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Mari Megias:

Good day everyone. I am Mari Megias in 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, the first one of the spring semester. So today we are joined by Dr. Marcella Alsan, who is professor of public policy at Harvard Kennedy School. She is the medical doctor and applied micro economist who studies health inequity. Her bachelor's degree is from Harvard college and she also earned her masters in public health from the Harvard Chan school of public health The MD from Loyola university and a PhD in economics from Harvard university. She trained at Brigham and Women's Hospital as a global health equity residency fellow and then combined her PhD with an infectious disease fellowship at Massachusetts General Hospital. Before returning to Harvard she was on the faculty of Stanford University. Given her expertise and experience we're so fortunate that she's chosen to share her thoughts today with the Kennedy School's alumni and friends. Dr. Alsan.

Marcella Alsan:

Thank you so much, Mari. And thank you very much for joining us today. I actually have for several years at Stanford taught a course called the economics of infectious disease and was able to teach it for the first time this past year at the Kennedy school. And so I thought I'd talk a little bit about what makes infectious disease? what are infectious diseases? What makes them special and unique? And why they are is sort of a role for government involvement when it comes to infectious diseases from a theoretical perspective. And then end with a little bit more on vaccines, since I know that a lot of people are interested in that topic in the current moment. So this was the Johns Hopkins map in February of 2020 it was focused on China and there were 43,000 cases at the time, and a thousand deaths. It was focused on China because really that is where the problem was. There wasn't really a problem anywhere else outside of East Asia and other parts of Asia. That we can fast forward to February 4th.

So roughly a year later, we have over a hundred million cases now. Over almost 2.3 million deaths and the map has panned out because we can see now that the entire globe has been touched by this virus. No country, no nation state really has escaped the tentacles of this virus. And this was an economist cover that really struck me in the summer. Just basically the entire earth had been closed down by this microscopic viral virus.

And a lot of my training, I started out in development economics as a healthcare worker in East Africa and other parts of Africa. And there is projections and now we're starting to actually see some data coming from household surveys, but these are projections from the World Bank. And after kind of a decade of progress following the great recession of 2008, there had been a decade of progress in reducing. This y-axis is the millions of people in extreme poverty around the world. The pre COVID projection had us continuing on that path and as the pandemic has continued on the April and then the June baseline in June downside projection have seen those gains eroded and more people in developing countries being put in to poverty.

Interestingly, Angus Deaton, who is a Nobel Laureate in economics at Princeton talks about the possibility across countries there actually being more convergence but within countries more divergence, because some developed countries economies might be actually really hard hit leading to stagnation for them as emerging economies might not be hit quite as hard but regardless of whether we see at the country level, some convergence within countries it does look like the poor will be very hard hit from these most recent household surveys that are coming out from developing countries. And in our own country, in the United States we see this disproportionate burden also affecting people. Marginalized communities, people of color, et cetera. So I include this.

This is by Anthony Fauci in 2012 the title is very appealing, The Perpetual Challenge of Infectious Disease. And again, I am trained in infectious disease as Mari said so, know your source. I have a very sort of oversized view of their importance, but if you look throughout history they've had a profound impact on human society. They have influenced as written here, Wars, determined fates of nations and empire, affected the progress of civilization. And they are compelling actors in the drama of human history. And why perpetual? I mean, just looking back since the 2000 we've seen lots of different viruses and other pathogens emerge or re emerge. so SARS, took a younger virus, Zika virus cholera has re-emerged on the Island of Haiti after that country's devastating earthquake. And then the UN peacekeeping troops actually defecated in freshwater and led to a massive cholera outbreak in that country. Ebola, as we were dealing with. Just recently MERS, and of course antedating this is the emergence of HIV AIDS. And actually in the background of all of this is antimicrobial resistance, or antibiotic resistance, which is also extremely terrifying in the sense that, you know we have basically built our modern medical enterprise on the use of antibiotics. And you might say, gee, but I don't go out and plow and get a knife cut in my leg and have horrible infectious and et cetera, et cetera. But you know think about childbirth. Think about any operation you have. Think about whether you get cancer. If any of these things happen, cancer is basically obliterating your immune system. That's what chemotherapy often does. So if you get an infection, you'll need an antibiotic. So if you go to surgery you're given a pre-op antibiotic to prevent infection. If you don't have any complications with childbirth sometimes you're put on an antibiotic if you have a ceasarean, so antibiotics are really the crux. They're the basic pillar that allow modern medicine to function.

