Market Failures, Testing, Treatments, and Vaccines

Mari Megias:

Good day everyone. I am Mari Megias from the Office of Alumni Relations and Resource Development at Harvard Kennedy School and I’m very pleased to welcome you to this Wiener Conference Call. As we all continue to navigate the new normal brought on by the pandemic, we’ll be increasing opportunities for remote engagement with Harvard Kennedy School. So watch your email for more invitations to learn from HKS faculty. Also, given that we are all working remotely, we’re running these calls a bit differently, so apologies in advance for any issues we may experience.

Today we are lucky to be joined by Amitabh Chandra, who is the Ethel Zimmerman Wiener Professor of Public Policy and Director of Health Policy Research at Harvard Kennedy School and the Henry and Allison McCance Professor of Business Administration at Harvard Business School where he directs the joint MS/MBA program in the life sciences. Chandra’s research focuses on innovation and pricing in the biopharmaceutical industry, value in healthcare, and racial disparities in healthcare. He is a member of the Congressional Budget Office’s panel of health advisors and is a research associate at the National Bureau of Economic Research. We’re very fortunate that he has chosen to share his expertise with us this morning. Amitabh.

Amitabh Chandra: 

Thank you so much for inviting me and welcome to all of you. It’s amazing, here we are on April the 16th and I’m talking to you about Coronavirus and new innovations for the Coronavirus, what we can do to restart the economy. And just to think that a month ago or certainly two months ago, none of us, including people like myself, were thinking seriously about the extent to which COVID-19 would affect the United States, even the NIH officials in charge today, if one goes back and listens to their interviews from late February, were quite optimistic that this virus would not reach our shores. And if it did, we would be able to contain it quite easily. So with that, I wanted to talk a little bit about how I’ve been thinking about the state of the economy and its connection to key issues like better treatments, and more testing, and how we might reopen the economy.

I think millions of Americans want to return to work. The president has urged us to stay at home until May the first and we do seem to agree that the likelihood of a vaccine being available is unlikely for at least another 12 to 18 months. So a lot of people have been wondering whether there is a trade off with economic benefits. So in other words, is there a tradeoff between the public health measures that we’re currently enacting and the economic cost of those measures? The second question that I’m going to talk about is how quickly can we reopen the economy. So the first question is I think the easier one to answer, is there a trade off? And my reasoning is that in the short run there is no tradeoff between public health measures like social distancing and economic activity because these public health measures are saving lives and buying us time to bring the economy back.

So put differently, the choices in between yesterday’s booming economy and today’s shuttered economy, it’s really between a temporarily shuttered economy and one that might be devastated over a much longer term. So that brings us to the second question, which is how should we think about reopening the economy? So at what point does that trade off, that doesn’t operate in the short term but might operate in the long-term, start to bite. And the way I think about this, and this is a framework that I’ve built with Doug Melton and Mark Fishman who are both scientists and physicians at Harvard Medical School and in the Faculty of Arts and Sciences, is that the date for reopening the economy depends on three things. It depends on healthcare capacity, and I’ll explain why, it depends on our testing capacity, and it depends on our ability to certify people who are immune to the virus as being immune to the virus. So people who are virus negative as being virus negative.

And my strong sense is that these three constraints, the healthcare capacity, the testing capacity, and the certification capacity all vary from one locale to another, from one state to another. So I do not believe that a single national policy is the right answer to when we should reopen the economy. I think Massachusetts should make a very different determination than New York and New York should make a very different determination than California. So let me tell you a little bit about this framework and why we’ve arrived at the conclusion that I just shared with you. The way I think about it… or the way we think about it, Mark, Doug and I, is that a number of conditions ought to be true before we can reopen a state’s economy. And I’ll go through them in turn.

The first is that the state should be over the peak of the first wave of infection. And the reason for this is that we will need resources and personnel available to deal with the second wave, so anytime we open the economy, there’ll be more transmission, there will be a second wave, we might be testing more. So maybe that second wave is smaller, but nevertheless, people will need hospital care and we need doctors who are well enough and rested enough and nurses who are well and rested to manage the second wave. So none of this works if the delivery system is stretched to capacity. I think this also recognizes that some communities simply do not have the capacity to open as quickly as other communities. The second is we need much greater testing capacity to identify those who have an active infection so that we can quarantine them and contact trace them to figure out who they might have infected. And then there’s this group of people who have been exposed to the virus, have had a prior infection, and some of these people may actually be immune to a second round of the virus.

