The fickle nature of COVID-19 vaccine agreements

As the pandemic wears on, countries are discovering that vaccine agreements and contracts are fickle. Entering into agreements doesn’t necessarily lead to promised doses, leaving populations in the lurch as vaccination campaigns stall. Delivery dates have been complicated by shortages in materials needed for the manufacturing process, export restrictions, and quality control.

The European Union is suing AstraZeneca over the company’s failure to deliver millions of doses. The COVAX Facility’s delivery of doses from the Serum Institute of India to low- and middle-income countries was halted due to government-imposed restrictions in India. An African Union agreement for 270 million doses fell through.

“We should always interpret anything that we're doing in the vaccine market like it is extremely fluid,” said Dr. John Nkengasong, director at the Africa Centres for Disease Control and Prevention during a press conference last week.

An ‘extremely uncertain’ world

In mid-January, the AU announced it had secured 270 million doses of vaccines from Pfizer, Johnson & Johnson and AstraZeneca, through SII, with at least 50 million to be made available by the end of June.

These doses would be available for countries to purchase through the Africa Medical Supplies Platform — with the African Export-Import Bank, or Afreximbank, providing advance procurement commitment guarantees of up to $2 billion to the manufacturers — and were intended to supplement COVAX, which is providing free vaccines to countries across the continent.

But the deal fell through. The parties, through discussions, decided it made little sense for both COVAX and the AU to get their vaccines from SII, given limitations on its ability to produce the doses, Nkengasong said.

AU, through its African Vaccine Acquisition Trust, has since pivoted to a contract with J&J to provide up to 220 million doses of its single-shot vaccine with delivery starting in the third quarter of this year. AU has the option to purchase another 180 million doses next year.

Afreximbank has already paid about $330 million as part of the advanced procurement, said Benedict Oramah, president of the bank, during an African Union summit, and African nations will repay the cost of the doses through payment plans to the bank with interest rates around 3% to 5%.

As part of its global manufacturing structure, J&J is working with AspenPharmacare in South Africa for the last part of the process of vaccine manufacturing, known as “fill and finish.” Prashant Yadav, senior fellow at the Center for Global Development, said delivery may depend on how quickly and how many doses this site can make, as well as how dependent the company is on fill and finish facilities abroad in order to complete the order.  

“I am confident if the Aspen site goes full scale, without any manufacturing bottlenecks or challenges, then yes, that commitment will be met. If meeting that commitment requires pulling supplies from a European or U.S. manufacturing hub, then I'm less confident,” he said.

When asked whether he was concerned about these doses materializing, Nkengasong responded that it’s wise to never predict the future.

“We are living in a world that is extremely uncertain now with respect to the COVID situation and vaccines,” he added.

Agreements vs. contracts

While the J&J advance pricing agreement with the African Union is “confidential between the parties,” according to a J&J spokesperson, a press release says the “availability of the vaccine candidate is subject to its successful approval or authorization by the national regulatory authorities of AU member states.”

Nkengasong said the difference between the announcement made in January and the new deal was that the latter was just an agreement, whereas the more recent deal is a legally binding contract.

Confirmed purchase contracts include details on quantities and delivery schedules, and can include penalties for not meeting delivery commitments, Yadav said. They will also include payment terms and the portion of the money that is expected upfront versus upon delivery of the doses. Memorandums of understanding, on the other hand, don’t necessarily outline all of these areas and are hard to enforce because they are ill-defined, he said.

Is it their ‘best effort’?

But even with contracts in place, a series of factors can complicate delivery, such as export restrictions. The EU has restricted the export of vaccines to countries with high levels of inoculated populations. COVAX is not receiving the doses it expected as the burgeoning COVID-19 crisis in India has caused the government to suspend major exports of vaccines so that production helps meet domestic demand.

The U.S. has effectively restricted the export of vaccines and materials needed to make them, requiring companies to meet domestic demand first, creating global shortages. Exceptions have been made for India and a U.S.-based Pfizer plant has now begun shipping vaccines to Mexico.

There can also be quality issues. Workers at a manufacturing plant in the U.S. ruined up to 15 million doses of the J&J vaccine through contamination.

These types of vaccine contracts are typically built around “best efforts” to comply with production obligations and tend to make delivery conditional on factors that could change, including circumstances beyond a company’s control such as actions taken by governments, said David Greene, senior partner and head of group action litigation at the United Kingdom-based law firm Edwin Coe.

“It gives a lot of leeway, effectively, to avoid liability on non-delivery,” said Greene, adding there tends to be stipulations to ensure parties act in good faith.

“Then it gets into a fuzzy discussion about whether or not they are meeting their performance goals to the best possible level and therefore, they are not liable to penalty,” Yadav said. “For large contracts in the middle of a pandemic, it's harder to exercise those penalties.”

Bringing forward legal proceedings against a company doesn’t necessarily get a country what it wants — which is the vaccines, Greene said. “Once you start fighting with someone, you lose that air of cooperation that you probably need in order to ensure early delivery of vaccines.”

Closed books

The lack of transparency in contracts makes it difficult to know what was agreed upon, said Dr. Manuel Martin, innovation and access policy adviser with Médecins Sans Frontières’ Access Campaign.

One of the reasons behind this is that companies might not want public scrutiny, he said. In Brazil and Argentina, Pfizer asked for sovereign assets — such as federal bank reserves, embassy buildings, or military bases — as collateral for any legal costs associated with the vaccine, according to unnamed officials who spoke with the Bureau of Investigative Journalism.

Another concern is: commercially sensitive information and privacy gives the companies the ability to achieve higher prices every time they negotiate, Martin said.

But greater transparency is important at a time like this, according to Yadav, who said that delivery dates should be made public to allow countries to compare how closely companies are sticking to schedules and whether companies are taking on more orders than they can reasonably produce.

“That kind of analysis cannot be carried out because the delivery schedule is not made public,” he said.

Update, May 10, 2021: This article has been updated to reflect that Afreximbank has already paid about $330 million as part of the advanced procurement and African nations will repay the cost of the doses through payment plans to the bank with interest rates around 3% to 5%.