Working Paper: CEPR ID: DP17388
Authors: Chad P. Bown
Abstract: In response to the COVID-19 pandemic, the US government used novel policies to accelerate research, development, and production of a diversified portfolio of new vaccines. This paper begins by describing the Defense Production Act (DPA) of 1950 and the initial "priority-rated" contracts agreed to under Operation Warp Speed in 2020 to expedite manufacturing and achieve scale, which succeeded in producing hundreds of millions of doses of COVID-19 vaccines by early 2021. However, a puzzle soon emerged, as the scale of US vaccine production was shortly thereafter overtaken by plants in the European Union and India. The paper investigates the tradeoffs US policymakers faced in early 2021 - once much of the initial uncertainty about the safety and effectiveness of many COVID-19 vaccines had been resolved - about whether to recalibrate contracts to expand production capacity to help meet global, instead of US, vaccine demand. It also examines the emergence of input shortages and assesses whether both the price constraints implicit in the 2020 DPA contracts and business decisions made to quicken the process of bringing new vaccine plants online globally inadvertently exacerbated them. It also explores the potential need for complementary, input capacity-enhancing policies in the face of highly fragmented, cross-border COVID-19 vaccine supply chains.
Keywords: COVID-19; vaccines; advance market commitments; manufacturing; input shortages; defense production act; priority-rated contracts
JEL Codes: F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Defense Production Act (DPA) (H56) | Accelerated vaccine production (L65) |
| Defense Production Act (DPA) (H56) | Input shortages (D24) |
| Policy decisions (D78) | Ability to meet vaccine demand (J20) |
| DPA constraints (D10) | Input sourcing difficulties (D57) |
| Lack of coordinated international policies (F68) | Limited effectiveness of domestic production strategies (L52) |