COVID-19 vaccination procurement and contract management in a South African context

Abstract

This article examines the lessons learnt and opportunities created to strengthen future procurement and contract management in the public health sector. In a rigid and highly regulated public sector procurement landscape, the COVID-19 vaccine procurement and vaccine roll-out activated not usually used regulations, policies and standards. The article views the COVID-19 vaccine rollout programme through a procurement and contract management lens focusing on two key segments in the COVID-19 vaccine programme – namely COVID-19 vaccine procurement and vaccine delivery into health facilities. To date, 60 million COVID-19 vaccine doses have been successfully procured and delivered to South Africa. The South African National Department of Health is integrating the COVID-19 vaccine programme into its national immunisation programme while also preparing to launch the National Health Insurance. The overall lessons learnt during the COVID-19 vaccine roll-out can be utilised to strengthen future procurement and contract management in the public health sector.

Overview of the COVID-19 vaccine rollout project in South Africa

As the world was grappling with the COVID-19 pandemic and each nation was trying to secure a supply of vaccination for its population, South Africa was facing similar challenges as the rest of the globe in procuring vaccinations and rolling out a national vaccination programme.

South Africa serves as an interesting reference to the COVID-19 pandemic response based on its population size of 60.6 million people (Department of Statistics, South Africa 2023), the geographical size of 1,219,602 km² (Government of South Africa 2023) and its status as a developing nation (World Bank 2023). With this reference, the article below unpacks the lessons learnt and opportunities created to strengthen future procurement and contract management in the public health sector within South Africa and other nations.

In February 2021 (Department of Health, South Africa 2021a), South Africa rolled out its national COVID-19 vaccine programme which aimed to vaccinate 40 million South African adult inhabitants. The vaccination programme entailed procurement, distribution, vaccination, monitoring, communication and mobilisation of various healthcare goods and services. The vaccination programme was a key intervention in mitigating the public health and economic impact of the COVID-19 pandemic.

The National Department of Health sourced, distributed, and oversaw the rollout of vaccines to the provincial governments and the private sector. South Africa has a well-established childhood vaccination programme and is experienced in rolling out large programmes such as antiretrovirals.

Early on it was identified that the success of the vaccine programme required both public and private participation in ensuring the rapid mass vaccination of the South African adult population scattered over an area five times the size of the United Kingdom. At its peak, daily vaccination rates were at around 140,000 doses per day (Department of Health, South Africa 2022b).

The benefits of an early, targeted vaccination programme extended beyond saving lives. With fewer infections to contend with, the health system could have also saved money spent on the care and treatment of patients.

Labelling the COVID-19 vaccine programme as a complex project is a vast understatement. Besides the plethora of unknowns-unknowns and known-unknowns, it was subject to various uncertainties which included vaccine supply, vaccine efficacy and vaccine demand.

Vaccine supply and demand exhibited three distinct phases in very swift succession:

Phase I: Constrained supply and high demand

Phase II: Unconstrained supply and high demand

Phase III: Unconstrained supply and waning demand.

The evolution from Phase I to Phase III took less than 6 months which required prompt actions to ensure the successful delivery of the programme in maximising public health benefits and economic efficiency.

A vaccination programme in a global pandemic greatly expands key stakeholders normally attributed to medicine procurement and supply by the Department of Health. The vaccination programme stakeholders now included the public at large, health agencies, government agencies, non-government agencies, politicians/parliamentarians, religious institutions, media and education/research institutions (Department of Health, South Africa 2022a). Thus, the attention placed on the success of the vaccine rollout project often served as an incentive to suppliers and service providers in ensuring successful delivery and performance on their contracts.

Procurement of COVID-19 vaccines and logistics services

Overview of the procurement of COVID-19 vaccines

As pharmaceutical companies started the development of COVID-19 vaccine candidates, governments lined up to procure potential vaccines to ensure the health of their respective populations. With vaccine nationalism being a great risk in securing doses, South Africa explored various procurement options and early on secured 12 million doses via the COVAX Facility (World Health Organization 2023) whilst negotiating bilateral agreements directly with manufacturers (Department of Health, South Africa 2020).

