When Regulation Becomes Instability: The Hidden Cost to California’s Innovation Economy

Anya Dalal

In recent weeks, U.S. health policy has been rocked by headlines that go well beyond COVID “vaccine hesitancy.” The Advisory Committee on Immunization Practices (ACIP), the CDC’s long-standing expert panel that shapes vaccine guidance, was dissolved and replaced with hand-picked members, some lacking expertise or holding explicit anti-vaccine views. CDC Director Susan Monarez was fired just weeks into the job after rejecting a demand to blindly accept recommendations from the newly transformed ACIP. One the same day as Ms. Monarez’s dismissal, Emergency Use Authorizations for Pfizer and Moderna COVID vaccines were scaled back, limited to high-risk populations and requiring physician consultation. A wave of resignations from senior CDC leaders followed, sparking alarm about the agency’s weakened ability to guide public health policy. 

At the California Association of Youth Commissions (CAYC), we normally focus on policy questions that directly affect young people: education, mental health, climate, and civic participation. We could write at length about the public health consequences of this chaos for California youth. But the health of California’s economy matters to youth as well, and it’s important that we highlight consequences that are less visible than the startling disarray in D.C., but no less damaging.

California thrives as an innovation economy; in biotechnology, technology, clean energy, and beyond. When agencies such as the HHS, CDC, or FDA send inconsistent signals that change coverage rules, ration new medicines unpredictably, or issue guidance that conflicts with FDA authorizations, the damage goes far beyond consumer confusion. Indeed, the economics of innovation are perturbed. Investors begin to price in policy risk, discounting even products with strong science, because reimbursement and adoption appear unpredictable.

For young people, the consequences are exponential, not linear. In the short term, fewer innovative products reach the market. In the longer term, capital exits the sector altogether. That means fewer companies started, fewer jobs created, and fewer breakthroughs developed for the next generation. The type of havoc we are witnessing is a perverse gift that never really stops giving.

Vaccines illustrate this dynamic. The federal government’s own guidance is the gatekeeper for vaccine adoption. If CDC/ACIP recommendations are late or unclear, companies face serious commercial uncertainty. Consider the Bay Area’s Vaxcyte which is developing a next-generation pneumococcal vaccine which promises to expand coverage of different pneumococcus serotypes beyond anything we have ever seen. And yet, despite its scientific triumphs, Vaxcyte trades at depressed valuations. That is not a reflection of science. It is a reflection of policy risk translating to an exorbitant cost of capital.

For California’s young people, regulatory stability is not a boring process issue. It’s an economic justice issue. Without it, our state’s innovation economy erodes, and tomorrow’s cures and technologies vanish before they even begin.

Image credit: FDA