So we need the ability to test for both these types of people. If you kind of think about the testing that we’re currently doing relative to what our proposal will require, currently we’re doing about 150,000 tests per day and we would need that to increase six fold to a bare minimum of about a million tests a day for this proposal to work. So even though we’ve been quarantined for four weeks, my sense is we have not really used the past four weeks adequately to really increase testing capacity as much as we really need. I think the third thing that we need that we’re getting much better at is the widespread availability of personal protection equipment like masks. So there’s a lot of talking about masks like N95 masks. They don’t have to be in N95 masks, there’s been a lot of innovation in this space. The N95 masks, as many of you know, were invented to protect people from industrial particulate pollution, not virus transmission.

So if these conditions are met, I think that we could certainly allow two groups of people to go back to work. One is people who have demonstrable immunity, and are under the age of 65, and have no complicating medical conditions. This group would include those with asymptomatic and previously symptomatic patients who are now virus free. And the second group would be people who test negative for current infection, but we would have to keep testing them again and again, because I’m negative today doesn’t mean that I’ll be negative tomorrow because I might have contracted the virus as I went grocery shopping. That’s one reason we need this big boost in testing capacity.

I’ll talk a lot about testing later in the call, but I think the thing to remember is that most current tests for active infection are what physicians would refer to quite generally as PCR tests, they’re based on assets for viral DNA, which require multiple cycles of heating and cooling. They are limited in availability and they’re time consuming to perform. The newer tests, we might be able to get away with just using paper strips, so they might be similar to pregnancy tests. They’re being developed. Once they’re developed, we would still have to figure out where to do the testing. And I don’t think it’s smart for us to be doing the testing in hospitals. They should be done in open air parking lots maybe parking lots that belong to schools that are closed or stadiums or shopping malls that are closed. And as soon as someone tests positive, we would have to immediately quarantine them and probably quarantine the contacts of the infected people as well. And all of this will require a nontrivial allocation of resources. And the way I think about it is that this non-trivial allocation of resources would still be worth it because it is the price of reopening the economy.

So if we think about the economy as having lost maybe a quarter of GDP, so maybe 25% of GDP we lost as a result of all of this, that is close to $5 trillion. In some sense we should be willing to spend trillions to get back the 5 trillion that we’ve lost. So after the testing, I think the thing that we need to do is the certification, which is we need to certify people as being okay to work. And I think there we’ve really not seen the kind of innovation that I’ve been hoping for. I was hoping for something like a phone app that would provide people with the time-bound certification of their status. And the reason it would be time bound and time limited is because virus negative people can still get the virus and become virus positive.

So it would be great to have a certification that employers could look at for returning employees. Airlines could check that certification for passengers, restaurants, retailers, grocery stores could require it as a condition for customers and suppliers to conduct business with them. And in some sense neighbors and relatives could require it as a condition to socialize. So initially I think people with the certification could go to work. Maybe they have to wear a mask when they first go to work, maybe they have to work in shifts, maybe they still have to adhere to social distancing in the office, like not shaking hands. And we could modify all of this over time.

Now since all of this is local, I’ll come back to this again, I think these decisions should be made by governors and governors probably have a lot on their plate so they should probably be thinking about appointing czars whose job would be to verify all of the assumptions that I’ve talked about, operationalize the implementation of these ideas, the testing, the certification, the return to work. I think most importantly, in the chance we see these ideas that I’m proposing as not working. So we see an uptick in infection, the kind of uptick that might overwhelm the healthcare system, then someone needs to have the authorization to restore the shutdown because if we restore the shutdown, we slow the transmission. And again, that person would have to be someone with a medical and public health background. So that probably ought to be someone who is not the governor of the state. And there’s a lot of questions out here that I would love to examine with you in the Q and A.

