COVID-19 vaccine makers are under intense pressure to rev up production, but the scale of the challenge is unprecedented — and the speed of production is limited.
Why it matters: Even with help from the federal government and outside companies, vaccine-making is a complex, time-consuming biological process. That limits how quickly companies like Pfizer and Moderna can accelerate their output even during a crisis.
The big picture: With new, more transmissible variants emerging, we’re in a race to get shots into more people’s arms. What would normally take years to set up is being compressed into less than a year, leaving engineers to adapt manufacturing processes on the fly.
“The bottlenecks keeps moving. It keeps changing,” said Chaz Calitri, who leads the COVID-19 vaccine program at Pfizer’s Kalamazoo, Mich., facility.
“It’s a dream project, but at the same time, it’s the weight of the world,” he tells Axios.
Between the lines: Making vaccines is complex, and the process can be hindered at different steps.
“There’s a lot of science and engineering that goes into the manufacturing of any vaccine,” adds Margaret Ruesch, a vice president of Worldwide Research and Development at the company. “It’s molecular biology at a large scale.”
How it works: Axios got a deep dive into the making of Pfizer’s vaccine, a three-phase process that takes weeks from start to finish and involves three different facilities.
1) DNA manufacturing: At a plant near St. Louis, Mo., Pfizer produces DNA that encodes messenger RNA — instructions for cells to make part of the spike protein on the surface of the coronavirus. That primes the immune system to defend against future encounters with the virus.
The DNA is produced by bacterial cells, then purified, frozen and shipped to another Pfizer facility in Andover, Mass.
2) Making the mRNA:In Andover, the template DNA is incubated with messenger RNA building blocks in a reactor to make the mRNA. Pfizer has been making two, 40-liter batches per week — up to 10 million doses worth —but expects to double that to four batches per week.
After purification and quality checks, the frozen mRNA is shipped to a Pfizer plant in Kalamazoo, Mich.
3) Formulating the vaccine: In Kalamazoo, the mRNA and lipid nanoparticles (oily envelopes that deliver mRNA to cells in the body) are combined and go through a series of filtrations.
The bulk vaccine is then transferred to sterile vials, capped, inspected, labeled and packed into containers the size of pizza boxes. Those containers are then stored in sub-zero freezers to await shipment to vaccine distribution sites.
Where it stands:Both Pfizer and Moderna say they’re on track to meet their commitments to deliver 200 million doses each to the U.S. over the first half of the year.
The Biden administration yesterday announced it had secured deals for another 200 million doses, bringing the total to roughly 600 million doses, enough to fully vaccinate 300 million Americans by the end of July.
Pfizer and its German partner BioNTech recently upped supplies 20% by getting FDA approval to squeeze a sixth dose (instead of five) out of every vial.
Yes, but: Extracting a sixth dose requires the use of specialized syringes, which have their own production constraints, as Reuters explained.
The latest:The Biden administration said last week that it will use its wartime powers under the Defense Production Act to give Pfizer priority access to critical components such as filling pumps and filtration units to try to help address bottlenecks.
Meanwhile, Pfizer continues to tweak its processes to boost output and says it is adding more suppliers and contract manufacturers to the vaccine supply chain.
Novartis, Sanofi and Merck KGaA are among 10 contract manufacturers that will help the company manufacture more doses, a Pfizer spokesman tells Axios.
Pfizer and BioNTech will still do most of the work in their facilities, but contract manufacturers will help with specific tasks like formulating lipid nanoparticles, sterile filling, inspection and packaging.
Ordering other drug manufacturers to stand up manufacturing lines to whip up extra batches of Pfizer’s or Moderna’s vaccines is not an efficient or practical way for the federal government to quickly increase supplies, some experts say.
“Making vaccines is not like making cars, and quality control is paramount,” Stanley Plotkin, a vaccine industry consultant, told Kaiser Health News. “We are expecting other vaccines in a matter of weeks, so it might be faster to bring them into use.”
What to watch:Johnson & Johnson has requested emergency use authorization from the FDA for its single-dose vaccine, but is reportedly lagging in production, the NYT first reported last month.
Four companies that agreed to pay a combined $26 billion to settle claims about their roles in the opioid crisis plan to deduct some of those costs from their taxes and recoup around $1 billion apiece.
