The Mustached Villain Behind the Rapid Covid Testing Shortage

The Food and Drug Administration has too many people that like monopoly power.

Welcome to BIG, a newsletter on the politics of monopoly power. If you’d like to sign up to receive issues over email, you can do so here

A few months ago, a colleague at my organization noticed there’s a shortage of rapid Covid tests in the U.S., while these tests are cheap and ubiquitous in Europe. We did some digging, and it turns out that the Food and Drug Administration official, Tim Stenzel, who approves Covid tests only approved two of them, and that he had worked at both companies. We sent a letter on the matter to the government, and contacted multiple members of Congress, which seemed to kick them into high gear.

Since our letter, the Biden administration has offered $2 billion to get rapid testing, and got agreements with Walmart, Amazon, and Kroger to reduce prices, HHS announced $560 million in funds to build out more manufacturing, the NIH and FDA said they will work on quickening approval times, and the FDA has approved more rapid testing products.

But we also sent our letter to ProPublica, who did a great story digging in to just what happened to cause this problem in the first place. The FDA comes out looking incompetent and downright evil, with one official quitting in frustration. There were no open payoffs, no smoking gun, just a bureaucratic run-around where the FDA simply refused to accept reasonable data (especially if it was collected abroad), and treated firms it had recruited to produce tests as criminals in a Kafka-esque bureaucracy. t

The real cause is that Stenzel simply thinks that monopolies are more efficient.

Shuren and Stenzel recommended a year ago in their New England Journal of Medicine column that the U.S. government should have authorized a handful of tests and had the CDC contract with those manufacturers, rather than trying to vet thousands of diagnostics, which they called “an inefficient use of resources.”

This is the theory behind the national champion idea of industrial policy. Dominant well-branded firms, the thinking goes, know what they are doing, so let them drive development. In this case, as in most cases, the actual firms were a disaster, not only gouging customers but actually destroying tests for financial reasons instead of selling them.

What is happening now that there’s more competition coming online?

"On an earnings call in October, Abbott CEO Robert Ford said the company anticipated dropping its price to maintain its market share, but wouldn’t if competition didn’t make it necessary."

And there we go.