For a developing nation (World Bank 2023), South Africa was early to secure a supply of COVID-19 vaccines for its population. The unknown efficacy of the various vaccines against evolving virus variants required diversification of risk. South Africa had to embark on procuring multiple candidates through various procurement streams.

Initial contracts were concluded with AstraZeneca via the Serum Institute of India in 2021, however, the doses were sold due to concerns about the low efficacy of the AstraZeneca COVID-19 vaccine against the Beta (501Y.V2) subvariant which was the prevalent variant in the emerging second wave in South Africa (Department of Health, South Africa 2021d).

The South African National Department of Health signed bilateral manufacturing agreements with Janssen for 31 million Johnson and Johnson doses (Janssen 2021) and Pfizer for 30 million Pfizer doses, ensuring the availability of vaccines for its population.

Challenges in the procurement of COVID-19 vaccines

The COVID-19 vaccine market was vastly different from the usual marketplace for medicines. In an unprecedented high-demand environment, the power balance was certainly in the manufacturer's favour which then limited the provisions that may have served the public interest in contracts being fair, equitable, transparent, competitive and cost-effective. The contracts concluded with vaccine manufacturers were strongly one-sided and there was no flexibility for the procurer to amend any terms or conditions. South Africa was representative of this trend being imposed internationally.

Globally, countries had very limited options as all COVID-19 manufacturers adopted the same approach requiring governments to accept full liability in an adverse event following immunisation. South Africa would have been excluded from accessing any vaccines if it did not accept these clauses, giving way to the no-fault compensation scheme. The purpose of the COVID-19 vaccine injury no-fault compensation scheme (South African Government 2021) is to provide compensation to persons who have suffered harm, loss, or damages because of a vaccine injury. This allows people to get access to financial compensation without having to go to court, which could potentially be a lengthy process. However, should a person not be satisfied with their award from the fund, they still have recourse to file a claim in the legal system.

The no-fault compensation scheme for adverse events has hindered the movement of surplus vaccines across countries, thus resulting in the possible destruction of expired stock which may have easily served its intended purpose elsewhere.

With low demand for vaccines in many nations including South Africa, countries are facing destroying expired stock whilst still under contractual obligation to accept and pay for more doses on bilateral agreements. This vast drop in vaccine demand 1 year later was not foreseen by any predictive modelling and now many countries are trying to exit their contractual obligations in procuring the balance of their doses. This hits low-income nations the hardest, especially amid rising inflation and debt levels.

Opportunities to improve in future procurement of vaccines

Transparency in public procurement is pivotal and the hindrance thereof infringes South African constitutional principles and public administration policy. It should also be noted that vaccine procurement was undertaken during an unprecedented global pandemic forcing the National Department of Health to seek a deviation from open bidding procurement procedures as this was the only option available in securing access to vaccines to protect its population. However future vaccine procurement contracts should be subject to public procurement regulations, thus ensuring open transparency.

Historically it can also be viewed that public procurement contracts also leaned to favour one party, namely the government. The procurement of COVID-19 vaccines has polarised both single-sided contracts and going forward a more collaborative approach between the parties in the interest of public health is required.

Some proposed improvements to vaccine contracts should allow for innovations to be structured with more flexibility, be it on the delivery schedule, revision of quantities and for reformulation of the vaccine candidates based on emerging variants.

Over the years, price transparency in medicines has become an issue and in health emergencies, it is a critical issue. A lack of transparency in agreements is also preventing the global health community from understanding the availability of various medicines.

In an emergency setting, we really think that the transparency aspect [of drug pricing] becomes very, very critical. – Lisa Hedman, technical officer for access to medicines and health products, WHO.

Overview of procurement of COVID-19 vaccine logistic services

Whilst in the process of procuring and securing vaccine supply agreements, the South African National Department of Health issued a tender for the pharmaceutical transport, warehousing and distribution services for COVID-19 vaccines (collectively logistic services) required to deliver vaccines to public and private facilities (Department of Health, South Africa 2021e).