But I think the questions that the czar or the governor ought to be asking are the following. Let me just go through the questions that are on my mind. At a local level are healthcare providers sufficiently resourced to cope with the second wave of cases? How would we know if they’re sufficiently resourced? And if they’re not sufficiently resourced, we should not be reopening the economy. Second question, which test kits are we going to rely on? In the Q and A, we can talk more about testing, but the testing ought to be robust. And right now it’s not always robust. Some of the tests out there have unacceptable rates of false negatives and false positives. Someone would need to figure out if we have sufficient numbers of these test kits available. We’d have to figure out where and how the testing will be done. And like I said, I don’t think we want the testing to be done in hospitals because that exposes the frontline nurses and doctors to potential exposure.

We will have to figure out the certification. How will we certify that some people are virus negative and other people are virus immune because they’ve acquired the antibodies from a prior infection. How will we enforce the quarantine of people that we find virus positive? How will we contact trace all of their contacts? Who will pay for all of this? Every employer, every insurer will say, “This is a very good idea, but we don’t want to pay for it.” So who is then going to figure all of this out? How will the state figure out how to do the testing and certification and not getting tangled in immigration law? I think there will be a real effort by certain people to say this is also a good time to check people’s immigration status and that could discourage precisely the most vulnerable people that we desperately want to test from coming forward and getting tested, which has huge implications for them and all of us.

How would we change this approach as in if a new treatment or vaccine became available? And then finally who will be responsible for calling all of this off if this approach starts to falter? So I think this solution which will require intense collaboration between governments, hospitals, schools, universities, employers, and scientists is not one that the economy is really set up to do. We’re not a particularly collaborative economy in this sense, but I do believe that this collaboration will be critical for population health and could also strengthen our communities long after the reopening. And I think strengthening those communities long after the reopening will be extremely strong, but very necessary medicine for the battered economy that awaits us once the reopening actually commences. So I’m going to stop there because I think that there’s so much expertise on the phone, much more expertise than I may have, that I would love to get all of you involved in the conversation and I would love to learn from all of you. So I’m going to stop talking and if you have questions, then please do ask.

Mari Megias:

Great. So I’d like to start things off by asking a question that has been submitted earlier by one of our callers, which is this, serological testing has been known to be fraught with unknowns and problems, can you please address some of these and how suppliers are working with and around them?

Amitabh Chandra:

Okay. And just to catch everyone up on the phone, the serological testing is the tests where we’re testing for whether or not my body has the antibodies that can fight the virus and give me immunity. They’re not a test for the active virus. So it’s something that we would look for. The serological tests are something that we would look for in patients who have the virus. And this would be important to know because if having had the virus creates the right antibodies and both antibodies confer protection, then these people would be certified to go back to work. So the key to serological testing is knowing whether the patients who have had the virus have the antibodies for immunity, number one. Number two, we’d have to know how much of the antibody they have. So just because they have some antibody does not mean that they have enough of the antibody to give them the immunity.

The third thing we want to know is how long does this antibody give me immunity? So there is some research we have from China suggesting that this immunity might last a couple of months. But if this is a general strategy for reopening, we’d like to know does it give me three months of immunity, six months of immunity, one year of immunity? We don’t have one year of data. So how would we figure all of this out? I think it’s also extremely important to know whether these patients are still shedding active virus. If they’re still shedding active virus, then it would be foolish to certify them as being okay to return to work. And then finally, it takes a while for the body to express, the immunoglobulin antibody. This is the IgG antibody. So what happens in a world where I’ve had the virus, my body is fighting the virus or has fought it, the test doesn’t detect the IgG, the antibody, but my body’s about to express this antibody.

So we sort of have to know when to do the test, how many weeks after the infection should we do the test or is it okay to rely on other antibodies like the IgM antibody, which is usually expressed before the IgG antibody? That’s one piece of this. The second piece of this I mentioned in my comments, which is we are going to have to benchmark the quality of the serological testing against the PCR testing. This is extremely slow and require samples. So we would have to take our novel tests, the one that we manufactured and calibrate it against actual data from a old fashioned PCR test. This would require data from China, or data from one of our hospitals, or data from Italy. The FDA has essentially waived all of this right now because it’s approved these tests without knowledge of the true accuracy of the test.

