Paul Romer has a lovely post, If virus tests were like sodas. (HT Marginal Revolution.) Go enjoy the whole thing. It's short. A few excerpts and a suggested addition:
Imagine a world in which the only way to get a soda is to get your doctor to write a prescription. It costs $20 per can. Your insurance company pays. ...
Because they have to keep total costs from running out of control, insurance companies, health care providers, and government regulators have cobbled together a system that limits access to soda. One part of this system is an expensive regulatory process...
The only people who can get sodas are those already under the care of the health care system. They are not thirsty, but the insurance company covers the cost, so whatever.
People who are thirsty start going to the hospital just to get soda. Doctors comply with their requests for a prescription. Soda producers try to increase output, but soon run into “bottlenecks.” One vendor with an approved soda delivery system that packages a straw with a can finds that its supplier of straws can not keep up with the increased demand. This soda company explains to its unhappy customers that it has FDA approval only for a product that includes a straw from its traditional supplier. The soda company says that it is applying to the FDA for an Emergency Use Authorization (EUA) that gives it permission to bundle a can with a straw from a different vendor. As it waits, it keeps repeating its excuse: “There is a straw bottleneck!”...
In their experiments with drinking from the can, these same university researchers realize soda is just flavored sugar water and that they could produce millions of sodas per day at a price well under $1 per can. The researchers publicize their findings. Policy wonks urge them to get going: “Produce the sodas that a thirsty nation needs.” But these do not say anything about who will pay for all these additional sodas. The researchers are good sports, but they are not idiots. They produce some token batches of soda and go back to writing papers.
... wonks conclude that even an economic system as big, as powerful, and as innovative as the one we have established in the United States cannot rise to the challenge of producing millions of sodas per day. They settle for a stretch goal of offering one soda per month to each family.Comment: The policy wonks as usual left out the problem: big, powerful, innovated, and regulated to death.
The facts:
Researchers affiliated with Rutgers University did discover that you do not need a swab to do an RT-PCR test for the SARS-CoV-2 virus. They even went to the trouble to get an EUA to conduct tests on saliva samples.
No one has proposed a way to pay the researchers at Rutgers, or their peers in comparable laboratories located throughout the United States, for the tests they could supply. For now, they do them because they are good sports.
The US economy produces 350 million 12 oz cans worth of soda each day.
Soda producers do not need to get regulatory approval each time they innovate around some hurdle or bottleneck.I'm not sure soda is so lightly regulated, but we'll leave that.
Lessons
If we want to use this nation’s massive capacity – much of which, by the way, is now sitting idle – to produce tens of millions of virus tests per day, there is a way to do it:
Decide what a test should do.
As long as labs provide tests that do what a test is supposed to do, let them worry about the details.
Do not appeal to charity; be prepared to pay these labs twice as much as we spend on soda.On the last point, the usually clear Paul ran out of steam. Who should be prepared to pay the labs? The same insurance companies and government purchasers where the whole problem started?
Let me offer a suggestion.Allow people and businesses to pay the labs whatever the labs want to charge and buy the tests themselves. Require only that they report the test result to the CDC's national database.
Lots of people and businesses will happily pay cash for a test. Spitting in a cup and sending it in -- or putting it in an Abbot Labs machine for instant results -- cannot possibly hurt anyone. There is no reason such tests should not be sold, unregulated, on the free market, like pregnancy tests.
Sure, label the test with the best estimate of its false positive and negative rate, and the same long legal boilerplate disclaimers that go on a lawnmower you buy from Home Depot.
Who gets it first? Well, those willing to pay the most. This is not a capitalist inequality outrage, this is a good idea. GDP and employment are cratering. The people and businesses who get most economic value out of testing should get them first. And, by doing so, they fund the immense expense of test development and rapid ramp up for the rest of us. And, of course, the higher the price, the more quickly competitors will ramp up and drop prices. We'll all get tests faster if those who "can afford it" pay through the nose to get it first.
