Part 3: Procuring Covid-19 vaccines

3.1
In this Part, we describe the Government’s strategy to procure vaccines. We assess:

• how the Government developed the strategy;
• the process the Government followed to secure advance purchase agreements;
• how decisions were made about which vaccines to purchase; and
• whether procurement processes were reasonable in the circumstances.

3.2
Given the importance of securing an appropriate vaccine supply, we expected that the Government would have had a clear procurement strategy and that it would have moved quickly to negotiate with suppliers. We expected to see a framework in place to help guide the Government’s decision-making, that it had drawn on appropriate expertise to help inform its approach (including the experience of other jurisdictions where possible), and weighed up costs and benefits of its choices.

3.3
Given the circumstances, we recognised that the Government’s procurement rules might not be applicable.⁵ Nonetheless, we expected to see evidence that the principles of good procurement were considered.

Summary of findings

3.4
A clear strategy for securing vaccines was developed and implemented. This resulted in advance purchase agreements with four pharmaceutical companies to supply vaccines to New Zealand. These advance purchase agreements are for more vaccines than are needed for New Zealand and the Pacific countries the Government has committed to support. Purchasing that amount was a deliberate strategy because of the uncertainty about if and when the vaccines would be supplied, and whether they would be approved for use in New Zealand.

3.5
Subsequently, one of the suppliers, Pfizer, had its vaccine approved for use in New Zealand and supply of the vaccine began. Pfizer agreed to provide enough doses of the vaccine to meet New Zealand’s needs.

3.6
In our view, the approach to procuring a vaccine was reasonable in the circumstances and broadly aligned with principles of good procurement. However, these decisions may have come at a cost. Even though the Government has now secured enough Pfizer vaccine for the population, it might have to pay for all of the vaccines it has entered into an agreement to purchase. Depending on how many vaccines are needed, and whether these vaccines gain approval for use in New Zealand, the costs could be significant.

3.7
There are also risks with the timing of delivery of the Pfizer vaccine, which are outside the Ministry’s control. In our view, it is important to manage public expectations in the event of delays in delivery affecting the roll-out.

Development of the procurement strategy

3.8
On 18 May 2020, Cabinet agreed to put a vaccine strategy in place to “ensure access for New Zealand to a safe and effective vaccine in order to implement our preferred immunisation strategy at the earliest possible time”.⁶ At that time, it was uncertain whether or when a successful vaccine could be produced. The strategy needed to be flexible to maximise New Zealand’s chances of acquiring an effective vaccine.

3.9
A key concern was how much priority New Zealand would be given compared to countries with more negotiating power, more chance of producing their own vaccines, and which were seen as having a higher need. Cabinet was also advised that global manufacturing capacity could be constrained by the expected levels of demand.

3.10
A dedicated taskforce (the Taskforce) was set up to advance the vaccine strategy and, in particular, focus on securing an appropriate supply of vaccines. A Science and Technical Advisory Group provided advice to the Taskforce on vaccine development, manufacturing, and safety. Members specialised in areas such as vaccinations and immunology, virology, and Māori health.

3.11
The Ministry of Foreign Affairs and Trade (MFAT) developed an International Engagement Plan to engage a range of overseas partners. Medsafe was also working with international colleagues to develop a shared framework to assess vaccines for efficacy and safety more quickly. PHARMAC issued a request for information from firms on Covid-19 vaccine research, manufacture, and supply. PHARMAC also worked with MFAT to initiate conversations with major international pharmaceutical companies that were not represented in New Zealand.

Securing a supply of vaccines

3.12
On 10 August 2020, Cabinet agreed a purchasing strategy that would maximise the chances of securing advance purchase agreements for a portfolio of vaccines.

3.13
One approach in the purchasing strategy was to secure agreements through what became the COVAX Facility (COVAX). COVAX is a framework set up to specifically support fair and equitable access to Covid-19 vaccines globally. It is led by GAVI,⁷ the Coalition for Epidemic Preparedness Innovations, and the World Health Organisation. COVAX negotiates access to vaccines directly with suppliers and then offers its members options to purchase vaccines based on an equitable distribution.

3.14
The Government agreed to join COVAX in September 2020. In January 2021, the Government accepted purchase options for 100,620 doses of the Pfizer vaccine and 1,668,000 doses of the AstraZeneca/Oxford (AstraZeneca) vaccine through COVAX.

3.15
The other approach that the Government took was to negotiate directly with vaccine suppliers. This is how the Government secured agreements to purchase four different vaccines.