This is good in the sense that it has granted emergency use authorization, but it’s bad because we don’t really know how good the tests are. There’s some evidence from one particular test from a company named Cellex, and I have no affiliation with Cellex. Cellex has actually shared that data publicly. They’re saying that if you benchmark their test against data from 130 folks from China, the test has a 96% specificity rate, which means that for a hundred people that the test says are virus negative only 96 are actually virus negative. So it sounds pretty good. It sounds like, “Oh wow, I nail 96 out of a hundred.” But that’s actually not good at all if you’re talking about a public health infectious disease, because four people will get told that they were virus negative when they’re actually not virus negative. They were falsely virus negative.

So those four people would then go out and infect others. So if you do this at scale and you have a million people being tested and say 5% of the population actually has the virus, if we have a test that’s at 95% specificity, we would produce 2,500 false negatives. These would be people who are actually infected, but we labeled them as not being infected. That’s a lot of people just in the sample of a million. So I’m a big fan of serological testing, but there’s a lot of unknowns to it right now. And I wish we had used the past month to have learned more of those unknowns because I think that work still has to be done by NIH, by the MGH, by our leading hospitals, by scientists.

Q: I listened to you very carefully and not withstanding I respect immensely what you were suggesting. However, my fear is that of personal liberty, human rights, security in the idea that it’s almost a form of categorization of the citizen as those who are, shall we say, positive and being healthy, more affirmed and those that are negative and are deemed less valid due to their health, a matter that was out of their control. I fully respect in terms of personal security because this COVID is extremely vicious in terms of how it’s able to transmit and I know very little about it, but my fundamental concern is that this could be used as a form for untold purposes in terms of negative categorization. If you have any comments on that, I would very much appreciate that, and I thank you for your insights.

Well, I’m very worried about these tests being used for purposes other than the public health. And I was trying to allude to that when I was talking just about the example of immigration law. I was worried that we will somehow use these tests to learn things about the people that we’re testing, learn things more than are you just virus negative or virus positive? Do you have the antibody? Do you not have the antibody? We might want to use it to learn something about people we might want to use this to snoop on them and pry on them. I think that can happen when we start deploy cell phone data for public health reasons. Suddenly we start to be able to peer into people’s private lives.

I think these are all first order concerns and I think the fact that they are first order concerns means that we should think about them a lot or we should trade off. Not we should, but we should ask ourselves before we enact some of the ideas that I am proposing whether the potential infringement by law enforcement and other authorities is worth the health and economic benefits. And it might not be and if it isn’t, then I don’t think that that’s the path we should go down in any way.

Q: I’ve got a two-part question. And the first part is the Coronavirus, COVID, is a classic black swan event, low probability, high impact. And given that reality and given just how tremendous the impact has been, I’m curious as to why you think we were all so asleep while this was ravaging in China and other parts of Asia. What were the causes for the failure of the imagination to consider that it could come over here? And then secondly, given the impact do we need a Norman Schwarzkopf? Some type of nationals czar to in a very scientific and fairway measure out these extreme steps that you’re talking about as we reopened the economy.

So let me answer the second part of the question first, and it’s always great to hear your voice, so thank you for joining the call. Let me answer the second part of the question first. The national czar idea would be an excellent idea for the parts of this that really require the federal government to act. So why did we stop investing in developing novel treatments and vaccines for this condition? And what’s really sad about this condition is we made a lot of progress as a nation. Our scientists made a lot of progress in terms of working towards the vaccine for Ebola. And we stopped all that research as soon as Ebola went away. That’s actually the reason that we were able to quickly use the Ebola drug, Remdesevir, and push it into trials right away because it had been sitting there on the shelf.

So I think we need a national czar to think about our national strategy around pharmaceutical and vaccine R&D. We might want the national czar also for the planning of who’s going to decide when to shut down the airports and make other determinations like that. That said, I do not believe a national czar is actually the right answer for every state and every locality simply because key to this decision of whether to shut down, whether to open, is the capacity of the local healthcare system. And we don’t want to overwhelm that. Testing capacity is also likely to be quite local. So you live in Chicago, so the great hospitals in Chicago will be able to test many more people, not only because they’re big and large, but because they’re committed to doing this kind of work. But there are lots of other cities with similar capacity that may not be able to rise to this challenge. So I think Chicago and Illinois probably needs to make a very different determination than another state. So I wouldn’t think that the Norman Schwarzkopf approach would substitute for a statewide czar to make statewide decisions.

