On Nov. 18, nearly a year into a pandemic that has killed more than 300,000 Americans, a modern miracle occurred: Pharmaceutical giant Pfizer and its partner BioNTech announced that its vaccine candidate had been shown in clinical trials to have a 95% efficacy rate and no serious side effects. The rollout, they said, would begin within a month of emergency use authorization.
Operation Warp Speed, President Donald Trump’s public-private partnership meant to facilitate the development, manufacturing, and distribution of COVID-19 vaccines was a success, it seemed: 100 million doses, enough for 50 million Americans to receive the two required shots, were on their way, and that was just the beginning. Vaccines would soon be available to anyone who wanted them. Mission accomplished.
Markets shot upwards; spirits were buoyed. After nearly a year of nationwide trauma, an end was in sight.
And then the trouble started.
Last week, the New York Times broke a story claiming that the Trump administration had turned down the chance to lock in an additional 100 million doses. Dr. Scott Gottlieb, a member of Pfizer’s board, later confirmed to CNBC that the White House had turned down multiple offers from the pharma company. Now they were promised to other countries.
Trump administration officials responded with muddled messaging. One official said that the offer was declined because there was no known efficacy rate, although Gottlieb said the doses were turned down again after trial data was released. Then, on Monday, officials denied that they had turned down any offer at all. At the same time, Pfizer CEO Albert Bourla said on CNBC that the U.S. government had recently asked him for those additional 100 million doses but that the time frame it wanted them in might now be unobtainable. Negotiations are ongoing, he said. Health and Human Services Secretary Alex Azar confirmed to reporters Wednesday that officials “are engaged in active negotiations” with Pfizer to purchase more doses.
But Azar also used the opportunity to seed some doubt about Pfizer’s abilities to deliver the basics. Pfizer had informed Operation Warp Speed “about various challenges they may have in their manufacturing,” said Azar. “We will ensure they fulfill their contractual commitment.”
Pfizer countered that it was on track to meet its supply promises. “Pfizer has not had any production issues with its COVID-19 vaccine, and no shipments containing the vaccine are on hold or delayed,” Pfizer spokesperson Sharon Castillo said. “We are continuing to dispatch orders to the locations specified by the U.S. government.”
The pharma giant said that any delays in the rollout could be chalked up to a lack of clarity from the Trump administration. Pfizer says that it has shipped 2.9 million doses of the vaccine to states, and that millions of doses are in warehouses ready to be sent out—the company just needs to know where to send them. It’s the government, Pfizer says, that’s being unclear about when and where they should go.
Now, some states are reporting that they have been told to expect far fewer doses of the Pfizer-BioNTech COVID-19 vaccine next week. There has been little explanation, a fact that has frustrated state leaders charged with overseeing the vaccination process. “This is disruptive and frustrating,” Washington Gov. Jay Inslee posted on Twitter Thursday after he learned from the Centers for Disease Control and Prevention (CDC) that his state’s allocation would be cut by 40%. “We need accurate, predictable numbers to plan and ensure on-the-ground success.”
California, Connecticut, Georgia, Hawaii, Illinois, Kansas, Montana, Michigan, Nebraska, Nevada, New Hampshire, and Indiana are also expecting slashed shipments.
“To slash allocations for states—without any explanation whatsoever—is disruptive and baffling,” said Nevada Gov. Steve Sisolak in a statement. His state’s allocation will fall by 42% next week.
Both sides have been accused of using the media to negotiate, and fingers have been pointed, quite publicly, in nearly every direction.
About a quarter of the U.S. population remains hesitant to receive the vaccine; 55% of respondents who were hesitant cited a lack of trust in the government, and 51% reported they are worried about the role politics played in the vaccine’s development. The confusion and back-and-forth between the Trump administration and Pfizer certainly won’t assuage any hesitancy around getting vaccinated. In order to reach the herd immunity threshold for COVID-19, between 50% to 80% of the population will need to be vaccinated. By contrast, the flu only needs between 33% and 44% of the population vaccinated to reach herd immunity. Even minimal levels of vaccine hesitancy could prevent that from occurring.
