Industrial Policy Failed With Vaccines Too

Global supply chains beat government-directed manufacturing once again.

More than 100 million Americans have already received at least one dose of a COVID-19 vaccine—but if the country was waiting for the federal government's handpicked vaccine manufacturer to deliver those shots, the pandemic's end would be nowhere in sight.

Emergent BioSolutions, a Maryland-based biotech firm, has received a series of government contracts since 2012 as part of a federal effort that anticipated the need for domestic vaccine production in response to a global pandemic of a flu-like disease, The New York Times reports. Last June, the company received a $628 million contract to produce COVID-19 vaccines being designed by Johnson & Johnson and AstraZeneca—but so far the facility has yet to produce a single usable dose of either vaccine.

Last week's announcement that more than 15 million doses of the Johnson & Johnson vaccine produced at Emergent's Baltimore factory would have to be destroyed after being contaminated is the most high-profile mistake, but it's part of a long track record of problems. The explosive Times story says at least 10 million doses of the AstraZeneca vaccine have been discarded due to contamination, while millions of other doses have yet to be approved for use by the general public.

Emergent has "spent much of the last two decades cornering a lucrative market in federal spending on biodefense," the Times reports. But while getting fat on government contracts, audits found "a persistent problem with mold in areas required to be kept clean, poor disinfection of some plant equipment leading to growth of bacteria, the repeated approval of raw materials that had not been fully tested, and inadequate training of some employees"—issues that likely culminated in the contamination problems that have plagued Emergent's COVID-19 vaccine production.

The whole story is a perfect illustration of why the urge to give the government greater control over crucial supply chains—something that some on both the right and the left are urging in the wake of the pandemic—could be inviting disaster. The vaccines that millions of Americans receive every day are the result of a global system of research, development, manufacturing, and trade. Forcing those networks to be concentrated within the United States wouldn't make those supply chains more robust, but would leave Americans vulnerable to the accountability problems that seem endemic to federal government contracting.

These problems are probably inevitable because of the incentives created by industrial policy. Emergent has a massive lobbying operation that has successfully steered hundreds of millions of dollars of government funding to the company. What it hasn't done is produce usable COVID-19 vaccines.

It's true, of course, that the federal government paid billions of dollars to Pfizer and other vaccine manufacturers in the form of advance-purchase agreements last year. But that's a different situation—one that effectively promised prize money but still put the onus on private companies to deliver vaccines that worked. While certainly not an ideal arrangement from a libertarian point of view, it's far better than an industrial policy that directs public funds to companies that hire the best lobbyists.

Unfortunately, there are plenty of people calling for exactly that. From the Biden administration's "Buy American" mandate, to Sen. Josh Hawley's (R–Mo.) demands that the federal government invest in manufacturing to counter China, industrial policy takes many forms. The COVID-19 pandemic has spurred calls for greater government involvement in supply chains for vaccines, pharmaceutical drugs, medical equipment, and more.

Advocates for industrial policy say they are concerned about the resiliency of global supply chains or worried that outsourcing manufacturing will leave Americans cut-off from vital goods. Those concerns are largely overblown—either the result of misleading political narratives or temporary disruptions caused by a once-in-a-generation global catastrophe. In fact, the private supply chains that carry everything from Xbox consoles to t-shirts around the globe have proven to be invaluable in the widespread distribution of vaccines, most of which are produced in Europe.

Industrial policy, meanwhile, results in head-scratching decisions like the Trump administration throwing $765 million at Eastman Kodak, a bankrupt film company, in the name of securing America's supply of crucial drugs—but only after the company had lobbied hard for the cash. This sort of thing doesn't protect America from the next pandemic. It merely empowers lobbyists and encourages cronyism.

The mess at Emergent Biosolutions seems to be the result of a similar set of incentives. A year after the 2009 H1N1 epidemic in the United States, a federal audit recommended that the government invest in "domestic manufacturing sites" for vaccines to head off the next disease outbreak, the Times reports. Two years later, Emergent started getting government funding for exactly that purpose.

We're still waiting for it to pay off.