Now to your first point, I have to say, so many of us, Dave, me included, all of finance, all the financial markets, nobody thought that this would actually become as big as it did. I mean, if we look at when was it that the financial markets started to respond to this, it was quite late in the day. It was sometime in early March, around the same time the politicians figured out that things have to slow down. So I think we were just all incredibly optimistic that social distancing and shutting down, essentially Wu Han in China, and maybe parts of Lombardy would be sufficient, right? And social distancing would have been sufficient had that social distancing happened very, very, very early in those places.

So I think we in the US thought that those countries were shutting down early. So in that world, social distancing is sufficient. But my sense is they were shutting down fairly late. And when you do the social distancing fairly late, the virus has already gotten out. And when it gets out, then the tracing and tracking doesn’t really buy us much because it has pretty high prevalence through increasing and tracking in a high prevalence environment, it’s not cost effective. It’s just everybody essentially has the virus. So everybody is positive so there’s no point in tracing and tracking everybody if they’re all positive. So I think that was the mistake we made, I think we looked at those places and thought, “Look, they’re doing the right thing and they’re doing it early.” My guess is they were doing the right thing, but doing it quite late just like we did the right thing, but we probably did it two weeks later than we ought to have done it.

Q: I just wondering about what entity would be doing this testing? Are you in thinking about local health departments? That type of thing, number one. Number two, how do you see there’s going to be basically a big brother in the sky going back to the previous question? So how do you see this not becoming like a national identity card? Thank you.

It should absolutely not be the national identity card version. So I think it’s got to be the kind of tests that can reside on your phone, so you build it with app manufacturers who can certify that there’s no data sharing back to a national registry on who has tested positive and who has not tested positive. Essentially the idea is it’s like a bracelet that you’re wearing. It just happens to be something that resides on your phone. Now I think there are people in public health that will say, “Well, maybe it would be a good idea if we kept the national registry of who’s positive and who’s negative.” But the more we go down that path of the national registry, the more that national registry can be used for a variety of other purposes that it was not intended for. This is why I prefer the information sitting very locally and the information can’t be shared with another server or another system.

I think who’s going to do all of this? That’s a really important question. If you think about the answer to the question, I think there’s going to be a lot of entities who will say, “We love the idea of testing our employees and getting them back to work, but we don’t want to pay for it. Someone else wants should pay for it.” So there’ll be a lot of free riding where individual employers will say, “We like this idea, but why doesn’t someone else do it? And we’ll get behind it.” Each individual insurer will say the same thing. They’ll say, “Oh, we would love to screen our enrollees, but why doesn’t someone else set up the infrastructure, the parking lot, to do this?”

So I think we know that when there are these three riding problems, the only entity that can really step in and solve free riding is the government working with local public health authorities. So I am very much a fan of what we’re doing in Massachusetts, where in Massachusetts the governor, Charlie Baker, is saying, “There’s a lot of free writing going on. Everyone wants this. No one’s willing to pay for it. So we the state, we’ll do this, we’ll do this for employers and for insurers. We’ll figure out who will pay for it later.”

And this is me speaking for myself, this is not me channeling the governor, my guess is we will raise taxes on all of us, on all employers, on all employees to pay for this. But we can do that after we’ve opened for business. But I think that is the right approach, the right approach being government solving the market failure, the free riding by signaling a very high willingness to pay. If high willingness to pay is just the sum of all our individual willingness’s to pay, we’re just not being truthful about our highest individual willingness to pay. We’re all free riding and I think government can solve that.

Q: So is there a market failure in supplying protective gear, ventilators, treatments? Is this something that the people who are advocating for nationalized health insurance, is that something that’s going to enable their argument? Or is this what is taking place national and inspected and the best that could happen?

That’s a great question, but my own sense of this is that the arguments for a nationalized health insurance do not follow from the facts about ventilator shortage and mask shortage. There might be very good argument for nationalized health insurance, but the ventilator mask shortage does not amplify those arguments and there’s several reasons for this. The first is let’s just look at the countries with nationalized health insurance. Let’s look at the UK, let’s look at Italy, let’s look at Spain, right? It’s not like they have a surplus or supply equals demand when it comes to ventilators and masks. It is absolutely not clear that the nationalized healthcare systems have the marquee research facilities that will rise to this challenge either. So this is not to put down nationalized health insurance. It’s just saying I don’t think that they had a particular advantage in dealing with Coronavirus.