The Taskforce was well prepared to enter negotiations

3.16
The Taskforce recognised that it needed to negotiate advance purchase agreements for vaccines from different vaccine suppliers to give New Zealand a good chance of having timely access to a suitable vaccine.

3.17
In August 2020, Cabinet agreed to set up a negotiating team drawing on expertise from the Ministry of Business, Innovation and Employment, MFAT, PHARMAC, and the Ministry of Health together with external commercial and legal advisors. A science review panel of seven experts, including some from the Science and Technical Advisory Group, was also set up to advise the negotiating team.

3.18
Cabinet agreed to establish a contingency that could be drawn down to secure advance purchase agreements for vaccines, with the approval of the Prime Minister, the Minister of Finance, the Minister of Research, Science and Innovation, and the Minister of Health (the Joint Ministers).

3.19
The Taskforce developed a robust process with clear roles and responsibilities for negotiating and signing advance purchase agreements. The process involved three main activities:

• initial engagement (for example, identifying target vaccine candidates and signing Confidential Disclosure Agreements for information about the potential vaccine);
• scientific and commercial evaluation of the vaccine candidate; and
• negotiation to agree the terms of a full agreement.

3.20
After a satisfactory agreement for purchasing supply of a vaccine had been reached, the process required the Ministry of Health and the Ministry of Business, Innovation and Employment to jointly make recommendations to the Joint Ministers, who would then authorise the Director-General of Health to sign the agreements.

A clear framework guided decisions about which vaccine to purchase

3.21
By September 2020, the Taskforce had a list of 10 target vaccines. The target vaccines were then prioritised based on expected performance and expected availability and access.

3.22
There were clear decision-making frameworks that guided how target vaccines were prioritised. These included clear criteria, accounted for situations where all the desired information was not available, and considered how the target vaccine would contribute to New Zealand’s overall vaccine strategy and portfolio.

3.23
In December 2020, Cabinet approved additional funding to be allocated to the contingency so there were enough funds available to secure agreements for a portfolio of vaccines.⁸ This funding also covered the estimated costs of implementing the immunisation programme.

3.24
By the end of 2020, advance purchase agreements had been entered into for four different vaccines. At the time of finalising the agreements, there was still uncertainty about the safety and effectiveness of each vaccine. Some were near the end of clinical trials but others had further to go. One of the main reasons for selecting four vaccines that used different technologies was to increase the likelihood of at least one resulting in a viable vaccine.

3.25
If all four vaccines purchased are deemed safe and effective, there will be more than enough doses to immunise all New Zealanders and the countries in the Pacific that the Government has committed to support.

The Government has now purchased enough of the Pfizer vaccine to meet New Zealand’s needs

3.26
The initial purchase agreement with Pfizer was for 1.5 million doses. The Taskforce wanted to purchase more doses of the Pfizer vaccine but, at the time the agreement was signed, Pfizer was in negotiations with other potential purchasers and could not commit to supplying more doses of the vaccine to New Zealand. However, the purchase agreement included an option to purchase further doses of the vaccine if they became available.

3.27
Early in 2021, Pfizer advised that it could now offer extra doses of the vaccine to New Zealand. In March 2021, the Government secured an agreement to purchase an additional 8.5 million doses of the Pfizer vaccine so that all eligible New Zealanders could receive it. This new agreement brought the total number of doses of the Pfizer vaccine to 10 million – enough for all New Zealanders aged 16 years and older to receive the full course of vaccine (two doses for each person).

3.28
The cost of the additional doses of the Pfizer vaccine is covered by the contingency funding already set aside.

Alignment with good procurement practice

3.29
The vaccine purchase was not a standard process. Agreements had to be made to purchase vaccines that might never reach production. Also, because of the significant demand for a Covid-19 vaccine and, at that time, a lack of supply, there was more competition between countries seeking to purchase vaccines than between suppliers. We considered the extent to which the purchase arrangements were in line with the principles of Government procurement.⁹

3.30
In our view, the Taskforce applied the principles of Government procurement in a way that was appropriate for the situation. Specific examples include:

• creating a clear vaccine strategy to guide the procurement;
• using the people with the right set of skills and experience for the Taskforce, the Science and Technical Advisory Group, the negotiating team, and the Science Review Panel;
• making efforts to understand the market for vaccines, including sharing information with other countries; and
• having clear processes for evaluating different vaccine options.

3.31
The Taskforce also worked to ensure that the Government was fully informed about different options, risks, and trade-offs. We describe some of these in more detail below.