In recent months, as details of the blockbuster settlement were still being worked out, pharmaceutical giant Johnson & Johnson and the “big three” drug distributors — McKesson, AmerisourceBergen and Cardinal Health —all updated their financial projections to include large tax benefits stemming from the expected deal, a Washington Post analysis of regulatory filings found.
In one example, Dublin, Ohio-based drug distributor Cardinal Health said earlier this month it planned to collect a $974 million cash refund because it claimed its opioid-related legal costs as a “net operating loss carryback” — a tax provision Congress included in last year’s coronavirus bailout package as a way of helping companies struggling during the pandemic.
The deductions may deepen public anger toward companies prosecutors say played key roles in a destructive public health crisis that kills tens of thousands of Americans every year. In lawsuits filed by dozens of states and local jurisdictions, public officials have argued that the companies, among other corporate defendants, flooded the country with billions of highly addictive pills and ignored signs they were being steered to people who abused them.
Under the terms of the proposed settlement— which is being finalized and will ultimately be subject to federal court approval — the four companies would pay between $5 billion and $8 billion each to reimburse communities for the costs of the health crisis. Plaintiffs who support the proposal say it will resolve a highly complex litigation process and make funds available to communities and individuals still struggling with addiction.
Others including Greg McNeil, whose son became addicted to opioids and died from an overdose, have said $26 billion is only a small fraction of the epidemic’s financial toll and argue the proposal doesn’t include what many family members of opioid victims want the most: an admission of guilt.
All four firms disavow any wrongdoing or legal responsibility. The companies have said they produced government-approved prescription pills, distributed them to registered pharmacies and took steps to try to prevent their misuse.
U.S. tax laws generally restrict companies from deducting the cost of legal settlements from their taxes, with one major exception: Damages paid to victims as restitution for the misdeeds can usually be deducted. Still, Congress has placed stricter limits on such deductions in recent years, and some tax experts say the Internal Revenue Service could challenge the companies’ attempts to deduct opioid settlement costs.
Harry Cullen, a Brooklyn-based activist who has worked to hold drug companies accountable for the epidemic, said it is “incredibly insulting” that companies would try deduct the settlement payments. “As if they are donating it to these people who they harmed in the first place.”
Erich Timmerman, a spokesman for Cardinal Health, said in a statement that the company’s tax deductions are permissible under federal law. He also pointed to a statement chief executive Mike Kaufmann made in November, when he said Cardinal takes its role in the pharmaceutical supply chain seriously and remains “committed to being part of the solution to this epidemic.”
AmerisourceBergen declined to comment on its taxes but said in a statement the company takes steps to mitigate the diversion of prescription drugs, including by refusing service to customers it sees as a risk and by making daily reports to federal drug officials.
Johnson & Johnson declined to comment on the opioid settlement and tax deductions beyond its regulatory filings.A spokeswoman for McKesson did not respond to multiple requests for comment.
Cardinal Health’s use of the “carryback” tax break draws attention to what some see as a shortcoming of the $2 trillion U.S. coronavirus bailout known as the Cares Act. In their haste to funnel cash benefits to businesses facing economic peril, lawmakers made billions of dollars in tax breaks broadly available to any company, regardless of whether it suffered during the pandemic.
Cardinal, a company with a $15 billion market capitalization and $4 billion in available cash, surpassed Wall Street expectations for its most recent earnings period. Last week, CEO Kaufmann told investors a rebound in medical treatments and procedures had revived demand for Cardinal’s health devices and drugs. He said the company was boosting its investment in sophisticated supply-chain technology.
On the same day, Cardinal said it was filing for a tax break using the Cares Act provision and expected a nearly $1 billion cash refund from the IRS within the next 12 months. The company plans to pay $6.6 billion in the settlement.
Francine J. Lipman, a tax professor at the University of Nevada at Las Vegas, said Cardinal Health appears to be “getting a bit of a windfall from laws that Congress intended to help companies that are suffering due to a pandemic.”
The “carryback” tax break permits any company that lost money in 2018, 2019 or 2020 to apply those losses to previous, more profitable years. Some form of this provision has been permitted by the U.S. tax code for over a century to help businesses that face ups and downs to even out their taxes.
The Cares Act raised the limit on the amount of losses companies can use to offset taxes and permitted them to apply those losses to earlier periods. Because the corporate tax rate was higher before 2018, companies with recent losses can increase tax refunds they received before that year by up to 67 percent.
