Relevant and even prescient commentary on news, politics and the economy.

Mass testing for Covid-19: economics, politics, and policy options

The Covid-19 epidemic is creating a painful dilemma for policymakers.  On the one hand, we need to practice social distancing to keep people healthy and to prevent our hospitals from being overwhelmed.  Unfortunately, this strategy is causing a severe economic contraction as people avoid contact with others.

An ideal response to this dilemma would have three basic components.  First, we would implement a hard, nation-wide lockdown to slow the spread of Covid-19.  This would “flatten the curve” and save lives by preventing hospitals from being inundated with patients in the next few weeks.  It would also buy time to put in place the testing, prevention, and surveillance measures we will need to start cautiously re-opening our economy.  Putting these measures in place should be the second element of our strategy.  Finally, as Paul Romer and Alan Garber argue, we need a major effort to increase our capacity to test for Covid-19, and to produce masks, gloves, and other forms of personal protective equipment (PPE) by an order of magnitude or more.  The ability to do mass testing and to provide masks and other PPE to most Americans will substantially reduce the risk that the epidemic drags on for many months and leads to an economic catastrophe.  (For further discussions, see here, here, and here.)

In this essay I explain why it is important to massively increase our ability to produce Covid-19 tests and PPE.  I also discuss how this can be done, considering the apparent reluctance of the Trump administration to lead this effort.  I make four basic points.

First, the ability to test millions of people daily for Covid-19 and to produce PPE for millions of Americans will require a large up-front capital investment by manufacturers that may turn out to be unneeded, but this investment is socially justified to lessen the risk of a severe and protracted economic shutdown.

Second, without firm contractual commitments from the government, businesses will not invest at the scale required to ensure that we can avoid a disaster.  Several factors will deter adequate investment by industry; the most important is probably the risk that the epidemic will abate and they will not be able to recover their investment costs.  The government can overcome this problem by agreeing to pay companies for tests and PPE even if the epidemic abates, by subsidizing investment in the capacity to produce tests and PPE, etc.  The critical point is that the government needs to make binding commitments NOW, it cannot wait to see if the epidemic can be brought under control using other means.  Valuable time has already been lost.

Third, the powers that the President has under the Defense Production Act to directly control the use of resources are not particularly useful if our goal is to spur investment in the capacity to produce tests and PPE.  We need to give firms incentives to invest in new capacity using contracts, competitions, and similar tools.

Fourth, an ambitious effort to expand production of tests and PPE will inevitably lead to genuine contracting failures and to situations that create the perception of failure.  Trump is clearly anxious to avoid setting ambitious goals and taking actions that might later be used to criticize him.  In response, Congressional Democrats want to force Trump to exercise his powers under the Defense Production Act.

This is a mistake.  Trump would likely veto any bill that tried to force him to act, and, in any event, it is very difficult for Congress to force a reluctant President to act.  Fortunately, there is no need for contracting efforts to be directed by the President.  Rather than trying to force a reluctant Trump to exercise his contracting powers under the DPA, Congress should either delegate the power to an agency, or it should create incentives itself, directly.  I will sketch out how this can be done.  The same point applies to efforts to organize mass testing, the distribution of equipment, and other activities where direct commands are an effective means of achieving our goals:  Congress should accept that Trump is unwilling (and arguably unable) to lead these efforts and try to work around him in ways that he can accept.

Mass testing and distribution of PPE mitigate the risk of economic disaster

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Coronavirus dashboard for March 28: testing falls further behind

Coronavirus dashboard for March 28: testing falls further behind- by New Deal democrat

Here is the update through yesterday (March 27)

In order to succeed in containing the pandemic, I believe that the US needs 2 weeks of China (nearly complete lockdown) followed by at least a month of South Korea (very aggressive and widespread testing).

At minimum, that means at least 50% of the US population under lockdown and a ratio of 15:1 in tests to results showing infection. The recent exponential growth of about 35% per day must be stopped. Those three most important metrics are starred (***) below.

As of now, just over 50% of the population is under total or business lockdown, and the rate of increase in new infections decelerated significantly – but is still growing at near 25%/day. The amount of testing continues to increase, but still is falling far short of what is necessary for a successful regimen.

Number and rate of increase of Reported Infections (from Johns Hopkins via arcgis.com)

• Number: up +18,825 to 104,837 (vs. +16,815 on March 27)
• ***Rate of increase: day/day: 22% (vs. 34.6% baseline and vs. 24% on March 27)

I am using Jim Bianco’s excellent exponential projection of 34.5% growth from March 10 as my baseline. It appears that “social distancing” strategies as well as State-mandated partial and total lockdowns may have begun to put a dent in the exponential rate of increase, as the average rate of increase for the past 4 days has been 22.5%.

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Coronavirus dashboard for March 27: (unsurprisingly) voluntary distancing appears to be failing

Coronavirus dashboard for March 27: (unsurprisingly) voluntary distancing appears to be failing

Here is the update through yesterday (March 26)

In order to succeed in containing the pandemic, I believe that the US needs 2 weeks of China (nearly complete lockdown) followed by at least a month of South Korea (very aggressive and widespread testing).