The Government may still have to pay for the other vaccines it agreed to purchase

3.32
For all four vaccines, the Government had to make an initial payment to secure the advance purchase agreements. In some cases, this is partially refundable if the vaccine does not gain regulatory approval in New Zealand.

3.33
After a vaccine has been approved, the balance of the payment is due, in most cases, after each delivery. However, the Government has committed to paying for all the vaccines it has agreed to buy. Even if the vaccines are no longer needed, the Government can only terminate the agreements if the supplier fails to deliver the vaccines within a set time frame. Officials briefed Ministers about the terms of each agreement, including that payments would be non-refundable, before Ministers gave approval to sign each agreement.

3.34
Now that the Government has decided to offer the Pfizer vaccine to the whole population, it will need to decide what to do with the other vaccines it has agreed to purchase. Options are limited and will depend on Medsafe regulatory decisions about each vaccine and contractual commitments.

3.35
In the first instance, the Government is likely to keep some of the vaccines for a range of reasons. Some of the reasons include:

• vaccinating members of the public that cannot have the Pfizer vaccine due to specific health conditions;
• single-dose vaccines might encourage people in harder-to-reach communities to get vaccinated;
• one or more of the vaccines might be approved for people aged under 16 years and could be rolled out to that age group; and
• to fulfil New Zealand’s commitment to purchase vaccines for other Pacific countries.¹⁰

There remains a risk that vaccines might not be delivered when expected

3.36
The purchase agreement with Pfizer includes an interim delivery schedule, which provides the number of doses of the vaccine that Pfizer expects to deliver to New Zealand for each quarter of 2021. Most of the doses are expected in the second half of 2021, which is when the general population is scheduled to be vaccinated. However, this delivery schedule is not a guarantee. We understand that it is standard international practice for vaccine suppliers to have agreed only indicative delivery schedules for Covid-19 vaccines.

3.37
We understand that the Ministry currently has certainty about vaccine delivery for up to two months ahead. This is largely because Pfizer is managing competing international demands for vaccines. This is not a risk specific to the Pfizer vaccine. The purchase agreements made with the other three vaccine suppliers also have indicative delivery schedules.

3.38
There are also delivery risks outside of Pfizer’s control, such as global tensions over access to Covid-19 vaccines. For example, the European Union has blocked some exports of the AstraZeneca vaccine.

3.39
The Ministry’s plans for rolling out the vaccine are based on an assumption of relatively even delivery of vaccines across the second half of 2021.

3.40
The Ministry is aware of the risks with delivery and has regular contact with Pfizer so that there will be warning of any potential problems with supply. The Ministry is also continuing to engage with the other three vaccine suppliers in the event of problems with Pfizer’s supply. None of the other three vaccines have been approved for use in New Zealand, but approvals for both Janssen and AstraZeneca are in progress. Novavax is at an earlier stage of development and is not expected to be available until later in 2021.

3.41
The Ministry has stated publicly that it is confident, based on Pfizer’s track record to date, that all the vaccine doses will be delivered. However, it has also acknowledged that there is no certainty from July 2021 about how many doses will arrive with each delivery and when. The Ministry needs to continue to be transparent about the risks of vaccine supply being disrupted or not arriving at the expected time or in the expected quantities. In our view, this is important to manage public expectations in the event of delays to the roll-out.

5: For more information about the Government procurement rules, see www.procurement.govt.nz.

6: Cabinet Paper (May 2020), Covid-19 Vaccine Strategy, page 2.

7: GAVI is a global alliance bringing together public and private sectors with the shared goal of creating equal access to new and underused vaccines for children living in the world’s poorest countries. Its partners include the World Health Organisation, vaccine companies, philanthropists, and others.

8: We have not disclosed the cost of the vaccines because this might be commercially sensitive. Public servants and Ministers who needed to know the details of the negotiations and the final agreement reached were required to sign confidentiality agreements before the vaccine producers would share information with them. This was standard practice for any country purchasing Covid-19 vaccines.

9: More information on the Government procurement rules and the principles of Government procurement can be found at www.procurement.govt.nz.

10: From the outset, the vaccine strategy included consideration of ensuring access to vaccines for our closest Pacific neighbours: the Cook Islands, Niue, and Tokelau, as well as Samoa, Tonga, and Tuvalu. The Government has purchased enough vaccines to include the populations of those Pacific countries but, at the time of our audit, was still working through the details of which vaccine might be used and the associated logistics.