And so if we have huge resistance building to antibiotics and new types of ways for bacteria to evade our current antibiotic system, and it's not a money making enterprise to have for antibiotics as it might be for other chronic diseases because the hallmark of a good antibiotic is it works really well for only a very short amount of time. And you don't use it that often or else you develop resistance. So you can see why we don't have a lot of RD going on in antibiotics and yet our pipeline of effective ones is really running dry. So that's not on this slide but it's also an ongoing challenge.

So what are the characteristics of infectious diseases that set them apart from other diseases that you might be familiar with? Well, as we've seen they have the potential for explosive human spreads. And they're caused by a single agent, so even though the sort of phenotype of it might vary based on your vulnerability, based on that particular actual pathogen and what it exploits. It's not always the elderly. It can be, for example, in Japan pregnant women were extremely vulnerable. HIV AIDS hit those who were in their prime of life because of its route of transmission, was sexually transmitted.

So basically you don't need to have, for example in cancer there's a two hit hypothesis, you need another one mutation and then another mutation, genetic predisposition and something else. This is just like one thing, or cardiovascular disease is sort of, a lot of different conflation of co-factors coming together. And it also has a few known routes of communicable transmission. This is why we have a whole surveillance unit in the CDC that gets deployed when there is an outbreak, because we can just figure it out through careful history who is sick? Who were the contacts? And what were the types of behaviors they had in common to help us determine is this something that's transmitted respiratory, is it human to human? Is it fecal-oral? Is it mother to child, et cetera, et cetera. And then once, you know, the transmission it's possibly preventable because if you know how it transmits then you can know how it could be prevented.

And I haven't asked you there because I think what we've seen again in the current moment and we certainly saw with HIV AIDS going back to the 1800 and looking at color on the United States, we saw it with the Irish in Boston, even now there's evidence from the bubonic plague that the poor in our society are less able oftentimes to protect themselves. They're less able to telecommute. They're more reliant on public transportation systems. They're more in positions where they're economically vulnerable and have to expose themselves. I remember Paul Farmer, who's a medical anthropologist at the medical school, and he would talk about HIV in Haiti and talking about the sort of non-voluntary nature of sex that was leading a lot of women in Haiti to contract HIV AIDS. So it's preventable with an asterix. It's almost a luxury good to be able to prevent infectious diseases sometimes.

And then this last bullet or the second to the last point I think is extremely important because, I feel like maybe we have become a little more attune to the notion that we have conquered infectious diseases. I mean, this was not just social scientists who've been seeing this. A lot of medical physicians and the medical community felt like infectious diseases were kind of a thing of the past. And we'd gone through the demographic transition. We'd gone through the epidemiologic transition. Infectious diseases are a problem from poor countries and poor people in poor countries. But the fact of the matter is that infectious diseases have, their genetics are just... They're actually astounding and I think are really... If I could come back and analyze that maybe just focus on that because they horizontally transfer genetic material and they're able to pick up genetic material from the mule. They exponentially proliferate, and so there's a lot of opportunity for mistakes in their editing process, and their genetic material to be passed on. And they can really quickly figure out which one is surviving, which one is not. Just through the process of evolutionary selection in the population.

