Casey Mulligan on Vaccines, the Pandemic, and the FDA

Episode Summary

Executive Summary: Russ Roberts and Casey Mulligan assess FDA regulation through the lens of Sam Peltzman’s classic work and Mulligan’s newer research. They argue that regulation often delays beneficial drugs, reduces innovation, and ignores substitution into worse alternatives, while Operation Warp Speed showed how advance purchases and deregulation can accelerate life-saving innovation in emergencies.

Main Topics: Peltzman’s critique of FDA regulation: Mulligan revisits Peltzman’s 1973 finding that FDA effectiveness rules sharply reduced new drug entry after 1962, likely acting more as a barrier than a quality filter. Opportunity costs of delay: The discussion emphasizes that regulatory delays have unseen costs: slower access to helpful drugs, lower innovation incentives, and worse health outcomes from postponed treatment. Drug pricing, me-too drugs, and regulation: Roberts and Mulligan debate whether FDA processes encourage marginal 'me-too' drugs and preserve industry profits, while also noting the role of price controls and global free-riding. Operation Warp Speed and vaccine acceleration: Mulligan explains how advance purchase commitments and lower regulatory hurdles were designed to speed COVID vaccine development, manufacturing, and distribution. COVID-era shortages and market responses: They compare masks, ventilators, tests, and vaccines, arguing that emergency response was hampered by regulatory barriers and missed market-based solutions. School closures, public health, and substitution effects: The conversation argues that closing schools was a form of 'quack medicine' because it imposed huge costs on children and families while ignoring better targeted protections for the vulnerable. Freedom, local knowledge, and unintended consequences: Both speakers conclude that voluntary cooperation, decentralized decision-making, and attention to alternative behaviors are essential in crises and in ordinary life.

Key Arguments: FDA approval rules can function primarily as entry barriers, delaying beneficial drugs rather than screening out many harmful ones. Opportunity costs matter: every day a useful drug or vaccine is delayed, people substitute into less effective, more harmful, or more expensive alternatives. Market processes and professional judgment already provide some screening of ineffective drugs; FDA adds less value than commonly claimed. Regulation can encourage 'me-too' innovations by making blockbuster drugs vulnerable to price controls and political backlash. Operation Warp Speed worked because it reduced uncertainty through advance purchases and encouraged manufacturers to invest in production capacity early. In emergencies, speed and efficacy should be traded off explicitly; waiting for perfect approval can cost more lives than accepting early, imperfect access. School closures were likely a major error because children were low-risk, while the social and educational costs were immense. Public health should focus on protecting the vulnerable rather than rearranging the lives of healthy people. When prescription drugs are constrained, people may shift to more dangerous substitutes such as heroin or fentanyl; policy must consider real-world alternatives. Freedom and voluntary cooperation mobilize local knowledge and generate better outcomes than centralized mandates in many contexts.

Data Points: FDA mandate expansion: 1962 - The year the FDA was given the effectiveness mandate, which Peltzman studied retrospectively. Estimated market harm from FDA regulation: 5% to 10% of prescription spending - Peltzman’s rough estimate of the cost of the FDA’s added mandate. Operation Warp Speed budget: $10 billion - Mulligan cites the Treasury cost of the program as tiny relative to its benefits. Normal life value saved by faster vaccine rollout: About $1 trillion every 6 months - Roberts’ rough framing of the economic value of returning to normal activity. COVID vaccine rollout timeline: About 9 months - Mulligan says this was fast but still too slow relative to what could have been done. Original vaccine formula development speed: A weekend / about a week - Roberts notes Moderna’s formula specification happened very quickly once focused development began. Delay for Europe on new drugs: About 3 years - Roberts argues European patients often receive new drugs far later than U.S. patients. Life expectancy difference in cancer care: 18 months longer - Roberts states that, conditional on tumor size, U.S. cancer patients may live 18 months longer than European counterparts. FDA-related drug price trend: First nominal decline in 46 years - Mulligan says drug prices fell in nominal terms for the first time in 46 years under deregulatory efforts. First human vaccine administration: March 16 or 18, 2020 - Roberts recalls the day the first COVID vaccine was administered to humans, just as schools were closing.

Pivotal Quotes: "the FDA kills people" — Russ Roberts: Roberts summarizes the Peltzman-style argument that delayed access to drugs can cost lives. "the goal of life is not to live forever or as long as possible. The goal of life is to get the most out of life" — Russ Roberts: Used to frame the broader tradeoff between safety, freedom, and human flourishing during the pandemic. "I think the power of freedom" — Casey Mulligan: Mulligan’s answer when asked for the most important lesson from the pandemic.

Implications: The episode argues regulators should weigh hidden costs, alternatives, and speed more carefully. In future crises, governments should favor rapid access, voluntary adaptation, and targeted protection over blanket restrictions and slow approval processes.