The crazy quilt of vaccine distribution…

Unnecessary complexity, unready component parts and politics as usual
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When the dust settles (and it will eventually) the first couple of months of COVID vaccine distribution — nationally and in most (but not all) states — will become a classic textbook case of how not to build a distribution network for a new “must have” product.

There are exceptions, of course, most notably West Virginia, which crafted an efficient delivery system by staying simple and focused.

See: So, why is West Virginia kicking other states butts?

But, most states are dismissive of the West Virginia model and seem intent on rushing to build complex distribution networks cobbled with unready component parts and fraught with political infighting.

Case in point: Maryland, my home state.

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To understand what’s going on, we need to dust off our notes from Distribution 101.

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If you’d like to literally go back to the notes, see my classic (i.e. old) 11-pager that tells all you need to know about distribution networks. It’s guaranteed to bring back fond (?) memories for my former students.
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Step-by-step, let’s build a prototypical depiction of the COVID vaccine’s emerging distribution network, starting at the top with the vaccine manufacturers and the Federal government.

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Vaccine Manufacturers

As everybody knows, there are currently two approved vaccine suppliers in the U.S. (Pfizer and Moderna) … with a third (J&J’s 1-shot vaccine) likely to be to be approved in early March.

Both Pfizer and Moderna were substantially ramped up when their vaccines were approved — with some inventory on hand and high volume manufacturing processes in place.

Note: Operation Warp Speed guaranteed Pfizer & Moderna billion dollar purchase commitments — due whether or not their vaccines were approved.

That commitment gave the companies the financial security to build their manufacturing capacity and accumulate large launch inventories

Originally, J&J committed 100 million doses  by the end of June, but, there are reports that J&J production has fallen behind schedule and may fall short of those targets.

Note: More specifically, J&J anticipated having 12 million doses on hand for an early March launch. That estimate has been cut roughly in half.

The company expects to ramp -up production quickly and come close to meeting its original commitment.  Source

Bottom line: the manufacturers are capacity constrained at output levels that are very high … but short of of the extraordinary pent-up, urgent demand.

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The Federal Government

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All of the vaccine supply is controlled by the Federal government (the blue box above).  That is, no state, county, city, hospital or store is authorized to order vaccine directly from the manufacturers.

Note: Some shipments are received by the Feds and physically redistributed to the downstream entities;  other shipments may go directly to downstream entities, but only with the approval of the Feds.

As indicated on the chart above, the Federal government allocates vaccine doses to 4 main distribution channels:

  • States (and U.S. territories)
  • Nationwide Pharmacy Partners … notably CVS and Walgreens
  • Federally-run mass distribution sites (i.e. large venues supported with supplemental military personnel)
  • Community Health Centers … intended for underserved urban neighborhoods and remote rural locations.

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Pharmacy Partners

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Early on, the CDC established national partnerships with, most notably,  CVS and Walgreens  to provide on-site COVID-19 vaccination services for the  residents and staff of over 70,000 long-term-care (LTC) facilities (i.e. nursing homes and assisted living venues). Source

Note: West Virginia is the only state that opted out of the  nursing homes – LTC partnership and serviced those facilities thru an established network of local pharmacies.

And, the CDC established a Federal Retail Pharmacy Program that includes CVS, Walgreen’s, Walmart and 18 other national pharmacy partners. List

According to the WSJ, the government initially plans to give around a million doses a week directly to pharmacies.

Around 20% of those doses are going to Walmart making it one of the biggest distributors of the Covid-19 vaccine in the U.S.

That is in part because out of the roughly 5,000 U.S. stores under the company’s Walmart and Sam’s Club banners, about 4,000 stores are located in what the federal government defines as medically underserved areas.

Retail Pharmacy Program is  intended to eventually provide vaccinations at over  40,000 retail store pharmacies.

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From the Feds to the States

The main vaccine distribution channel runs through State governments.

In general, the Feds claim an intention to distribute the scarce supply of vaccines to States on an equal per capita basis adjusted  for “demographic equity”.

Based on CDC reports, there is state-to-state variation in the per capita vaccine distributions.

See Not all states are getting their ‘fair share’ of vaccine.

Any vaccine that the Federal government distributes through the Pharmacy Partners programs or allocated directly to the Federally-run mass vaccination sites and Community Health Centers are diverted from the aggregate pool to be allocated to the states.

Said differently, those doses are  subtracted from the allocations that go to the States for redistribution.

Some governors — who are used to calling the shots — want to be sure their states don’t lose any flexibility in how they manage vaccine distribution. Source: AP

So, some State governors are, for example, declining Federal mass distribution sites, asserting that they need “doses, not tents” … and will only accept “tents” if they are accompanied by incremental doses of vaccine.

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The States

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States allocate their vaccine distributions along 4 sub-channels:

  • Counties and large cities … which then vaccinate residents via established and “pop-up” Public Health Sites
  • Hospitals … which are expected to vaccinate their staffs and the public
  • State-run Mass Distribution Sites … similar to, but separate from, the Federally-run mass distribution sites
  • Retail store pharmacies … that aren’t supplied by the CDC’s Retail Pharmacy Program

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The Whole Picture

Putting all of the pieces together, here’s what the whole distribution network looks like in most states.

We’ll be referencing back to this distribution network schematic is future posts.

click for a full-size (printable) PDF
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For now, a couple of observations.

1. At this stage of the vaccination roll-out, the distribution network is unnecessarily complex.

The distribution network looks pretty straight forward, akin to the distribution network for most established consumer products.

The key word is “established”.  The vaccines are most akin to early life cycle new products which typically call for a smaller set of strategically selected and tightly managed distribution channels & outlets.

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2. Objectives are muddled and there is a very heavy political influence on the distribution process.   Each level of government (Feds, States, Counties) has its own constituency and its own priorities which may (and do) conflict.

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3. Management control is exerted through the allocation of scarce vaccine doses which are essentially the “coin of the realm”. The Feds can force the States to conform to its priorities … and the States can force the Counties to conform to their priorities by throttling the distribution of doses.

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4. There is substantial channel conflict and competition among the governmental entities.  For example, both the Feds and the States operate mass vaccination sites.  The States work around their County governments by opening mass vaccination sites and by diverting County vaccine allotments to State managed retail pharmacy partnerships.

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5. Many (probably most) of the distribution network component entities weren’t (and aren’t) ready for prime time.

For example, practically all of the scheduling systems suck.  They are either old legacy systems that can’t handles the flood of demand or the complex requirements (e.g. mandatory 2nd shots, people priorities) … or, they’re being cobbled from scratch — essentially half-baked beta versions that aren’t ready for “production release”.

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6. The scarce supply of vaccines is being carved into inefficiently small allotments.  As a result, vaccination sites are generally operating far below capacity (e.g. truncated hours of operation, closed some days).  As the governors say “we don’t need more tents, we need more doses”

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Much more to come…

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