Operation Warp Speed Is Built On Warped Logic

On May 15, 2020, the United States government announced Operation Warp Speed (OWS) — a partnership of the Department of Health and Human Services (HHS), the Department of Defense (DOD), and the private sector — to accelerate the development, manufacturing, and distribution of vaccines, therapeutics, and diagnostics to control COVID-19. The candidates are in partnership with established pharmaceutical companies: Moderna and Pfizer PFE /BioNTech (both mRNA), AstraZeneca, and Janssen (both replication-defective live-vector), and Novavax NVAX and Sanofi SNY /GSK (both recombinant-subunit-adjuvanted protein).

The Goal of Operation Warp Speed Is a Shot in the Arm.

HOLLYWOOD, FLORIDA – AUGUST 07: Lisa Taylor receives a COVID-19 vaccination from RN Jose Muniz as … [+] she takes part in a vaccine study at Research Centers of America on August 07, 2020 in Hollywood, Florida. Research Centers of America is currently conducting COVID-19 vaccine trials, implemented under the federal government’s Operation Warp Speed program. The center is recruiting volunteers to participate in the clinical trials, working with the Federal Government and major Pharmaceutical Companies, that are racing to develop a vaccine to potentially prevent COVID-19. (Photo by Joe Raedle/Getty Images)

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The distribution of the Pfizer mRNA vaccines requires using a custom-built “cool box” that can store 1,000 to 5,000 vaccine doses up to 10 days at minus 94 degrees. (Think Artic temperatures in the dead of winter, and the need to ship, transport, and kit the vaccine for distribution. And, yes, the product has a short shelf-life like bread.) Designing a supply chain program for the Pfizer vaccine is unprecedented: handling products at these temperatures at this scale has never been done before.

The goals are ambitious and dependent on cold chain logistics. The government program is trying to move faster than the speed of light, but the plans will soon hit a stark reality. We don’t just need a vaccine; the goal is a vaccination. To get a shot in the arm, we need to implement and design logistics infrastructure for cold chain delivery. As we stumble through the issues, we will soon learn that the plan is warped, unable to move at the speed of sound.

Background

Vaccines move through cold chain logistics. In a cold chain, the flow of products from origin to destination is in a temperature-controlled environment involving an uninterrupted series of refrigerated production, distribution, and storage activities. The colder the chain, the greater the issues with efficacy and shrinkage. The current cold chain in the United States is fragile and fragmented. There are many players with no centralized control. As a result, experts expect 5-15% waste in the product handling in Operations Warp Speed. The gross refrigerated storage capacity in the United States is 3.65 billion cubic feet. The United States has more cold storage than is available globally. Global pharmaceutical companies may need to store vaccines in the United States for global deployment.

In parallel, the demand for cold chain capacity from multiple supply chains is surging. The pull to health & wellness increases the consumption of fresh fruit and vegetables. The closure of restaurants puts more pressure on prepared foods, moving mainly through cold chains. Tariff shifts require more storage. The change to biologics in the pharmaceutical market also puts pressure on the cold chain. In short: high demand in a fragmented infrastructure.

Across the network, pharmaceutical companies utilize 21% of total capacity. The rest is seasonal demand for fruits and vegetables; chicken, fish, and meat; dairy products, and processed foods. In dollar value, in 2019, food/beverage flows were $18B, and bio/pharma was 17B$. As demand for pharma increases, cold storage bills for other players increase.

The shared assets operate independently with no over-arching planning governing body. The industry assumes that cold chain capacity is readily available, and there are no provisions for a mediator or cross-industry governing body.  Both facts are problematic.

In interviews, I find vaccine manufacturers taking logistics for granted. The reason? We seldom operate supply chains where logistics is the constraint. The mental model is the flu vaccine supply chain. Pharmaceutical manufacturers are currently shipping 194-198M doses of the Influenza vaccine for the United States market without issue. As a result, Operations Warp Speed plans to use the Flu Vaccine supply chain design. In August, the CDC extended contracts with McKesson MCK and logistics providers to build logistics infrastructure. However, logistics issues are brewing without clear answers:

1.      More Complex Flows. The COVID-19 vaccine is a two-shot system requiring the administration of the second shot twenty-one to twenty-eight days after the first dose. This requirement necessitates additional coordination of the vaccine to the population.

2.      Higher Volume. There are 328M people in the United States. A two-shot system translates to 640M dosages. There are 7.8B people in the world, translating to 15.6B doses. Adjusting for 5-15% waste in product handling, the supply chain design requirement is the delivery of 15.8B doses.

3.      Tougher Requirements. While vaccines typically travel in cold chain environments of 2-8 degrees Celsius, the Pfizer candidates for trial (mRNA) requires colder temperature requiring dry ice shipping by air. DHL estimates that this requirement translates into 200,000 pallet shipments representing 15,000 flights for global coverage. The problem? Dry ice, a by-product of ethanol production, is limited in supply. Air cargo volumes are down 40%, and there is no room in the belly of aircraft. With the continued downsizing of the airlines, air cargo capacity is at a premium. The vaccine will compete with the release of the latest technology gear and holiday cargo to get space on planes. (Ocean freight bookings are also problematic forcing more demand for air cargo.) The competition will drive up the cost of air freight for all goods at a time when Commercial capacity has never been lower.

4.      More Uncertainty. Navigating the Unknown. As the vaccines proceed to trial, to streamline the supply chain, Operation Warp Speed’s dictate is to manufacture and store the vaccine pending approval. As a result, the estimates for storage by year-end are 20-30M doses of ultra-cold storage (-70 degrees C) and 35-45M doses for -20 degrees C storage. This estimate is for only two of the many potential vaccines. The more vaccines released, the greater the storage requirement. As bio/pharma takes more refrigerated space, prices will rise, with less room for lower margin commodity products like ice cream. The impact is unknown. We have never had a condition mandating this much storage before for a vaccine. Could storage requirements for the COVID-19 vaccine potentially eliminate the market for fresh produce? Should we be planting victory gardens?

In parallel, with the testing of the vaccine, holistically design the supply chain to mitigate economic impact. While McKesson and UPS are designing their supply chains for the vaccine, I can find no one looking at the impact on other commodities and related supply chain flows. I believe that a successful vaccination is going to require a village of supply chain leaders working together. Here are some options:

While a spacecraft equipped with a warp drive travels faster than light, warped logic is a flawed or distorted path. Unfortunately, I fear that Operations Warp Speed is currently warped logic.