The tender process included a prequalification round and then a bidding round for the prequalified bidders. It was already known at the time that the various vaccine candidates required different storage requirements and thus the tender allowed for three cold chain solution options (2 to 8 °C, −20 °C and −70 °C).

In addition, the Incoterms with vaccine manufacturers and suppliers were also unknown and the tender included prequalification of logistic services providers if vaccines were not supplied on the delivered at place (DAP) Incoterm (Trade Finance Global 2020). The DAP Incoterm in this context would mean that the vaccines would not be delivered to the logistics service provider's warehouse.

South Africa's existing cold chain capacity is predominantly focused on safely storing vaccines in refrigerators that require storage temperatures between 2 °C and 8 °C, much higher temperatures than the ultra-low temperature required for mRNA vaccines which require storage at −70 °C. Therefore, during the prequalification phase distributors needed to demonstrate well-managed warehouse storage and distribution service to maintain the cold chain. Due to the real and perceived value of vaccines, logistical and security arrangements also needed to be made to safeguard vaccines during distribution.

South Africa opted for a phased approach to the vaccine rollout, not only based on scientific evidence regarding infection and transmission risk but also on societal impact and principles of societal solidarity. Phase 1 targeted approximately 1.25 million frontline health workers who were vaccinated primarily through facility-based delivery programmes. Phase 2 was opened to essential workers, adults over the age of 60, all adults with co-morbidities, and adults in congregate settings (e.g. prisons and care homes) which targeted an estimated 16 million people in total. The final phase targets an estimated 22.5 million adults and now includes adolescents aged between 12 and 17 years old.

Phases 2 and 3 vaccinations leverage a multitude of service delivery platforms, ranging from public facilities to remote community pharmacies, to ensure that vaccines are accessible across geographic locations (South African Department of Health 2021).

Challenges in the procurement of COVID-19 vaccine logistic services

To reduce vulnerabilities to the distribution chain and ensure rapid delivery of vaccines required the appointment of at least two distribution service providers per cold chain solution. This resulted in the successful award of distribution contracts to three service providers and afforded an equitable spread of services with the two current vaccine types.

The contracting model for the distribution services adopted an outcome-based approach and payment was triggered only when vaccine vials were successfully delivered to vaccination or vaccine storage sites.

The distribution contracts also set clearly defined performance indicators at various segments in the distribution chain. Some of the key performance indicators (KPIs) include:

Receipt into distributor warehouse within 24 h of delivery of vaccine shipments

Dispatch to the National Control Laboratory of the batch quality sample within 48 h of delivery of vaccine shipments

Weekly vaccine cycle counts at a distributor warehouse

Vaccine order delivery within 3 business days to public and private facilities.

Although the vaccine inbound shipment and distribution volumes were always uncertain, clearly defined responsibilities and performance criteria allowed both parties to manage the contract effectively during fluctuating and uncertain times.

As the participation of the private sector to ensure rapid mass vaccination evolved, the requirement for cash collection and debtor administration services was identified. The contracted distribution service providers were best positioned to provide these services as they already had established similar services for other parties and had centralised staff and systems in place. This resulted in an expansion of service of the distribution services providers and added additional segments to the vaccine distribution value chain.

Opportunities to improve future logistic services for vaccines

During the initial stages of the vaccine programme, capacity management of vaccine doses at central storage and the possible destruction of expired stock were not considered. All parties assumed high and then sustained demand for vaccines (conspiracy of optimism). This proved to be a shortfall for many nations with several countries now eager to donate short-dated stock to other nations, which is now being construed as dumping.

Future procurement of distribution services should take cognizance of the entire lifecycle of the vaccine be it either delivered to a vaccine facility or requiring destruction post expiry.

Contract management for the supply of COVID-19 vaccines (Pfizer-BioNTech Comirnaty and Janssen COVID-19 vaccine)

Overview of the contract management for the supply of COVID-19 vaccines

Once successful vaccine candidates were approved and manufacturing commenced, South Africa took delivery of its bilateral vaccine shipments on 3rd May 2021 consisting of 325,260 Pfizer doses (Department of Health, South Africa 2021c).