So I hope that we have lost some of our hubris when it comes to thinking that we've conquered infectious diseases. And then there's close dependence on the complexity of human behavior, we've seen it, and a lot of times infections are introduced by trade, by the military, by oftentimes the first people to get sick will be those people that are more mobile. Often the elite we'll get will fall sick first, but it does have a pattern, a very market unfortunate pattern whereby it settles in and really grips and takes hold in the communities that are less privileged. Okay. So in my course that gives you all of these different factors. I'm just gonna talk a little bit about the theory of externalities. But in my class, externalities are a problem. Sorry, I should've said so. The fact that infectious disease are communicable is what makes them by definition have an externality. I'll talk a bit more about that, but in my course I also talk about the measurement of externalities. You can't actually simply... Think about a randomized trial. You generally have a control group and a treatment group and you just compare averages across the two groups, right? And you randomly assign them, so you dealt with bias. That is easy to do in the presence of externalities because there is by definition a spillover effect, but the treated group could be affecting the control group. So even the straight or RCT, Randomized Controlled Trials becomes challenging in the setting of externalities, then there are different frameworks we need to bring in mind. And more theory that we go through in the actual course.

So the First welfare theorem for many of you that our alumni probably remember this from your intro to micro courses, and it is the basis for kind of the prominence of the free market system. Is it the competitive equilibrium is pareto efficient and maximizes the social surplus. Maximizes the song of consumer surplus and producer surplus and is pareto efficient. Meaning no entity can be made better off without making another entity worse off. And however, there are some assumptions that go behind that. And of course, they're all kind of farcical particularly in the setting of infectious diseases. So no asymmetric information, everyone is a price taker, so there's no monopolies. And then of course this part that I've highlighted in red, no externalities. But again, as we just said and I'll formally define here, infectious diseases by their communicable nature have an externality associated with them. So an externality is present whenever some agents welfare, utility or profit is directly affected by the actions of another agent in the economy and this effect lies outside the price system. As I said if externalities are present that violates an assumption of the first welfare theorem and the competitive equilibrium no longer maximizes surplus. The private and social marginal benefit or costs differ. So think about on the producer side.

Well, I'll give you a couple of examples in this next. So there are actually, you can draw a two by two table of the different types of externalities that exists there on the consumption side and on the producers side, and they're positive and negative. So negative externalities we want to curtail, positive externalities we want to promote. And so consumption externalities might be consumption of an electric vehicle. The government won't promote that sort of thing. Negative externalities are exhaust fumes from maybe driving a diesel car. So we might want to figure out a way to discourage that, because that person that's driving that car might really enjoy that old vintage mobile, but not fully appreciate the fact that they are packing the health of the environment, and maybe particularly hurting people that have vulnerable lungs or something like that. There are also production externalities, basic research into new technologies might be underfunded, particularly those, like I just mentioned antibiotics that don't have extremely, you know, their market size is gonna be limited because the time period that you wanna use them is actually very, very short. And doctors who are trying to preserve them, so that they don't develop resistance. Aren't going to be prescribing them all that often. So the market size is maybe smaller, or maybe the market is poor. We might not see a lot of investment into technologies but overall investment into new technologies could suffer, because if you put all this money into finding some natural resource who's to say that your company will be able to drill or use that natural resource, or to patent a new system who's to say that that secret won't get out. And so we need to think about government approaches to encourage production. And then pollution from factory is the most common canonical sort of negative production externality. So infectious diseases, we could populate this whole thing with COVID-19 externalities. On the consumption side people might under consume the vaccine, they might not understand that not only is it helping them, but it might be protecting others around them that could actually have fiscal externalities. It can have benefits for the entire economy. People might go out and have gatherings and whatnot and that might actually have a negative externality in terms of disease spread. Investment in R&D with respect to COVID or showing a film, or having people come to your restaurant, or something like that. That could have a negative production externality as well.