Cardinal estimated in August it expected to deduct $488 million from the expected opioid legal settlement. But in its Feb. 5 filing, the company said the amount probably would be higher in part because the Cares Act permitted it to carry back losses related to the opioid litigation to previous years when the tax rate was higher.
UNLV’s Lipman said Cardinal’s decision to apply for a tax refund before any legal settlement has been finalized could face scrutiny from the IRS. Deductions must be made against business expenses that are shown to have “economic effect,” she said, which may preclude deductions against future, unpaid legal settlements.
Timmerman, Cardinal’s spokesman, said the company has already recorded a loss related to the opioid litigation because Cardinal insures itself through a wholly-owned insurance subsidiary. The opioid litigation caused a loss to the insurance company’s reserve, and that is the loss that Cardinal is deducting, he said.
“Tax and accounting rules applicable to insurance companies, including self-insurance companies, require recognition of loss when an insurance reserve is set, thus establishing economic effect, even if the underlying settlement is not final,” Timmerman said.
The three other companies involved in the $26 billion settlement have estimated the tax benefits of the deal but have not filed for tax refunds. They all said the tax benefits could be lower if courts or regulators determined some or all of the payments are not tax-deductible.
McKesson, which expects to pay $8.1 billion in the settlement, said in a Feb. 2 filing that the actual cost of the deal would be $6.7 billion after taxes, implying a $1.4 billion tax benefit. The company also said $497 million in tax benefits were “uncertain” because of the “uncertainty in connection with the deductibility of opioid related litigation and claims.”
AmerisourceBergen, which anticipates a $6.6 billion settlement payment, said in November it expects a $1.1 billion tax benefit. The company said an additional $371.5 million tax benefit was possible but “uncertain.”
“A settlement has not been reached, and, therefore, we applied significant judgment in estimating the ultimate amount of the opioid litigation settlement that would be deductible,” the company said.
Matthew Gardner, a senior fellow at the nonprofit Institute on Taxation and Economic Policy, said these disclaimers suggest the companies are making conservative estimates. “That’s one way of saying they are likely going to claim even bigger tax benefits in their tax returns than they are showing on their financial statements,” he said.
Whether the payments will be deductible may hinge on specific word choices in the final terms of the settlement. Though recent changes to the tax code have attempted to close loopholes that permit companies to deduct taxes when they have committed wrongdoing, many companies now push to make sure their settlements include a “restitution” payment for victims — the “magic word” that often qualifies them for deductions, Gardner said.
In previous opioid-related settlements local governments reached with McKesson, Purdue Pharma and Teva Pharmaceuticals, the companies admitted no fault and agreed to restitution payments that appeared to qualify them for tax deductions, USA Today reported in 2019.
Johnson & Johnsonhas said it expects it could deduct as much as 21.4 percent of its $5 billion share of the settlement, which would mean a roughly $1.1 billion tax benefit. However, the company said last summer that the deductible amount may be lower if a regulation proposed by the IRS last year came into effect.
The rule, which did take effect Jan. 20, requires companies to meet a long list of specific criteria to qualify government settlements for tax deductions.
Faces on pills are seen at the Provocative Opioid Memorial in 2018 in Washington, D.C. There are 22,000 pills that represent the number of people who died of an opioid overdose in 2015.
In 2019, The Post analyzed a database maintained by the Drug Enforcement Administration that tracks the path of every pain pill sold in the United States. The database shows that America’s largest drug companies distributed 76 billion oxycodone and hydrocodone pain pills across the country between 2006 and 2012 as the nation’s deadliest drug epidemic spun out of control.
McKesson, Cardinal Health and AmerisourceBergen distributed 44 percent of the nation’s oxycodone and hydrocodone pills — the two most abused prescription opioid drugs — during that time.
An investigation by The Post last year found that near the peak of U.S. opioid production, a Johnson & Johnson subsidiary was manufacturing enough oxycodone and hydrocodone to capture half or more of the U.S. market. The company also lobbied for years to help persuade regulators to loosen a narcotics import rule, allowing Johnson & Johnson’s U.S. subsidiary to produce rising amounts of opioids out of potent poppies harvested by its Tasmanian subsidiary, The Post found.