What we know
In July, the Trump administration agreed to purchase 100 million doses of the Pfizer vaccine ahead of Phase III trials; the deal would be made good as soon as the FDA approved emergency use of the vaccine. The $1.95 billion contract also came with an option to buy an additional 500 million doses, which appears to be the initial cause of disagreement.
“We have been and continue to negotiate with Pfizer for additional doses. At no time did Operation Warp Speed turn down an offer from Pfizer for any number of millions of doses having a firm delivery date and quantity,” a senior official at HHS told Fortune.
The official said that Warp Speed had asked for a “delivery schedule for doses in excess of the original 100 million so that we could finalize an updated agreement with Pfizer,” well before the data from Pfizer’s Phase III trial became available in November. The problem, he explained, is that Pfizer could not supply a delivery date or give a reasonable time frame for those additional doses.
This summer, Pfizer announced that it would have 100 million doses ready by the end of the year, but by November, a number of supply chain issues caused the company to scale the number back to 50 million doses, which would fully vaccinate 25 million Americans, further frustrating the Trump administration.
“Should at any time we feel we are being treated unfairly, we will use every lever at our disposal to address the situation,” the Trump administration official added, referring to ongoing negotiations.
That comment comes in reference to Pfizer’s request for the U.S. to exercise the Defense Production Act (DPA) in order to provide the company with additional equipment to aid in manufacturing more doses of the vaccine.
“I think it would be very positive, and I think that it will allow us to maximize what we can do,” said Bourla of the DPA on CNBC this week. “We are asking them right now…and I hope that they will do it very soon because, particularly in some components, we are running at critical supply limitations.” The DPA, a law that gives the President the emergency authority to “allocate materials, services, and facilities” for purposes of national defense, would help increase supplies of raw materials for the vaccines, which are often expensive and in short supply.
The disagreement, however, is over the conditions that come with the DPA—and the increased control the government would gain over the doses and Pfizer’s actions if it were invoked. Those controls could mean that the government would require Pfizer to prioritize the U.S. over other nations and perhaps renege on supply contracts across the world, say legal scholars.
The legal play
On Nov. 11, Pfizer entered into a supply agreement with the European Union for 200 million doses of its COVID-19 vaccine, which are expected to be delivered by the second quarter of 2021. On Wednesday, it was announced that the company would supply 100 million doses to China by the end of 2021.
If Pfizer agrees to the DPA, the federal government could require the U.S.-based company to prioritize the U.S. over deals with foreign countries, so long as the vaccine is produced in domestic factories. But the government won’t be able to control Pfizer’s manufacturing lines abroad and could potentially step into diplomatic trouble by forcing Pfizer to spurn its deals with foreign governments.
Experts in international pharmaceutical contracts say that it’s boilerplate for deals to include an explicit recognition that in some circumstances, such as if the U.S. demands the dosage first, the company can delay or end its contract without significant repercussions. While the contracts have not been made public, it’s likely that the federal government and Pfizer are working together to find and discuss what is possible within legal limits.
The U.S. is also engaged in a number of bilateral investment treaties with countries in Europe and across the globe, and these agreements typically provide investors with protections in one another’s markets. The federal government forcing a private company to void contracts for lifesaving medicines would likely raise some questions about violating the terms of the treaties. The U.S. has been working on such an agreement with China for years, and while nothing official is in place, there would certainly be damage done to the negotiating process.
Trump signed an executive order last week that prioritized vaccinating Americans before providing doses to other countries, but the EO was largely symbolic. It’s not clear if the President has the authority to prevent companies from fulfilling international contracts, and because Pfizer finalizes its vaccine in its Belgium factory, the President likely has little control over it. A summit held in honor of the order was quickly politicized, and representatives from Pfizer and Moderna did not attend, nor did any representatives from the Biden transition team.
Name your price
All signs indicate that ongoing negotiations around the vaccine have more to do with power than price tag. If anything, it appears that the Trump administration would like to spend more, so long as they have control over production. But cost still factored into earlier orders, according to officials.