I think the shortages occurred primarily because of people like me, I think a lot of us just thinking, “This would not come to the United States. This will be something that we’ll be able to contain in Lombardy and China.” So market forces were just not signaling to manufacturers that they ought to ramp up production. It’s not like there’s heavy intellectual property on making surgical masks, on making N95 masks. They’re not easy to make, but this is not rocket science if there was a sufficient market signal, we would have built them. They’ve asked this question about a czar for planning for pandemics and I think this is the kind of thing that czar-like entity could have figured out.

So Finland for example, things have been paranoid. They’ve been prepping for a pandemic forever. Not because I think they’re worried about pandemics as much as I think they’ve been living under the shadow of an invasion from the East. And they were actually quite well prepared with masks and ventilators for that reason. And I think that would be one of the advantages of having an organization like FEMA have a very targeted person, but that person would need to be adequately resourced by Congress to be able to procure masks and ventilators and build a plan for building beds in Central Park well before the pandemic happens.

Q: Hi. Everything you say makes just complete sense from the idea of trying to prevent most of the population from getting Corona, but the economic cost is going to be devastating if we wait for all of these medical fixes to kick in. What about the idea of having the ... I’m interested in this from a health and a science perspective, but the idea of having the old and the vulnerable stay home, everybody goes else goes out. You take precautions that you can, but you get this just as you would the flu. Yes, it’s more severe. Yes, you’ll be sick. But if you don’t have an underlying health condition and you’re not very old, maybe this is the risk we have to take before our whole economy goes under. And I’m really wondering what the answer is from your perspective as a health person as well. What am I missing? Because that seems obvious to a lot of us who are not in the health profession.

So I would say the reason I would disagree with you on that answer is the vertical transmission that happens with this virus. So in particular, if we go to Wu Han and look at who got the virus in Wu Han, 80% of the people who got the virus and Wu Han got the virus from young people in the family who were going out and working. Some of them were taking precautions, coming back and giving it to the parents and grandparents in the family or giving it to an asthmatic child in the family. The problem with this virus is that it’s incredibly asymptomatic. Ebola, or SARS, or MERS the minute they infect you, within two days they loudly announce their presence to you and to your family members, so you can quarantine yourself.

This is a very stealthy virus. It doesn’t announce its presence for five, six, seven days. So a lot of people can be fairly asymptomatic for a long period of time. If we allow them to go out in the absence of testing, they will contract the virus and that’s how we have so much of the virus spreading from spring break parties in Florida and Biogen conferences in Boston, Right? These are all very young, healthy people who succumb then gave it to other people. So I would be in favor of this approach of quarantining the elderly and letting other people go to work, and wash their hands, and maybe just take the regular precautions if this was a fast acting virus.

It’s actually a slow acting virus, which means that people who have virus positive can give it to a lot of people and one group that they can give it to that is extremely scarce is just healthcare workers. That’s a group that we need not only for this virus to help us get through this virus, but we need them for all the other ailments that we’re just going to continue to have when we recover from this. But when the stock of healthcare workers is affected, if they’re hurt, if they’re tired, if they die, they get discouraged from coming to work, then I think the health consequences and through that channel the economic consequences can become extremely, extremely severe.

Q: I’m curious about the issue regarding the value of negative tests because they’re valid and good, only at the moment of the test. And because it’s so easily transmissible, someone could test negative and by the time they get the results, they may already have been attacked. How much value is there in terms of this certain certification that someone’s tested negative relative to another individual who’s just completely asymptomatic and hasn’t been tested?

I think what you could do is you could ... I mean your point is right, which is why in the way I’ve been thinking about it, I’ve been saying, “Look, there’s a tradeoff.” It’s absolutely true that if I test negative today, I could test positive tomorrow, which doesn’t mean that today’s negative test has no value. It has less value than some permanent certification, which is why we’re going to have to re-test the virus negative people repeatedly, which in turn means we need more testing capacity than we had been thinking. Now, the reason I’m saying that we need to do the repeated testing to kind of connect to the earlier question, which is there is an economic cost to keeping the economy locked down. And I think in the presence of testing technology, we should be willing to deploy that technology to lessen the pain of the shutdown.