Attorneys for Johnson & Johnson have said its opioid-producing subsidiaries did not cause the United States’ addiction crisis, that the companies were heavily regulated, and that such companies play only a “peripheral role in the multibillion-dollar market for prescription opioids.”
I went out on a social event with a hospital CFO. During the course of the day, it seemed that all I heard was griping about the CEO. Then I heard that the organization was ‘giving back’ most of the last year’s gains, how most of the leadership team were idiots, and on and on. Finally, I told my friend that I thought he was in burn-out and that if he did not do something to alleviate the stress he was bearing, things were not going to end well. A couple of weeks later, I received a call from my friend. The conversation started with, “You will not believe what just happened.” My answer was, “How many guesses do I get?”
In hindsight, it was easy to see this transition coming. I know. It has happened to me – more than once. The circumstances, emotions, and process leading up to a transition event are relatively consistent in my experience. People stop listening to you. You start feeling out of touch with the rest of the organization. Your relationships with peers begin to cool, especially the relationship with the boss. You learn that you are increasingly not invited to important meetings or summoned to participate in matters that are clearly within your scope. You begin to sense divergence of political and or philosophical views with the core leadership of the organization. Your boss and others start going around you to approach your staff directly.
These processes continue until you get invited to an unscheduled meeting where you learn that you are about to be freed up to seek other opportunities.
First, a disclaimer. I am assuming that the termination is not for cause, i.e., violation of policy, violation of the law, or behavior unbecoming. The majority of separations and terminations I am familiar with have little if anything to do with cause and occur primarily because of lack of fit or growing disagreement between the incumbent and their manager regarding the organization’s course. Sometimes, the incumbent’s area of responsibility is no longer meeting the needs of the organization. Too often, internal corporate politics are responsible for deals that started well souring. Sometimes, a transition follows an executive, usually but not always the CFO, digging in over their interpretation of the organization getting too close to crossing a compliance red line. Instead of greasing the squeaky wheel, the organization decides to address the problem by getting rid of the irritant. I have been in a situation more than once where I had to decide whether my integrity was for sale and what a fair price might be. In every case, I elected to avoid the disaster that has befallen executives that flew too close to the OIG’s flame, and in one case, it led to a separation from the organization.
One of my favorite Zig Ziglar quotes is, “Failure is an event; it is not a person.” Just because someone ends up in a transition does not mean by definition that they are a terrible person. Time and again, in these blogs, I have stipulated that for me to follow someone that was ‘bad’ in some way is extremely rare. In these articles, I address termination from the view of the ‘victim.’
I am speaking from experience writing this as I have been through an unplanned transition more than once. I know my problem; I get frustrated with politics, BS, sub-optimization, the toxicity of culture, and eventually lose my sense of humor or ability to eat crap without gagging. Not too long after I start telling people what I really think and, . . . . well, you know the rest of the story. What I believe is a growing risk of being an employee is why I decided to leave permanent employment and become a career Interim Executive Consultant. Regardless of the cause of a turnover event, it is gut-wrenching. Even if you sense it coming, it is no easier to bear. In a matter of a few minutes, you go from someone whose expertise and perspective are in high demand to someone that has no reason to get out of bed. The pain is increased exponentially by those that used to dote on you refusing to return phone calls or answer emails.
More than once, I have received a call from someone looking for help because their deal either has gone bad or is in the process of deterioriation. Invariably, a few weeks later, I get the call. Upon answering the phone, the conversation starts, “You aren’t going to believe what just happened to me!” My first thought is not again! It pains me almost as much to witness someone else go through a transition as it is to go through it yourself. As I said before, my response is, “How many guesses do I get?” I ask this question with a high degree of certainty that the answer is a forgone conclusion.
Sadly, people going through a transition process do not fully appreciate what they are facing, especially the first time. The first problem is the amount of time the executive is going to be unemployed. When this happened to me the first time in the ’80s, I was shocked when a mentor told me to expect a month for each $10,000 of pre-transition compensation. I could not believe this was possible, but I have seen it happen time after time. With the inflation that has occurred since then, a good rule of thumb is probably a month for each $20,000 of pre-transition compensation. Thinking back to my principle that the time to start planning for a transition is now, one of the things to be prepared for is up to a year of interruption in income unless you are fortunate enough to have a severance agreement.