So you can see that again, by dent of this communicable nature, people can take actions, firms can take actions that have effects on others in the economy, and they don't necessarily have to pay the cost or maybe not receive the benefit associated with those things. So basically that means that there is large scale scope for, I mean, this is classic 101 basic economics. No economists would argue that there's not a role for government in the presence of externalities. It's just economics 101. And then there are different solutions. Command and control regulations, or just the government coming in and kind of setting a standard. Could be in taxes or subsidies, or trying to tax any of the negative externalities. Subsidize those that are positive, encourage those things that are positive. Taxes are seen as sort of a double dividend, because not only can you correct the inefficiency and improve the size of the social surplus, but you can also raise money without distortions, but for all of these types of interventions, you need a lot of information to know what is the right size of the tax or the subsidy in order to actually align the marginal private cost with the marginal social cost, or marginal social benefit if it's a positive externality Now, just to show you that this is not, again I think Greg Mankiw, is seen as. I think he worked in Republican administrations. And so he's not kind of one of the most left economists out there by any stretch, but he wrote in the New York times, we should be paying people to get vaccinated. Again, this is the notion that we want to encourage this positive consumption externality. And so to do that the theorem suggests that this would be an appropriate way to proceed. And will be happy to debate this more in the Q&A, but at least from the theory, it definitely follows that you know you have something that you want people to do more of. They might under consume it, because their private benefit doesn't align with the social benefit. And this is a way to make those two things align, to correct the price system. Now of course on the production side there was a concern particularly in if I think it's still pretty cute but there was a concern that, first of all we should pull resources globally, through this mechanism called COVAX, because we might not actually have a winner. So we want to distribute the risk associated with investing just in a few games manufacturers, BARDA max operation works giving money to a few companies, but globally we could invest in a lot more companies where we could share the knowledge, share the innovation that is occurring.

Let's say Oxford actually got there first and Pfizer's didn't work. We could pull this knowledge together for the global good. So COVAX was to invest in nine candidate vaccines and to pool resources in order to do that in the innovation stage. It also plan to distribute $2 billion to participant countries based on population size. So it's still because of that sort of innovation problem. I mean, with the new variants I guess we could also discuss how we're going to innovate and response to that. But because I think all of the vaccine candidates or majority of them went after the spike protein that seemed to work no matter whether you used an mRNA technology or a viral vector technology. The first goal of COVAX which was to kind of spread risk across multiple different producers is not as pertinent anymore. But the second goal, which is to distribute vaccine to developing countries is still very pertinent. And the idea of claw backs kind of falls... A lot of people we'll talk about it in an advanced market commitments. Advanced market commitments are actually something that came before you know, 10 or 15 years, years ago now, Michael Kremer the recent, shared the Nobel with Esther Duflo And Abhijit Banerjee in 2019 for their work on using randomized control trials and development economics, but him and his wife Rachel Glennerster, who is now the head of DFID, they talked about advanced market commitments at least a decade ago when it came to Pneumovax. Pneumovax was a vaccine against strep pneumococcus which is a bacteria that really affects children. Can kill children, causes meningitis. Ear infections, make them deaf. Hard to learn. And Pneumovax was being used in the United States but there were different variants of the strain over different strains in Africa and other parts of the developing world. And no manufacturer work actually producing vaccine for those particular strains that were circulating in Africa. So the idea of that advanced market commitment was basically to say, look, governments or there'll be a private public partnership with maybe Gabby, Bill Gates, wealthy countries will come together and they'll commit if companies will invest in R&D they will commit to buying the product, after it passes some specifications. Now that's a different problem than the problem we have now. The problem we have now is really capacity. We have a lot of the innovation already done. So we're farther down at the pipeline. They're trying to kind of build something that is pretty far upstream in terms of the pipeline. One of the problems with technology is way up in the pipeline. Let's say you wanna come up with a brand new technology for a disease like Chavez disease. You wanna have a vaccine against a neglected tropical disease like Chagas disease. If it's so far upstream, it's hard to actually specify in the contract what the vaccine or what the technology has to do. So there are some contracting problems that people have noted with this idea of an advanced market commitment. But the idea is basically to subsidize these firms to engage in research that is directed towards poor people, problems of poor people. So it's a very noble idea, even if there are some concerns about how you contract that or whatever, but that sort of a different problem than we're at right now.