“The simplest explanation [of why the U.S. initially turned down the extra doses of Pfizer’s COVID-19 vaccine] is one of two things,” said Christopher Snyder, a professor of economics at Dartmouth College and a member of Accelerating Health Technologies, a group focused on the financial and economic cases for vaccine development. “Either the negotiator knew the enormous economic value of the tranche of doses to the U.S. and botched the deal, or the negotiator botched the economic calculation of the enormous benefits to having these doses.”
Holding negotiations so publicly while holding up the possible delivery of more vaccination units is not worth the “couple of million of dollars” that may be saved by the Trump administration, he said. “The trillion-dollar risk to the health and welfare of the country is not worth taking…It’s worth a billion-dollar payment.”
Whatever the holdup is, it will be handed over to the Biden administration a month from now. President-elect Joe Biden and his team will be left with the task of parceling out the bulk of the vaccinations that the Trump administration had purchased and negotiated for.
Initial fears that Trump and the General Services Administration’s refusal to onboard the Biden transition team would lead to delays in the vaccine distribution process have subsided, and Biden’s team appears to be regularly meeting with pharmaceutical executives without the Trump administration.
“We’re in regular conversations with Pfizer, Moderna, and other companies who are working to develop vaccines, and our focus is making sure safe and effective vaccines are available to all Americans and to the world as soon as possible,” TJ Ducklo, spokesperson for Biden’s transition team, told Fortune.
The transition team, said Trump officials, is receiving briefs about ongoing negotiations but is not directly involved. And Castillo, the Pfizer spokesperson, noted: “Pfizer is in regular communications with both the Trump administration and the Biden transition team.”
Yet, even with things on track, the Biden administration is still playing catch-up. Ron Klain, who will serve as White House chief of staff under Biden, told Meet the Press: “We’re going to have meetings between our top scientific advisers and the officials of these drug companies,” but the “bigger issue will be the mechanics of manufacture and distribution, getting this vaccine out. That really lies with folks at the Health and Human Services Department. It’s great to have a vaccine, but vaccines don’t save lives; vaccinations save lives…It’s a giant logistical project.”
Biden will work to depoliticize the nature of the vaccination, a goal that the Trump campaign had not worked toward.
Donald Trump Jr., the President’s eldest son and campaign surrogate, accused pharmaceutical companies, without evidence, of waiting to release clinical trial results of the vaccination until after November’s presidential election.
“They all knew it but kept it from the public on purpose,” he wrote on Twitter. “Big Pharma hates Trump for taking on the gouging of Americans with drug pricing while offering the same drugs elsewhere in the world for pennies in the dollar.”
Senate Democrats, meanwhile, have launched a probe into why the White House passed on Pfizer’s extra doses. “We are concerned the failure to secure an adequate supply of vaccines will needlessly prolong the COVID-19 pandemic in this country, causing further loss of life and economic devastation,” a group of lawmakers wrote to leaders of Operation Warp Speed.
This summer, the Trump administration signed six contracts with vaccine makers, including Moderna, the second company to have a COVID-19 vaccine approved for emergency use, and Johnson & Johnson, which just enrolled 45,000 participants for its late-stage vaccine trial.
The strategy was intended to maximize the success of finding a vaccine that worked—but also to be used as a bargaining chip. “You can make an economic case for saying, ‘Well, look, we have several successful manufacturers, AstraZeneca and Pfizer and Moderna, so we can be a little bit tougher in our negotiations,” said Snyder, adding that “it’s still a very bad economic decision.”
The government is contracted to receive 100 million doses of the Moderna vaccine—also a two-dose system, which would fully vaccinate 50 million Americans. Those will begin to ship immediately: Moderna plans to distribute 20 million doses this month. And unlike Pfizer, the government has a larger role in the development and manufacturing of this vaccine. Warp Speed provided Moderna with $4.1 billion in total, including the price for the doses.
Pfizer initially spurned additional funding to aid in manufacturing, claiming that there was a worry that government oversight would harm its work. That left administration officials with a limited understanding of what the company was doing on a week by week basis and an air of mistrust.
“We remain confident that across our portfolio of multiple vaccines we will have enough doses for any American who wants a vaccine by the end of Q2 2021,” said a senior Trump administration official.
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