At minimum, that means at least 50% of the US population under lockdown and a ratio of 15:1 in tests to results showing infection. The recent exponential growth of about 35% per day must be stopped. Those three most important metrics are starred (***) below.

As of now, just over 50% of the population is under total or business lockdown, and the rate of increase in new infections decelerated significantly – but is still growing at near 25%/day. The amount of testing continues to increase, but still is falling far short of what is necessary for a successful regimen.

Number and rate of increase of Reported Infections (from Johns Hopkins via arcgis.com)

• Number: up +16,815 to 86,012 (vs. +16,815 on March 26)

• ***Rate of increase: day/day: 24% (vs. 34.6% baseline and vs. 25% on March 26)

I am using Jim Bianco’s excellent exponential projection of 34.5% growth from March 10 as my baseline. It appears that “social distancing” strategies as well as State-mandated partial and total lockdowns may have begun to put a dent in this, as yesterday’s +25% and Tuesday’s+19% have been 2 of the 3 lowest rates of increase in the past two+ weeks. At the same time, it remains an exponential growth rate.

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Self Quarantine in Rhode Island Like it or Not

This came up on the radar this morning.

PROVIDENCE, R.I. (AP) – The American Civil Liberties Union of Rhode Island is questioning the constitutionality of Gov. Gina Raimondo’s directive allowing state police to stop vehicles with New York license plates to collect information from drivers and passengers in an effort to slow the spread of the coronavirus.

The Democratic governor on Thursday called the measure extreme but pointed out that the New York City area is the epicenter of the disease in the U.S.

While Raimondo has the authority to suspend some state laws and regulations to address a medical emergency, she cannot suspend the Constitution, ACLU of Rhode Island Executive Director Steven Brown said in a statement late Thursday.

“Under the Fourth Amendment, having a New York state license plate simply does not, and cannot, constitute ‘probable cause’ to allow police to stop a car and interrogate the driver, no matter how laudable the goal of the stop may be,” he said.

The governor’s directive is simply to ensure that travelers from New York staying in Rhode Island know they are required to self-quarantine for 14 days, Raimondo’s spokesman said.

Hat Tip CBS Boston, March 27,2020

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Notes on the economy and coronavirus issues

Notes on the economy and coronavirus issues

As is obvious, I have stopped reporting on almost all incoming economic data, as anything older than last week is out of date. But once the last important February data is reported tomorrow, I will take one last fond look back at our pre- Coronavirus Recession economy. How close to recession was it?

I also want to write a few more detailed posts on several points. But for now, let me leave a quick note about some important issues going forward.

1. The federal government under Donald Trump is NEVER going to do what is necessary to bring this pandemic under control. Success is only going to be achieved by cooperative action by the States.

2. As I forecast, the increasing urgency of the pandemic has put the States under enormous public pressure to take more effective action. Most, especially the “blue” States and some Eastern, Midwestern, and a few Mountain West “red” States have done so. But Southern “red” States in particular continue to resist, and probably will continue to do so until it is too late – although ultimately they too will respond to pressures from their publics.

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Coronavirus dashboard for March 26: southern “red” States resist effective measures

Coronavirus dashboard for March 26: southern “red” States resist effective measures

Here is the update through yesterday (March 25)

In order to succeed in containing the pandemic, I believe that the US needs at least 2 weeks of China (nearly complete lockdown) followed by at least a month of South Korea (very aggressive and widespread testing).

At minimum, that means at least 50% of the US population under lockdown and a ratio of 15:1 in tests to results showing infection. The recent exponential growth of about 35% per day must be stopped. Those three most important metrics are starred (***) below.

Yesterday we crossed two out of three of those thresholds – just over 50% of the population is under lockdown or near lockdown, and the rate of increase in new infections decelerated substantially. The amount of testing continues to fall are short of what is necessary.

Number and rate of increase of Reported Infections (from Johns Hopkins via arcgis.com)

  • Number: up +13,972 to 69,197 (vs. +11,705 on March 25)
  • ***Rate of increase: day/day: 25% (vs. 34.6% baseline and vs. 19% on March 24)
I am using Jim Bianco’s excellent exponential projection of 34.5% growth from March 10 as my baseline. It appears that “social distancing” strategies as well as State-mandated partial and total lockdowns may have begun to put a dent in this, as yesterday’s +25% and Tuesday’s+19% have been 2 of the 3 lowest rates of increase in the past two+ weeks.

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Congress and the Fed Could Ensure Universal Protection During the Pandemic

Congress and the Fed Could Ensure Universal Protection During the Pandemic

No matter how well or poorly the federal government addresses the overall economic crisis, millions of vulnerable people will be left unprotected.  Homeless people, incarcerated people, immigrants, people in fringe, off-the-books employment like day labor—unless steps are taken that specifically target them, they are staring into the abyss.

This is fundamentally a local problem.  States, counties and cities know where the needs are.  They have existing ties through social service agencies and their connections to nonprofits.  This is where the expertise lies, but their budgets, lean in good times, are in free-fall right now.

