA approval for vaccines and their parallel manufacturing on a large scale.”

No Help from Congress

What makes the success of Operation Warp Speed even more remarkable is the political climate surrounding former President Donald Trump, says John C. Goodman, president of the Goodman Center for Public Policy Research and co-publisher of Health Care News.

“Trump had to do this on his own, with no help from Congress,” Goodman said.  “He stretched the limits of budget authority by scavenging other budgets when Congress refused to authorize funds for the effort.  All the while, the liberal press criticized him for the effort.”

Bonner R. Cohen, Ph.D., (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research.