So if we had to do the shutdown say a hundred years ago, a hundred years ago, we didn’t have all this testing technology, we would have been forced to rely on social distancing forever or for a very long period of time. A hundred years later, we have testing technology. So we should use the testing technology to ease the economic burden. But I very much agree with you that it’s not that the test is perfect. We’re going to have to test people almost every day, every two days, maybe it’s every week. And again, connecting back to the earlier question, the frequency with which we have to test people really depends on how prevalent the virus is. So, if it’s not very prevalent then we don’t have to test people that often. If people are being cautious, they’re wearing masks, and washing their hands, and not exchanging food utensils in the workplace, then maybe we have to test people less frequently.

Q: I had a quick question about the underlying structure of the US healthcare system and how that has affected our response and will affect our future response, specifically our grounding and fee for service and whether or not that has had an impact on the healthcare workforce has been, how they’ve been able to respond. We’re looking at a lot of primary care practices specifically, but other practices in general that are facing real shortages of revenue from declining foot traffic and in-person visits. We’ve seen, I think, the most recent jobs record actually had healthcare losing jobs for the first time in well over a decade. And I’m just wondering if we think the structure of fee for service is contributing to that shortage, helping reduce our slack at a time we need to increase it or if it’s really having not that much effect and even under a value based care system we’d still be facing a lot of these same challenges.

So I think there’s no question that the physician practices in particular and hospitals are going to get crushed under a fee for service model, right? Because if they’ve had to put off all elective surgery, then they’re not getting paid and some of those elective surgeries will come back and then there’ll be fine, but some of them may just go away completely, which is what would hurt a lot of physicians and a lot of hospitals. All that said, I think this just highlights yet another reason for why the fee for service have to go. It just has to go and we have to replace it with something else, which looks like competition between hospitals or competition between insurers, between physician led accountable care organizations. I think those are the kinds of ideas that we have to get behind.

I will say that those ideas will not by themselves have actually helped us in this situation. I mean, if we think about the closed HMOs in the United States, yes, they’re not hurting as much as the fee for service practices because those closed HMOs like Kaiser are getting paid regardless of whether or not they do the elective surgery. So that’s good. But it’s not like they were better prepared with more ventilators and more masks or better treatments or anything like that as a result of being a closed HMO system.

So it’s just another way of saying I would be happy to see this pandemic accelerate the demise of fee for service healthcare, which would be good. But even when that fee for service healthcare gets replaced with something else, it’s not like the new entity that replaces it is going to be able to be prepared for three-sigma events. That’s, I think, highly unlikely. In fact, it’s going to be even less likely that they’re prepared for three-sigma events simply because they have no financial incentive to invest in very, very rare things. They would love to say no to spending on pandemics.

Q: I wanted to pick up a little bit on the fee for service question and maybe in a more optimistic way. It feels like many proven business models, and one I’m thinking of in particular is asynchronous virtual care, have just exploded because the demand has gone elastic. People just need to go through these COVID screens in some way or another. Baylor Scott & White in Texas saw their volume of virtual care quintuple in three weeks because of this asynchronous training, or testing, or asynchronous virtual care. And they were able to train doctors quickly using a YouTube video. You think a lot about innovation, I’m just wondering if you’re seeing things like that that are emerging, proven business models, proven technologies that the system is suppressed in large measure because of fee for service payment and perverse incentives. Will we see things like these emerge in such incredible fashion that they fundamentally change supply demand dynamics and business models when this is all said and done?

Oh, absolutely. I think there’s two innovations. I mean, you talk about telemedicine and I think a lot of people might have been reluctant to use telemedicine and maybe it was providers like Providence out West that were relying on telemedicine. And those of us who live in urban America have not been using telemedicine. But I think a long shutdown like this, a long quarantining might force many of us to experience it and then come away saying, “I liked that that was actually more convenient. It was actually better and cheaper.” I think another force of innovation that I’m starting to hear about more and more is a much needed conversation around letting people practice at the top of their license. So the local CVS and Walgreens are all open, but my doctor’s office is closed. So allowing pharmacists in the United States to sort of do more than they’ve been allowed to do or it could be minute clinics or what have you, I think that kind of innovation will also be accelerated as a result of this pandemic.