The solution is straightforward.  Congress should authorize the Federal Reserve to purchase specially designated state and municipal bonds floated for the specific purpose of serving the health, housing, food and other essential needs of vulnerable populations.  There should be no limit to the amount that can be borrowed.  And the Fed should purchase these bonds with the intention  of retiring them.  Effectively, the Fed would be using its money-creating power to finance social protection at the local level.

This facility can be created immediately, with auditing to follow when practicable.  There should be no delay in meeting the urgent human needs that will otherwise go unaddressed by more conventional policies.

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Hydroxychloroquine update

A clinical trial of hydroxychloroquine with 30 patients (15 treated 15 controls) has been completed in Shanghai. It is the first genuine randomized trial. It reports no evidence that hydroxychloroquine works at all.

It is true, that given the principal outcome measure defined in advance, the trial has no power. Not low power, 0 power. In a hypothetical, if all patients treated with hydroxychloroquine became healthy immediately with no symptoms and no detectable virus, then the report would be that there was not a statistically significant diference in the principal outcome measure for the treated and control subgroups.

The principal outcome measure was “can virus be detected 7 days after treatment starts”.
the answer was yes for 2 people in the treated group and 1 person in the control group.

Given that 14 out of 15 people in the control group had no detectable virus, the best outcome for hydroxychloroquine would have been 15 out of 15 in the treated group. Again a hypothetical, what if all the treated patients were assessed as cured after a week (best possible value of the principle outcome measure). This would reject the null that the probabilities were the same against the 1 sided alternative that treatment was better at the 50% level. It would reject the null against the two sideded alternative at the 100% level (not a typo).ù

So exactly zero power. Not low 0, zero, nada, niente.

With the benefit of hindsight, the researchers write that they could have designed the trial better. This does not mean that mistakes were made. When in a crisis, one has to act and must not make sure that one doesn’t do anything which is clearly suboptimal with the benefit of hindsight. That would imply sitting around thinking. They didn’t have time for that.

The secondary outcome measures provide statistically insignificant evidence that one is better without hydroxychloroquine. As noted by the authors, none of this evidence is strong enough to affect best practice of medicine (I still think that all patients without counterindications should be given hydroxychloroquine (I am not a doctor)).

The trial

At the clinical trials register, it is tagged “completed”, but the results are not yet uploaded (given the absolutely rigid standard format this takes the time of someone who is probably very busy).

The results are reported here.

p.s.

googling for the link above, I found Hydroxychloroquine Is Ineffective In Treatment Of Patients Hospitalized With Covid-19, According To Small Controlled Trial From Shanghai

To that headline I say no No NOOOOOOO. Failure to reject the null is not a finding that the null is the truth. that would only be the case if all tests had power 100%. Since this test happens to have power 0%, the error is extreme. The error of rejecting the null is universal. It is a simple mistake – a failure to understand the Neyman Pearson framework.

Since I am a big fan of the alternative in this case, it is a delicate time to point out that the headline is simply incorrect. But it is.

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Patent Protection vs Orphan Drug Market Exclusivity

Massive Scandal or a Massive Misunderstanding of Regs and Laws for Orphan Drugs

Most of you know, I have been writing on healthcare for a long time and much of it has been negative about healthcare and the costs. I am not defending Gilead’s marketing of Remdesivir; but, a few articles (Common Dreams, The Intercept, etc.) written and the pundits amongst us appear to have misunderstood the issue for Remdesivir’s status.

I can understand why people would become excited and upset with the actions by the FDA to “designate” Remdesivir an orphan drug “candidate (note the quote notation).” In the past, I have found myself to be distracted by headlines (Intercept) which lead me to believe something bad was to come about only to find out it was not as serious as described in the headlined article. With all the issues we are faced with from COVID 19, the half attempt to mandate a lockdown of us in our homes, people “still” clustering, and our government led by a jackass; it is easy to get agitated.

Some thoughts; Given the pandemic, COVID 19 appears to be the exact opposite of a rare disease and describing a new drug for it as an orphan-drug does sound absurd.

A Little History

The seventies found incentives for profit-making drug companies not aligning with the needs of people having rare diseases. Drug Development of new drugs was expensive even 40 years ago. Companies concentrated on needed new therapies and pharmaceuticals potentially having high customer demand yielding increased profits rather than focusing  on those therapies and pharmaceuticals needed by a handful of patients. In 1983, the Orphan Drug Act was passed to encourage R&D for these drugs.

The FDA was given the power to grant a drug “orphan” status and to compounds without patent protection. If a company got its product “approved” as an orphan drug, it gained a period of market exclusivity of seven years. No one else was allowed to sell the same product to treat that specific disease. Additionally, the costs associated with developing that orphan drug including payroll for scientists, and miscellaneous costs were subject to a tax credit. Under the Orphan Drug Act, more than 800 orphan drugs and biologics have been approved by the FDA out of more than 5,300 applications. The Whys and Whats after the leap   .   .   .

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