Earlier Johnson and Johnson donated doses which were still in Phase 3b clinical trials were allocated to frontline health care workers under the Sisonke I Implementation study which began on 17th February 2021 (Presidency of the Republic of South Africa 2021).

Initial vaccine inbound shipments were sporadic with 1.9 million doses arriving in May 2021, 5.5 million doses arriving in June 2021, 6.4 million doses in July 2021 and 13.4 million doses in August 2021 as shipment frequency and volumes increased. By the end of February 2022, a total of 55 million doses had been received from various sources predominantly the bilateral agreements, COVAX and donations from the United States Government (United States Government 2021).

Challenges in the contract management for the supply of COVID-19 vaccines

One of the challenges experienced in the contract management of the inbound vaccines was the allocations of vaccines by manufacturers and delivery schedule. In traditional medicine supply, most if not all steps are performed consecutively. This results in longer lead times but with efficiency and mitigated risks.

For COVID-19 vaccinations time was of the essence and to reduce the lead times, many steps from development, approval, manufacturing and delivery were performed concurrently. Historically, most vaccines took over a decade to research, test and produce. COVID-19 vaccines cleared the threshold for emergency use in less than 11 months through unprecedented collaboration.

For COVID-19 vaccine development four factors changed to accelerate the development:

Develop as many possible vaccine candidates as possible

Move faster, by running development stages side by side

Carry out clinical trials at the same time in different countries

Invest in greater manufacturing capacity around the world

(Wellcome Trust 2021)

The COVID-19 vaccine rollout project was a trailblazer in many ways and challenged well-established and rigid systems. The contract management for the delivery of the vaccines called for adaptive measures by all parties involved to ensure success.

Vaccine manufacturers were immediately deemed as key suppliers to the National Department of Health and the principles of Supplier Relationship Management (SRM) were quickly embedded during the contract management process. For this essay, SRM is defined as ‘the function that seeks to develop a successful collaborative relationship with key suppliers for the delivery of significant tangible (business) benefits for both parties’. (IACCM 2014)

During Phase I of the constrained supply and high demand stage of the vaccination programme, South Africa accepted vaccines with a reduced shelf-life (vaccine doses nearing expiry date following thawing). This short shelf life stock was used to vaccinate essential workers, persons in congregate settings, persons over 60 years and persons over 18 years with co-morbidities. The distribution of the short shelf life stock required great coordination efforts to ensure that all the vaccines were utilised before expiry.

The lagging delivery dates of certain shipments made planning and allocation of these vaccines extremely problematic. To facilitate adjustments in planning, frequent communication of the projected inbound shipments to all parties was essential. To ensure that all logistical risks and issues were raised, understood and mitigated, the vaccine distribution service providers were included in weekly progress meetings with vaccine manufacturers.

However, as vaccine demand waned the management of stock nearing expiry became a topical issue. This was temporarily reprieved with deferred shipments, several shelf-life extension regulatory approvals, and updated stability data for storage of both vaccine types however storage capacity, extended cost of storage and possible destruction of expired doses are risks and issues that need to be managed as we near the end of this vaccine programme.

Opportunities to improve in the future contract management of vaccine supply

In a Volatility, Uncertainty, Complexity and Ambiguity environment, the only certainty is change. We, therefore, need to build clauses into contracts and mechanisms to allow for flexibility in absorbing the impact of change.

In a vaccine contract management space with uncertainty in demand, including certain gates or milestones provision to review future commitments dependent on vaccine uptake would greatly reduce the risk for both parties.

Although many contracts are silent on this topic, collaboration is a key success factor in executing any project. It is important to ensure that the key personnel representing the various parties have a collaborative mindset to facilitate rapid, clear and informed decision-making to resolve issues as soon as they manifest.

Overview of the contract management for the logistic service for the COVID-19 vaccine

The COVID-19 Vaccine Control Tower was launched by USAID's Global Health Supply Chain – Technical Assistance programme which ensures the centralised management of all inbound shipment, warehousing and distribution. The Control Tower also micro plans and provides technical support to the South African vaccine programme.