And then I think finally the kind of innovation that we were always capable of, but probably under-invested in as a society was innovation in treatments and vaccines for viruses. I think that reflected this fee for service mindset where I’m going to get paid a lot more money producing and selling a gene therapy for a rare orphan disease, which is great, which is transformative for that patient, but that is quite different than developing and discovering a vaccine for a pandemic that might never happen because if it doesn’t happen, how do I get paid? I need it to happen to get paid.

So I think one positive implication of this pandemic for innovation is that people will start to realize that we need to pay for some of these vaccines regardless of whether the pandemic happens or not. If we had created a market for these vaccines prior to the pandemic having shown up at our doorstep, then we would have had the vaccine and we wouldn’t have had this pandemic. In fact, maybe it could have been the case that China shuts Wu Han down on January the 24th and we, the United States, ship 15 million doses of a Coronavirus vaccine to them on January the 25th. And then we would have contained the virus in China and it wouldn’t have reached us. And if it did, we’d have more vaccines for it. I think that innovation is something that our scientists and our doctors were always capable of around the world.

We heavily under-invested in that around the world. That’s not, I think, an American failure, that is a worldwide failure. And I think at the time for people who have advocated for national healthcare systems to ask themselves, “Gee, why didn’t my national healthcare system produce that vaccine or produce the treatment for a pandemic given that the nationalized healthcare system ultimately has to care for people who have the pandemic?” I think that we will finally start to think about investing in treatments for diseases before people actually have the disease, which would be a very good thing.

Q: I just want to ask if there are other countries taking a similar path. I know that a lot of countries have now gotten past their apexes, thinking about Spain, and China, and South Korea, and Japan, and Denmark, and Sweden, and Germany, and maybe other places too that are now unleashing parts of the economy in certain ways, [inaudible 00:52:41] similar kinds of things, are they setting up reporting mechanisms through cell phones? What mechanisms are they putting in place so they can not roll back just the way you’re trying to not roll back? Any comment on that?

Right. Right. So I think the countries that are opening, a lot of them that are opening like Denmark and Germany, have much more testing capacity available to them that we do not. I do not believe from my understanding of what they’re doing, that they’re doing the testing as deliberately as what I was suggesting where there’s a local czar that’s essentially saying, “This is a time bound test and your phone will glow red because you’ve not had your test in the past 48 hours.” I’m not aware of that kind of certification being deployed in those countries. In South Korea, which did a much better job of testing everybody, the testing was nationalized, there was a lot of data collected on people getting tested. And I think connecting that fact to the questions that were asked earlier on the call, I worry that in our system in the United States, that level of data collection would actually be deployed for all the wrong purposes.

I think this would activate all our instincts to discriminate against those who are most vulnerable in society. And that it would be damaging for society, but it would also discourage those members from coming forward and getting tested in the first place. So I think it’s another way of saying while I supported what South Korea did with testing, the certification that they instituted is not the certification that I think is the best idea for the United States given our long history with using this kind of information for all the wrong reasons.

So I think that’s one reason that what Doug and Mark and I proposed was in some ways a uniquely American solution where we don’t just rely on social isolation, we do rely on social isolation to buy us time. It buys us time to actually build the tests and deploy the tests. But then we do use technology to open the economy as quickly as possible certifying people who are virus negative or who have the requisite antibodies for a limited period of time. And this just reflects my own uncertainty around how long the antibodies confer immunity and how long virus negative people are actually virus negative. So to me it’s a very American solution because it’s this combination of technology with local decision making to figure out what’s best for communities.

Mari Megias:

Great. Well, thank you very much for that question and answer and thank you very much for everyone who called in to listen. And thank you especially to Amitabh Chandra for sharing his expertise with us today.

Amitabh Chandra:

I just want to thank everyone for joining the call. I have had to get up to 80 miles an hour on this topic. And I know that many of you have thought about this question and if you have feedback on the way you’re thinking about it, things I should really be thinking about that I have not thought about or if you’d just like to continue the conversation, I would be honored to continue that discussion with you. And then finally, I’ll end by saying, none of my thoughts would have been possible were it not for just the incredible generosity of the Kennedy School and the Wiener Center to create an environment where faculty members can actually think about these kinds of questions for long periods of time and get actively involved in the policymaking process. So I thank you and all our donors and alumni a lot for that generosity.