By Cynthia Koons and Emma Court
January 25, 2022 (view full article on Bloomberg)
The U.S. is awash in vaccine doses, but the availability of tests has been a problem throughout the most intense surges of the Covid-19 crisis. That’s because while there was an Operation Warp Speed to create vaccines, there hasn’t been a comparable initiative for tests.
In response to the omicron wave, the administration of President Joe Biden has stepped up its investments in testing. It promised to give Americans 1 billion free rapid kits starting in January—you may have already signed up to have yours delivered by the U.S. Postal Service—and recently unveiled a policy requiring private health insurers to reimburse up to eight tests per person a month.
These moves should alleviate the stress on a system that has been overwhelmed by people needing diagnostics at a time when labs themselves are struggling with Covid-related worker shortages. But there’s a risk that without longer-term investments in testing infrastructure, the U.S. will again find itself scrambling when the next highly contagious variant comes along.
“There is a market problem here. Tests are hard to produce, there’s a longer lead time, there are investments that need to be made, and the demand on the back end is hard to predict,” says Proof Diagnostics Chief Executive Officer Sid Shenai. “If I were sitting back in D.C. right now, I would say: ‘What are the various different levers we can pull to catalyze the production and distribution of rapid, cheap Covid tests to help with the pandemic?’ ”
When the pandemic started two years ago, the government invested in vaccine production in a way it had never done before. Operation Warp Speed spent at least $18 billion and helped achieve the mass deployment of shots a little more than a year after the virus first hit the U.S., a feat that had been considered all but impossible. Government funding meant drugmakers could invest in production capacity without worrying they’d be stuck with losses if they failed to find an effective vaccine or if the virus subsided on its own.
Test makers are looking for financial assurances from Washington much like those provided by Operation Warp Speed, but with even longer-term time horizons. “I think certainly through various different agencies, facilities, structures—be it debt financing at a lower interest rate than you would see in the private markets, or forward purchase agreements, or subsidies of the materials, or even assistance procuring some of the longer lead time items, all of those would be helpful for the industry,” Shenai says.
That may sound like a fantasy wish list, but it’s not beyond the realm of possibility. The U.S. government subsidizes other critical industries, such as oil and farming. Health care—with the exception of government programs for lower-income and elderly Americans—has largely been left to the private market. That’s created acute problems in the time of Covid. The profound societal and health impacts of the disease, and its ability to be spread by people without symptoms, has created a need for testing unlike anything that’s come before it.
In addition to the billion free Covid tests, the Biden administration in the fall pledged $3 billion to expand rapid testing. That money, plus government support for testing in various settings and purchases by the states, means “there will be many buyers for this market in the months ahead,” says Tom Inglesby, Biden’s newly appointed testing coordinator. “We will use those things as long as they are viable strategies, and when they become less useful we will switch to other modes of partnership with industry.”
People want rapid test kits to use at home to determine if it’s safe to gather with elderly family members or attend a group dinner. This kind of demand is going to ebb and flow along with Covid caseloads. In a surge, demand could be staggering, but in a slow period, it could totally dry up.
Manufacturers have already been burned by the fluctuating market during Covid. Becton Dickinson & Co. threw away $70 million worth of rapid virus tests and components that were expiring in the spring when consumer demand hit a lull. In the summer, Abbott Laboratories, the U.S.’s biggest rapid test maker, shut down a factory, laid off workers, and destroyed testing materials, according to a New York Times report. Delta started causing outbreaks in the U.S. around that time.
Abbott is one of the companies making the 13 over-the-counter rapid antigen Covid tests that the FDA has authorized. Those companies are producing 375 million rapid tests a month for the U.S., up from 25 million in August. The six biggest rapid test makers have the capacity to produce 700 million kits a month, a U.S. Food and Drug Administration official says, but have held back because they don’t have long-term contracts and don’t want to be stuck with tests they can’t sell.
Another problem for the U.S. may be lack of diversification. The European Union has authorized at least 45 versions of rapid antigen tests that don’t require a prescription, more than three times the U.S. number. It’s unclear whether the gap results from the U.S. approval process being more stringent, or just slower. In April 2020 the National Institutes of Health launched the Rapid Acceleration of Diagnostics program, known as RADx, to speed up innovation in testing. The program, which companies can apply to join, funds new tests and gives diagnostics makers other forms of support to help advance their products.
The FDA recently said it’s prioritizing reviews of test makers that can produce at least 2 million tests a month soon after authorization. That might put small companies such as Proof Diagnostics at a disadvantage. A spokesman for the FDA declined to comment.
To better anticipate fluctuations in demand, test maker Intrivo has been using artificial intelligence to forecast spikes in cases. Its test, On/Go, sold through Walmart Inc. and other channels, remained more available than most throughout the omicron wave. Because users send in pictures of their test results, the company was able to analyze that data as omicron was taking off to help determine where demand was going to be.
That know-how doesn’t make scaling up the business in response to demand any easier, though. “Manufacturing, unlike technology, is not something where you can write a little bit of code and start cranking apps into the market,” says Intrivo co-CEO Ron Gutman. “Manufacturing is a laggard, it takes months to increase production, add to this it’s a highly regulated market, any change you make has to be approved by the FDA—all of these things make it hard to make changes quickly.” To sustain production, he’d like to see the government create a long-term subscription model for testing. “All of these spikes and ups and downs should be smooth,” he says. “We are ready to work with them at large scale.”
In September, Colorado started offering to send free rapid tests to any resident who requested them. It struck a deal with Abbott to buy 2 million BinaxNow kits. When demand started to get out of control in other parts of the country, says Emily Travanty, a laboratory director in the Colorado Department of Public Health and Environment’s laboratory services division, the deal with Abbott was sufficient to ensure the state had a steady supply of tests.
It’s the kind of thing the White House could attempt on a federal level if it doesn’t want a repeat of recent history. “It needs to be more than a crisis reaction right now,” says Mara Aspinall, who leads the Rockefeller Foundation’s K-12 National Testing Action Program. “We have to use the lessons we have now—and while these lessons are still painful and while the topic is still hot—to change the way we do it in the future.”
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