Centralised control via the Control Tower facilitates unambiguous communication, not only to the distributors but also to the public and private-sector customers. This also assists in the management and mitigation of risks.

To mitigate the risk of theft and loss of vaccines, vaccine deliveries were escorted under armed escort with the coordination of the National Joint Operational and Intelligence Structure (NATJOINTS). NATJOINTS is a multidisciplinary coordinating structure of the South African government that is activated to manage large projects which amongst others included the coordinated government's daily response to COVID-19.

Challenges in the contract management for the logistic service for the COVID-19 vaccines

Successful delivery of vaccines requires not only contract and performance management but also coordination with numerous stakeholders. In a highly volatile and complex environment communication is key, thus initially daily (which changed to weekly) check-in meetings in the new normal virtual setting were established to ensure frequent and clear communication and alignment with an aim for rapid problem-solving. It is imperative that consistency exists in all communications with distributors and that common governance is applied.

The measurement of the contractual KPIs was set up from the onset of the contract and is reviewed in monthly KPI review meetings ensuring clear measurement of performance and identifying opportunities for improvement. Lessons learnt, especially early in the programme, by each distributor are transposed to other distributors to ensure collaborative continuous improvement and improve the success of the vaccine delivery programme.

From a service delivery lens, due to the national importance of the COVID-19 vaccine roll-out programme, logistics service providers were inherently incentivised to collaborate with the Department of Health to ensure successful delivery.

The influx of vaccine shipments and a lowering of vaccine demand created a new challenge posing storage capacity issues at the distributor's warehouses. This required a proactive engagement with a vaccine manufacturer and the distributors to manage the risk and avoid possible wastage.

Opportunities to improve in future contract management of logistic services for vaccines

Post-signature contract management undergoes several stages as part of the contract lifecycle. From the initial kick-off or implementation phase to the operational and service delivery phase and finally the contract close-out phase. Each phase comes with its challenges and risks that require careful management.

Understanding the distributor's business model will also provide better insights into how contract modification may affect the underlying business case and where contract management can add the most value to all parties involved.

In a programme, where services are too complex to be captured in contract language and where assumptions and requirements are subject to change, post-contract management is more about working with the other parties (relationship management) and less about the enforcement of terms and conditions.

Strengthening the South African public health sector

A key stakeholder in the vaccine programme is the Auditor-General of South Africa. The Auditor-General checks the spending of public funds and resources by looking at whether these were used for the intended purposes concerning the economy, efficiency and effectiveness. As the vaccine programme undergoes numerous audits, recommendations and findings allow for further enhancements and strengthening of future health programmes in South Africa.

Many new standard operating procedures have been developed based on the lessons learnt from the vaccine programme to assist in the overall response and management of vaccine procurement and distribution. Adopting and embedding these standards will increase efficiency and effectiveness in another health emergency.

In summary, the key learnings from the vaccine programme that still need to embed into the sector overall going forward include:

Being more flexible and adaptive

□ collaborative rather than one-sided contracting

□ balanced risk allocation

□ clauses to accommodate volatility in demand

□ greater focus on outcomes in performance criteria.

Ensure transparency, especially in emergency medicine pricing.

Understand the entire value chain from cradle to grave

□ segmentation and transitioning of post-award processes.

Relationship management

□ frequent stakeholder engagement

□ clear communication

□ defined responsibilities.

As the COVID-19 pandemic is now setting behind us, the many achievements and lessons learnt during this period need to be recorded and galvanised to strengthen our preparedness for the next crisis.

Areas for future research

• How can a better understanding of the risks and responsibilities make change management a collaborative and dynamic process within the pharmaceutical industry in terms of procurement and contract management? The focus of this research would be to develop a risk and responsibilities framework to afford more transparency in procurement and contract management in ensuring risks are assigned to the parties best positioned to manage them.

• How to reduce the nationalisation of emergency medicines during health crises to strive for equitable access to everyone irrespective of their location and nationality? The focus of this research would be to explore mechanisms in the equitable procurement of emergency medicines and contract management in the delivery of these medicines within a supply chain.