For millions of Americans, scoring a Covid-19 rapid test over the holidays was harder than finding a Tickle-Me-Elmo at the height of the 90s craze. Public frustration pushed the Biden administration to announce several initiatives—including a new government website that launched this week—to improve America’s miserable testing situation via government planning, procurement, and funds for domestic manufacturing capacity. If this “industrial policy” initiative sounds familiar, it should: The new testing plan is actually the president’s sixth promise to subsidize and plan our way to testing abundance, and policymakers have promised similar plans for all sorts of domestic industries. Yet the rapid test experience shows yet again why industrial policy proposals intended to somehow beat the market all too often produce results far worse than what the market could provide. 

Given Covid-19’s virulence and various private and public requirements, demand for antigen rapid tests in the United States has skyrocketed since the summer. Although less accurate than polymerase chain reaction tests for detecting an infection, rapid tests are useful for quickly—and without a lab—gauging whether someone is infectious. The products are therefore an integral part of the nation’s fight against Covid-19 and Americans’ return to relative normalcy.

Yet scarcity persists, despite the need, tests’ simplicity, dozens of global producers, and the Biden administration’s repeated promise to boost domestic supplies. Indeed, on the president’s first full day in office, he released a Covid-19 National Strategy that would “increase onshore test manufacturing” and procure those tests via the Defense Production Act. Just a month later, he directed $815 million to “increase domestic manufacturing of testing supplies.” More promises would follow, the most comprehensive of which came in a September testing plan that again emphasized national production.

Long before Biden took office, however, public health experts and economists understood that the primary impediment to cheap and abundant home testing in the United States wasn’t a lack of federal funds or domestic production but instead the Food and Drug Administration’s standards and process for approving rapid tests. The procedures and paperwork for receiving an FDA emergency use authorization are onerous. So are the agency’s standards, demanding accuracy like a PCR test even though the tests measure different things (infected versus infectious) and have different uses. Because of these rules, the FDA didn’t first issue an EUA for an over-the-counter, at-home rapid test until mid-December 2020, even though MIT lab E25Bio created a cheap, effective version in March 2020 and several others had products ready by the summer, as ProPublica reported.

The FDA’s high regulatory bar stymied those tests and contrasts with the standards used by the agency’s counterparts in Europe and other developed countries, where rapid tests are today diverse, dirt cheap, and omnipresent. For example, shortly before the president announced his September testing plan, the FDA had issued EUAs for only six home antigen tests, while Germany had authorized more than 60—including several made in the United States for export only. No surprise, then, that test prices were as low as $1 each in Germany but remained about fifteen times that here.

Since September, even as the Delta variant raged, the FDA has approved only a handful of additional tests. Two of those EUAs, moreover, came only in late December pursuant to the administration’s “accelerated” process—one that still took several months, even though the applicants were large, reputable foreign producers whose tests were long ago approved elsewhere. Given the Omicron variant’s speed and the basic logistical hurdles to getting newly-approved tests into Americans’ hands, the current surge may be over before the administration’s latest policy moves can have an impact. Having more rapid tests in February 2022 may be useful for future outbreaks, but we really needed them months ago.

America’s continued testing scarcity has real and unfortunate consequences. Just ask anyone with a school-age child or job in a front-facing industry. It undoubtedly counts among the U.S. government’s worst public health blunders during the pandemic. President Biden himself acknowledged the error at yesterday’s press conference. However, in this debacle lies a valuable lesson for American policymakers who today promise to revive domestic production of “critical” goods using the same types of industrial policies that fared so poorly for rapid tests during the pandemic. These advocates claim that various “market failures” require government interventions to boost national production and achieve strategic national objectives. They ignore, however, the current government policies thwarting those goals; how simply removing regulatory, trade, and other restrictions could rapidly achieve them; and the resources wasted by government attempts to use industrial policy to reinvent the free market’s wheel. 

In the testing debacle, all three errors came to life. The Biden administration wasted 11 months and countless taxpayer dollars trying to boost domestic test production when what was most needed was to remove existing regulatory barriers and let the global economy do its thing. Indeed, that’s just what E25Bio’s chief researcher did after abandoning her quest for FDA approval. Instead, she worked to provide cheap, reliable rapid tests to high-risk American communities. She successfully flooded her local test market with $2 tests as good FDA-approved $20 ones by using imported “experimental” tests authorized abroad but not here at home. No grand industrial policies needed.

More often than not, the “market failure” justifying an industrial policy turns out to be a government one.