Right now we have a problem of just capacity. How do we actually make enough vaccine for all the people in the world who need it? And then of course, how do you distribute it? And how do you make sure that it's equitable? Okay. So COVAX ideally was going to be the centralized authority which would basically, if every country in the world was participating in COVAX and only running its agreements through COVAX imagine it. So sort of a centralized place, still working with whoever the players are, the manufacturers are in the current moment, but then COVAX would basically take all the orders kind of serve this middlemen and decide and dole out to each country, according to its population size how much vaccine it would get. That could be one approach to COVAX, but what's happened of course is that all of the rich countries have gone and done these purchase agreements with different companies. and they have, they call them this is a slide from Duke, Duke universities doing a great job, tracking all of these deals that are going on.

This slide is a little bit old, but you can see that even before a vaccine was developed a lot of countries were going in and making deals with these manufacturing, with these companies saying, we'll buy this, we'll buy that, et cetera, et cetera. And if you look across where are these vaccines being distributed as of January 30th, we can see that, this is red is low income and then pink is high-income, and you can see Oxford university AstraZeneca, that partnership has put the most. First of all, I think they can produce the most, their scale seems to be larger than other countries. And also they've committed to COVAX more than these other companies. And, you know, that's a sort of academic as well as public private partnership. But a lot of the supply has been going to the countries that can pay the price. So those are Pfizer and Medina are almost exclusively going to high income or disproportionately going to high-income countries. Now, I don't see on here the production of, so there's Sinovac. And I don't see on here the production of Sputnik Sputnik is Russia's vaccine that's enhanced it was recently shown to be very efficacious actually, even though they went out prior to having those results. So I think Sputnik has made some deals already with South American countries. So those are not represented here just as an aside.

So what can we do to increase the supply? And this is from, I mentioned in the pre-call that Pfizer and Stat news are two great resources again and also Duke for looking at the actual supply side of things. Technological challenges are daunting and it's hard to know what companies actually need. And of course the Biden administration has committed to use the defense production act for things that are kind of on the fringes, like needles or vials, or maybe PPE that people need. You know, fresh gloves and hand sanitizer, in order to actually be able to poke someone you need little alcohol rubs. So all of that is potentially going to now be produced using the Defense Production Act. But other things it's not really clear what the holdups might be. And this is from statnews, where there was actually, Andrey Zarur, a CEO of GreenLight Biosciences actually writing an op-ed in statnews saying I'd like to help my company and others can. In fact by breaking a number of production bottlenecks with our technologies, facilities, and staff, but for now we can only stand by because we don't know what the bottlenecks are. No one company can solve this alone. And then there's this question if the United States government actually tried to take over a firm that was, you know a Pfizer or a Moderna firm. That could lead to a lot of retaliation. It might be a global mess is the point here. So what power does the government have, and why hasn't the defense production act been used yet? This suggests that there might be consequences of basically a takeover. There's other problems as well. There's shortages in actually the manpower. I think people who have tried to get vaccinated might have had problems actually getting a hold of anyone, either if they're going through insure and they're getting someone on the line to talk to them, or if they're trying to book an appointment and they're put on hold, or if they're just refreshing their screen. And then a lot of the distribution right now is happening in mass production sites, which work well for people that have cars, or have licenses, and can drive, and actually have information as to where that is and how to get there. But for the frail, for people that don't have licenses for people that don't own vehicles or they work with public transportation it can be more challenging to try and get there, and try and get there safely. And so just this notion of maybe we don't have enough people and we don't have trained enough people unlike a lot of developing countries that rely on community health workers to distribute vaccines and to do well childcare and maternity checkups.

We don't really have that public health army at our disposal that could go and really reach those people that are vulnerable. Both to tell them about the vaccine and inform them and then also to distribute it. And then this is just talking about where are some of the products coming from. Forbes is talking about Switzerland produces one of the mRNA ingredients for the vaccine. Germany produces some of the lipids. Roche is producing some of the nucleotides. So basical