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Editor's Note: A top priority in the world today is the development, production, and distribution of an effective Covid-19 vaccine. Few understand the scientific, logistics, and legal complexities of such a task, however. The authors of the following article identify certain existing strategies used in the production and delivery of annual flu vaccines in the U.S. that may hold the key to successfully planning for and implementing the vaccine supply chain for the Covid-19 disease. Health-care, transactional, and government lawyers may play a part in sorting through the issues to find acceptable solutions that address the uncertainties and balance the risk and rewards of this global effort. For information about how to build a coronavirus vaccine supply chain, see our companion article.
The Covid-19 pandemic exposed vulnerabilities in global supply chains of medical supplies, which stoked public fear over shortages of essential medicines and medical supplies. As the world is focusing on the development of vaccines to combat the latest coronavirus, we shall not lose sight of the delivery of these vaccines, especially when there is a lack of a coordinated medical supply chain in the U.S.
Flu vaccine supply chains provide valuable lessons and help inform a strategic plan for the delivery of Covid-19 vaccines in the near future. The following manufacturing, contracting, and coordination strategies have proven essential to the smooth and orderly functioning of the U.S. influenza vaccine supply chain.
Flu vaccines may sound mundane. Yet in reality, manufacturing flu vaccines is a tough business for two reasons. First, the production process of flu vaccines takes at least six months because it involves virus cultivation in chicken eggs. For this reason, pharmaceutical firms often start production before the Vaccines and Related Biological Products Advisory Committee of the U.S. Food and Drug Administration selects the composition of flu vaccine (i.e., which strains to include) each February. To insist on production after knowing the selected composition would mean a nontrivial likelihood of late delivery.
Second, the flu vaccine production process is subject to multiple risk factors. For example, in 2004, the FDA suspended a flu vaccine license held by Chiron Corporation after its inspectors discovered serious contamination, with bacteria concentrations more than 1,000 times of accepted level. The delay resulted in severe flu vaccine shortages in 2004.
To ensure on-time delivery, flu vaccine manufacturers such as GlaxoSmithKline PLC and Sanofi often start producing flu vaccines in January, well before the FDA determines which strains to produce. This practice is known as “at-risk early production.” Unfortunately, in the event that such production does not match the FDA recommendation, the manufacturers must discard entire batches of vaccine strains. Thus, supply chain pressures cause manufacturers to balance between improving on-time delivery performance and reducing the likelihood of producing the wrong strains.
Complex business contracts govern the supply chain delivering vaccines to physicians’ offices and retail pharmacies. Complexity itself does not necessarily result in better balance of supply and demand, however. Instead, incentive alignment is key to the design of medical supply chain contracts that band together the otherwise divergent interests of pharmaceutical companies and health-care providers.
Specifically, in the case of flu vaccine contracting, early contracting that shares risks and rewards can create a virtuous circle of incentives—it provides incentives for health-care providers to commit to sufficiently large orders and encourages manufacturers to produce early to ensure smooth delivery. More importantly, early contracting elicits efforts from health-care providers to collect demand information and share it with manufacturers to plan production and delivery.
In the U.S., flu vaccine manufacturers sign early or “pre-book” contracts with their customers (hospitals, clinics, and retail pharmacies) nearly one year ahead of the flu season. These committed pre-book orders provide guaranteed payments, which can reduce manufacturers’ financial risks of producing vaccines that do not match the FDA recommendations. It shows that, without these pre-book contracts, on-time delivery of flu vaccines would be in jeopardy.
Most of the pre-book contracts contain terms that incentivize manufacturers to produce early. They also provide incentives for health-care providers to order early, place large orders, and allow revisions to their orders as their demand forecast changes. Discounts are sometimes provided for early commitments.
For example, in a 2012 contract offered by Novartis Vaccines and Diagnostics, Inc. to the State of New York, the price was $77.52 per 10 dose vial if the order is pre-booked before February 1, $82.37 between February 1 and March 1, $87.21 between March 1 and April 1, and $96.90 after April 1.
Depending on the date of a pre-book order is submitted, the return policy is based on the above pre-book time schedule: the maximum returnable proportion of the pre-book orders ranges from 20% (for pre-book orders placed before February 1) to 15% to 10% and finally to 0 (for orders placed after April 1).
Some of these return policies may go as far as to accept returns of all unused flu shots and provide full credit for those returns. For example, one of the largest flu vaccine manufacturers allowed health-care providers to return a proportion of unused doses for full credit. The return allowance depends on the timing of delivery: Health-care providers can return up to 25% of those doses delivered before October 15, and up to 50% of those doses delivered after October 15.
While making the delivery is challenging, mobilizing the public to get vaccinated is also far from straightforward. The CDC has long-standing guidelines for priority vaccination groups, including those 65 years and older, pregnant women, children, and those living with infants. In addition, the side effects of flu vaccines have been well-understood and the benefits has been known to far outweigh potential risks. Yet, many individuals shy away from getting vaccinated, in part due to deep-seated “anti-vax” beliefs that have grown more influential in recent years.
In addition, individuals can benefit from others who are vaccinated, so some may become “free riders” by skipping vaccinations. To encourage more people, CDC and various health authorities have been active in promoting the public's awareness of the benefits of vaccination through various campaigns, and adjusting their campaigns depending on the delivery of the flu vaccine. Researchers have also proposed incentive programs to encourage individuals to receive the vaccine.
As all stakeholders—flu vaccine manufacturers, CDC, hospitals, clinics, retail pharmacies and the public—learned the above lessons over the years, proactive planning, incentive contracting, and effective campaigning can help balance the supply and demand of flu vaccines despite the threats of myriad uncertainties.