Docket Entries Since Last Update
NOTE: This court's RSS feed does not list MOTION entries, so Bloomberg Law cannot detect them and thus they will not be listed here. However, motions will be included if you update the docket.
Editor's Note: The uncertainty of regulatory approval, coupled with an indefinite forecast of supply and demand, add to the complexity of the Covid-19 vaccine supply chain challenge. Which producer will win the vaccine development race, and at what cost? How will we ensure rapid delivery of a vaccine once approved? The authors suggest that cooperation among competing manufacturers in the form of production alliances and production capacity-sharing arrangements makes the most sense strategically, but that will entail resolution of satisfactory licensing terms and possible relaxation of competition rules. Lawyers will need to understand the emerging strategic framework, priorities, and practicalities as they advise their stakeholders and clients who play important roles in the supply chain. For information about the role of influenza vaccine supply chains as a model for coronavirus vaccines, see our companion article.
Behind the news about resurging coronavirus cases and the debate about wearing face coverings in the U.S., a global race is underway to develop Covid-19 vaccine to quell the pandemic. As of July 15, 2020, there were 163 vaccines against the coronavirus and 23 of them were undergoing human trials.
Before this race ends, we must start thinking about the endgame. The underlying health risks have prompted the U.S. government to promise delivery of 300 million doses of Covid-19 vaccine by January 2021 under Operation Warp Speed.
Whichever new Covid-19 vaccines the U.S. government will select, one thing is certain: the chosen vaccines will have inherent uncertainties that lead to consequences of varying magnitudes. Accordingly, we have outlined a number of issues for pharmaceutical companies, government agencies, health-care providers, and businesses to consider, under the banners of four general topics: uncertain efficacy and side effects, uncertain demand, uncertain supply and our proposed flexibility strategy.
In its regulatory guidance, the Food and Drug Administration requires that all approved Covid-19 vaccines must have a minimum effective rate of 50% in terms of preventing disease or reducing its severity. In the case of Covid-19, the FDA has not ruled out temporary approvals under less-stringent requirements.
The actual effective rate of the flu vaccine against 2019-2020 seasonal influenza A and B viruses was only 45%. The actual effective rate of potential Covid-19 vaccines is highly uncertain—especially because underlying methods have not been used on the vaccine market for humans.
Unlike the flu vaccine that uses a weakened or inactivated version of the flu virus to provoke an immune response, some of the frontrunners receiving investments from Operation Warp Speed, including AstraZeneca PLC, Johnson & Johnson, and Moderna Inc., are developing viral vector vaccines and genetic vaccines that have never been available on the market for human use. The former two firms use adenovirus from chimpanzees or monkeys to deliver Coronavirus genes into cells to provoke an immune response, while the latter use Coronavirus's own genes to deliver messages via messenger RNA (mRNA) to cells to trigger an immune response.
The side effects of seasonal flu vaccines have been well understood, but many potential Covid-19 vaccines are based on unproven market use in humans and their actual side effects remain to be discovered. For example, the mRNA vaccine may trigger unintended immune reactions. Are proactive mechanisms for controlling those unintended immune reactions reliable? With so many unknowns, should manufacturers examine liabilities proactively?
While the public waits anxiously for the Covid-19 vaccine to become available, a debate is emerging about the allocation of vaccines to different priority groups of individuals. Besides health-care workers, should the elderly with higher fatality rates get a higher priority? However, because younger people are more mobile, should younger people get a higher priority to reduce the infection rate? Answering these questions requires scientific, ethical, and legal inquiries. Prioritizing among different health-care providers and businesses will be even more challenging and requires innovative contracting mechanisms. The supply chain management literature shows that under limited production capacity, simply allocating in proportion to order sizes will lead to inflated orders and inefficient allocation.
