Let’s face it – the COVID vaccine is not a medical product in the traditional open market sense, produced by a company that competes with others based on the strength of their intellectual property. The vaccine should be considered in the context of a utility – because, if it does not flow between countries, the lights will go out on the global economy. Based on what I heard at the virtual C19 Global Supply Chain and Manufacturing Summit, hosted by COVAX, CEPI, DCVMN, IFPMA, and BIO, the real problem that exists in the vaccine supply chain is the challenge to ensure material flow between entities in the supply chain. Maybe it’s time for horizontal collaboration, to ensure that we all get through this pandemic alive. But this is no easy task. How do we create a commons that allows all parties in the supply chain – manufacturers, suppliers, and regulators – to work effectively together to achieve this goal?
In my address to the Summit participants, I proposed that there are two issues to address this problem: 1) how to create material visibility to improve supply and demand planning in the global supply chain, and 2) how to create incentives for sharing of materials, and to think longer-term about building capacity.
To address these questions, I proposed creating a global material visibility system that can show how much inventory of key raw materials is at each manufacturer’s location, and each supplier’s location. Each party must be willing to share information which is pulled from their material system, and shared with those upstream or downstream, perhaps in a region that has a greater need. We could also have “fire walls” so someone could see how much of their inventory is on hand, but not their competitor’s inventory levels
This is not science fiction – I have observed an enterprise system at Flex in California called the Pulse which I wrote about in my book The LIVING Supply Chain.
Key pieces of data required for such a solution include the following:
- Total volume of inventory, and vaccine production systems that require different types of materials and production supplies
- Volume of inventory allocated by supplier/manufacturer to different countries
- Ability to supply different global regions
- Production rate of key material suppliers, and a system of production allocation based on greatest need.
- Some sort of prioritization scheme related to vaccine shortages, urgency of need, and ability to supply different regions based on current manufacturing footprint of participants
- Other factors such as government funding, veracity of distribution system (e.g. lack of gray markets), and other factors that may impact allocation
A second problem is hoarding – how to create incentives for allocation of material to other competitors who need it, perhaps through a trade or swap plus some fee? What is needed is some type of a contractual incentive system, where enterprises are awarded credits for sharing, which can be used against future purchases of materials or trades,
I believe that perhaps a coalition of the ICC/WTO/WHO should play a role to help create capacity for future investment. In this case, the organizations could act as a third party adjudicator as needed to deal with capacity issues. These parties would act as a neutral, disinterested group that could identify to a manufacturer or supplier when they need to shift supply to one source vs. another and to highlight when they suspect that opportunistic, hoarding, or inequitable practices are being conducted by a manufacturer.
Details of such a contractual agreement could perhaps follow an incentive-based structure, that would not be mandatory, but completely optional to all vaccine providers that want to help address the massive COVID vaccine distribution challenges that lie ahead. Features of such a structure might include the following guidelines:
- Establish data sharing requirements necessary to be listed as a “COVID Commons Transparent Provider” (CCT) – requirements would be those necessary to inform the ‘control tower’ or visibility system.
- Establish equitable distribution requirements necessary to rate these CCT Providers
- Ask countries within the WTO GPA to create a preferential set aside program whereby:
- Those firms listed as CCT Providers get set aside orders (only competed among suppliers on the list) for the next X years (say 5-10 years)
- Those firms listed as CCT Providers compete with everyone but get a price premium of, for example, 10-15% on their proposals (i.e. they bid $100 but we evaluate it as $90 for the next X years, or allow for either to be the case where countries can elect to set aside or use price premium benefits to CCT vendors
If a provider blatantly disregards or fails at equitable distribution requirements, they would be suspended or removed from the CCT Providers list, even with data sharing, and could only get back on if they take steps to correct.
This is a rough cut proposal, but requires strategic thinking to identify how to navigate a new complex future for COVID vaccine planning. It is not so radical as you might think. I am a firm believer in the role of the free market, as Adam Smith advocates, but we have never seen a pandemic of this nature wrought so much devastation on mankind. We are all in this together – we cannot afford to just vaccinate wealthy countries while lower income and middle income countries founder. The longer we wait, the more likely it is that variants will grow in these countries and spread to vaccinated countries, and we are not safe until everyone in the world is vaccinated. Then we will go into a cadence of ongoing vaccinations of COVID and its variants, likely for a number of years to come.