Black Markets in COVID-19 Vaccines Were Inevitable Once Government Got Involved

A politicized vaccine distribution process intended to take price out of the picture has given the edge to the rich, connected, and powerful.

In the U.S., a botched and politicized COVID-19 vaccine distribution process seems to be fueling a black market in vaccines.

Anyone with knowledge of their fellow humans could have seen this coming. Limited supplies and controlled distribution of a product in high demand incentivize people to jump the line, or to make money by offering to help others do so.

"There absolutely will be a black market," New York University bioethicist Arthur Caplan commented at the beginning of December. "Anything that's seen as lifesaving, life-preserving, and that's in short supply creates black markets."

Caplan spoke well before government officials—who have monopolized distribution of the Pfizer and Moderna vaccines and purchased billions of dollars' worth of doses—dropped the ball on getting the stuff into Americans' arms. The vaccine has been in short supply as only something handled by government agencies can be.

"It was a planning error and I am responsible," U.S. Army General Gustave F. Perna, chief operations officer for the Trump administration's Operation Warp Speed vaccine program, said in December after state governors complained of a shortage of inoculations. Perna had to say something after Pfizer officials made it clear the problem wasn't on their end.

"This week, we successfully shipped all 2.9 million doses that we were asked to ship by the U.S. Government to the locations specified by them," the company revealed in a December 17 press release. "We have millions more doses sitting in our warehouse but, as of now, we have not received any shipment instructions for additional doses."

To be fair, states and localities contributed to the massive screw-up.

New York Gov. Andrew Cuomo threatened providers with penalties if they let anybody jump the government-mandated line for shots, but also promised to slam them if doses were wasted because of inability to meet the criteria. "Cuomo presented area hospitals with a double bind: Fail to use all of your vaccines and be fined up to $100,000, or vaccinate people out of order and be fined $1,000,000," Billy Binion noted for Reason.

In Florida, state and county online reservation systems crashed and phone lines booted those who sought to make an appointment to receive the vaccine. "Due to overwhelming demand, we have reached capacity with our COVID-19 vaccination for the community," the Broward County Board of Health announced on December 30. "Scheduling will resume in the coming weeks."

In the end, federal promises of 20 million vaccinations administered by the end of the year were off by a lot, with the actual number just over 2 million.

But there were people who had no trouble getting their doses: politicians. Members of Congress—regardless of their ages—were among the first to be offered the vaccine.

At the end of December, The Washington Post interviewed a medical resident who "watched with frustration last week as inoculations were administered to scores of government leaders … while she and her colleagues were initially left unprotected because their hospital had received fewer than 1,000 doses of the scarce resource."

As it turns out, if you're going to have a political process for distributing a scarce resource, politicians who command that process can prioritize themselves over everybody else. The supposedly "fair" system of government distribution gets gamed very quickly.

"The argument for free markets is not that they are perfect," points out economist John Cochrane. "The argument is that the known alternatives are much worse. And we have seen a catastrophic failure of government at all levels around the world to handle this pandemic, especially in delivering tests and vaccines."

Cochrane believes governments should have got out of the way of companies that could have sold people what they need to deal with the pandemic, including vaccines. "The government could buy too," he offers, but "allowing the vaccine to go to the highest bidders—and allowing people to get it at CVS or administer it themselves—would have rolled vaccines out much faster."

We got politics instead. But prices find a way when governments can't deliver—which is pretty much always. Caplan's prediction that "there absolutely will be a black market" was right. It's not just politicians cashing in political capital—it's plenty of people with old-fashioned cash.

"At least three South Florida hospital systems—Jackson Health, Mount Sinai Medical Center and Baptist Health—have already reached out and offered vaccines to some donors in advance of the general public," the Miami Herald reported in early January. David S. Mack, the chairman of a Florida nursing home, reportedly arranged for wealthy friends—some who flew in on private jets from New York—to get shots ahead of the pack.

A politicized vaccine distribution process intended to take price out of the picture has given the edge to the rich and powerful.

When people willing to operate illegally enter the market for scarce goods, they seldom stop at breaking one law. Vaccine doses are now being stolen, presumably for resale. Just before Christmas, New York officials claimed a provider "may have fraudulently obtained COVID-19 vaccine, transferred it to facilities in other parts of the state in violation of state guidelines and diverted it to members of the public."

In the Philippines, smuggled vaccines have reached not just the politically potent, but also the large numbers of workers in the country who have connections to China, from which inoculations are smuggled. "The vaccine could fetch between $200 and $300 on the black market, presumably for both doses," according to The Washington Post.

As is often the case in underground markets, though, there are questions about the purity and efficacy of illicit products. That's been the case in the Philippines, and there are now reports of scammers offering very likely counterfeit vaccines in the U.S.

Markets move in to make up for the failures of government-controlled systems and their artificial restrictions on supply. But they work at their best when allowed to operate openly and aboveboard, not in the shadows. By trying to keep prices out of vaccine distribution, officials hobbled the system for getting shots into people's arms. They also guaranteed that price would get involved anyway, but with a host of unfortunate complications.