In addition to prioritization, experts have suggested that we need to vaccinate at least 70% of the population to achieve herd immunity for Covid-19. However, the public is either unsure or hesitant to be vaccinated despite the Covid-19 vaccine race. A recent survey reported that only 50% of Americans plan to get a Covid-19 vaccine. As many state governments struggle to enforce the face covering order, or mandate against it, can the government succeed in mobilizing the public to get vaccinated? Can businesses mandate their employees to receive Covid-19 vaccines?
Because seasonal flu vaccines rely on an egg-based production process that takes a long lead time (at least six months) and the production yield is uncertain, it is customary for flu vaccine manufacturers, such as GlaxoSmithKline and Sanofi Pasteur, to start producing flu vaccines in January, well before they are instructed by FDA on what to produce. If the strains of flu vaccines do not match what the FDA recommends, the manufacturers must discard their vaccines. Because of the underlying financial risks, recent research shows that advance ordering and buyback contracts between health-care providers and manufacturers are necessary to incentivize vaccine manufacturers to produce an adequate supply of flu vaccine.
The supply of potential Covid-19 vaccines is subject to even more uncertainty. To deliver the vaccines as soon as possible, pharmaceutical manufacturers need to start producing them even before they have been fully verified and approved. To reduce the time for Covid-19 vaccines to reach the market and to reduce the financial risks, the Bill and Melinda Gates Foundation has provided financial support to encourage AstraZeneca to start production of its potential vaccine in June before approval. It is laudable for Gates Foundation to support up to seven potential Covid-19 vaccines; however, with so many uncertain elements, how the foundation will eventually deliver the chosen vaccines to health-care providers will be a challenging problem to solve.
The administration of Covid-19 vaccines may encounter new frictions besides potential shortages of vials and syringes, especially in resource-constrained settings. For example, mRNA vaccines can lose their efficiency when exposed to different temperatures, so require a cold chain for transportation and storage. In addition, the use of mRNA vaccines requires a complex lipid delivery system that has yet to be tested.
When the focus of attention has been on the research and development of different types of Covid-19 vaccines, it is time for pharmaceutical companies, government agencies, health-care providers, and businesses to start planning for speedy and smooth production, delivery, and administration of Covid-19 vaccines ahead of the FDA approvals.
With so many types of uncertainties associated with all potential vaccines—including whether any of the 163 potential vaccines will be approved—it is extremely risky for firms to start mass production of the vaccines before approval. The Gates Foundation can support the production of up to 7 potential Covid-19 vaccines, but to support the production of more than seven potential vaccines would require a strategic approach, especially given the limited availability of required resources (e.g., glass vials) shared across various product lines.
We propose a horizontal “co-opetition” approach, in which competing manufacturers cooperate in building production capacity. This approach extends an emerging vertical licensing practice called “at-risk alliances.” For example, an alliance between AstraZeneca and The Serum Institute of India will produce 400 million doses of vaccine by the end of 2020.
As different pharmaceutical manufacturers compete on the development of Covid-19 vaccines, firms that use similar methods can cooperate by sharing their production capacity so that they can produce more with lower financial risk just like an airline alliance. For example, AstraZeneca and Johnson & Johnson are developing their own Viral Vector potential vaccines. Both firms can start building production capacity and produce their own potential vaccines. At the same time, they can proactively seek approvals for producing the vaccine for each other when needed. By sharing the production capacity, the production flexibility can reduce their financial risks.
Under this co-opetition arrangement that involves capacity sharing, each firm can reduce their financial risks by building a lower production capacity than otherwise. This way, they each lose less if neither vaccine is chosen. However, if only one of the two vaccines is selected, one can produce for the other firm immediately. This way, both firms win, more vaccines can reach the market faster, and the fund provided by the Gates Foundation and others can stretch further to support more potential vaccines.
For firms to engage in this kind of capacity-sharing scheme, a crucial contracting question entails the appropriate price that a firm should charge for producing for its competing firm. Possible contractual mechanisms include a licensing contract through which one firm might impose production restrictions on another.
As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.” Therefore, before the Covid-19 vaccine race ends, let us start preparing the production and delivery process to succeed.