Contact me to discuss any questions or observations you might have about these articles, leadership, transitions, or interim services. I might have an idea or two that might be valuable to you. An observation from my experience is that we need better leadership at every level in organizations. Some of my feedback comes from people who are demonstrating an interest in advancing their careers, and I am writing content to address those inquiries.
I encourage you to use the comment section at the bottom of each article to provide feedback and stimulate discussion. I welcome input and feedback that will help me to improve the quality and relevance of this work.
If you would like to discuss any of this content, provide private feedback or ask questions, you can reach me at ras2@me.com.
As both vaccinations and acquired immunity spread, life will likely settle into a new normal that will resemble pre-COVID-19 days— with some major twists.
The big picture: While hospitalizations and deaths are tamped down, the novel coronavirus should recede as a mortal threat to the world. But a lingering pool of unvaccinated people — and the virus’ own ability to mutate — will ensure SARS-CoV-2 keeps circulating at some level, meaning some precautions will be kept in place for years.
Driving the news: On Tuesday, Johnson & Johnson CEO Alex Gorsky told CNBC that people might well need a new coronavirus vaccine annually in the years ahead, much as they do now for the flu.
Gorsky’s comments were one of the clearest signals that even as the number of vaccinated people rises, the mutability of SARS-CoV-2 means the virus will almost certainly be with us in some form for years to come.
Be smart: That sounds like bad news — and indeed, it’s much less ideal than a world in which vaccination or infection conferred close to lifelong immunity and SARS-CoV-2 could be definitively conquered like smallpox.
With more contagious variants spreading rapidly, “the next 12 weeks are likely to be the darkest days of the pandemic,” says Michael Osterholm, the director of the University of Minnesota’s Center for Infectious Disease Research and Policy.
But the apparent effectiveness of the vaccines in preventing hospitalizations and death from COVID-19 — even in the face of new variants — points the way toward a milder future for the pandemic, albeit one that may be experienced very differently around the world.
Details:From studying what happened after new viruses emerged in the past, scientists predict SARS-CoV-2 will eventually become endemic, most likely in a seasonal pattern similar to the kind of coronaviruses that cause the common cold.
That’s nothing to sneeze at — literally, it will make us sneeze — but as immunity levels accumulate throughout the population, our experience of the virus will attenuate, and we’ll be highly unlikely to experience the severe death tolls and overloaded hospitals that marked much of the past year.
Yes, but: The existence of a stubborn pool of Americans who say they won’t get vaccinated — as well as the fact that it may take far longer for children, whom the vaccines have yet to be tested on, to get coverage — will give the virus longer legs than it would otherwise have.
“This will be with us forever,” says Osterholm. “That’s not even a debate at this point.”
What’s next: This means we can expect the K-shaped recovery that has marked the pandemic to continue, says Ben Pring, who leads Cognizant’s Center for the Future of Work.
With the virus likely to remain a threat, even if a diminished one, “those who are more stuck in the analog world are really going to continue to struggle,” he says.
Health security will also become a more ingrained part of daily life and work, which means temperature checks, masks, frequent COVID-19 testing and even vaccine passports for travel are here to stay.
The catch:That’s not all bad — the measures put in place to slow COVID-19 have stomped the flu and other seasonal respiratory viruses, and if we can hold onto some of those benefits in the future, we can save tens of thousands of lives and billions of dollars.
If the inequalities seen in the early phase of the vaccine rollout persist, COVID-19 could become a disease of the poor and disadvantaged, argues Mark Sendak, the co-founder and scientific adviser for Greenlight Ready, a COVID-19 resilience system that grew out of Duke Health.
Sendak points to the example of HIV, a disease that is entirely controllable with drugs but continues to exert a disproportionate toll on Black Americans, who take pre-exposure prophylactic medicine at much lower rates.
“If we go back to ‘normal,’ then we have failed.”
— Mark Sendak
What to watch:Whether the vaccine rollout can be adapted to reach hard to find and hard to persuade populations.
The Biden administration announced yesterday that it will start delivering vaccines directly to community health centers next week in an effort to promote more equity in the vaccine distribution process.
As the administration rolls out new COVID-19 plans, it needs to “invest in the community health care personnel” who can ensure that no one is left behind, says Sendak.
The bottom line:While SARS-CoV-2 has proven it can adapt to a changing environment, so can we. But we have to do so in a way that is fairer than our experience of the pandemic has been so far.
HENRY KOTULA 