Warp Speed: Not So Fast?
7/29/20
I’ve been wanting to write about the Warp Speed Program for some time. That’s the program designed to assure delivery of 300 million doses of Covid-19 vaccine by early 2021. The problem is, few of my questions have been answered either by government releases or by mainstream news outlets.
The US Department of Health and Human Services (HHS) prepared a fact sheet describing this program on June 2, detailing the progress to date (https://www.hhs.gov/about/news/2020/06/16/fact-sheet-explaining-operation-warp-speed.html). Since then, promising results pertaining to prospective vaccines have been publicized, and clinical trials are gearing up. My concerns, however, pertain to the financial aspects of the program, and those have not been well publicized.
About a month after the publication of the fact sheet, the Senate Committee on Appropriations chaired by Roy Blunt [@RoyBlunt] held a hearing on this program. One of the testifying witnesses was Gary Disbrow, Acting Director of the Biomedical Advanced Research and Development Authority (BARDA). This agency bears primary responsibility for contracting with private health and pharmaceutical companies, expecting to advance vaccines, diagnostics, and therapeutics relating to Covid-19. In his testimony, Disbrow explained an approach that mimics that of venture capitalists. As of the date of that hearing, the BARDA team had identified and invested in 40 projects. These are ventures that the BARDA staff had identified as promising, albeit with no guarantees. Disbrow was careful to caution the Senators to expect some of those investments to fail, but to expect the overall portfolio approach to be fruitful. The plan calls for participating manufacturers and distributors to be capable of delivering the resulting vaccines and therapeutics as soon as they are deemed to be safe and effective.
The fact sheet detailed investments that have been made with several companies including AstraZeneca, Moderna, and Johnson & Johnson to support development of the vaccine and to ready manufacturing capabilities. My question, yet to be answered, is what is the nature of these “investments?” What do the taxpayers get for this money? Is it really an investment, which presumes some prospect of a return, or is it merely a grant? I can’t tell. We’re talking about something on the order of $10 billion.
Undoubtedly, the hope and expectation is that the expenditures will accelerate delivery of vaccines and therapeutic remedies, but I’m surmising that those outcomes will be owned and controlled by the private companies that receive the federal funds and that any profits from sales and distributions from the resulting medicines will accrue to the benefit of their shareholders.
The issue of pricing and concerns about the possibility of price gouging was raised by several of the Democratic senators at the July 2 hearing, but my own sense from having listened to the testimony is that much is yet to be determined. Meanwhile, with this background, the NY Times ran a story on July 25, “Corporate Insiders Pocket $1 Billion in Rush for Coronavirus Vaccine,” by David Gelles and Jesse Drucker [@dgellis and @JesseDrucker] (https://www.nytimes.com/2020/07/25/business/coronavirus-vaccine-profits-vaxart.html.)
This article is chockfull of revelations about questionable business practices by selected warp speed partners. Importantly, it’s hard to fault existing stock holders if they happen to be able to benefit from a spike in stock prices due to announcement effects relating to this program. It’s another thing altogether when those same events trigger new grants of stock, options and warrants to company bigwigs. It’s more than unseemly. It’s disgraceful. Capitalism run amok. I fear there’s more to come. Congress should be putting up some guardrails.
