What would you do as head of AstraZeneca?

Germany launched its mass Covid-19 vaccination programme on December 27. More than a month later, nothing much has happened. Over-80s were supposed to be inoculated first, along with care home residents, but tens of thousands of eligible Germans have yet to get the shot. This mess is the same across much of the EU due to a shortage of vaccination doses.

Probably this situation will not change during the upcoming weeks. One reason:  The European Commission (conducted negotiations for all EU members) seems to have negotiated poorly with AstraZeneca. Even though the pharmaceutical company cancelled its confirmed delivery (not 80 but just 40 million doses until the end of March), it seems the Commission has limited opportunities for pressing AstraZeneca to fulfil its obligations. 

Obviously, the treaty misses contractual penalties. The company won’t have to pay if it doesn’t fulfil its contract. The Commission’s defenders argue that penalties wouldn’t help get more vaccines immediately if it sued the company for not fulfilling its obligations. But this argument is missing the purpose of penalties. It is less about punishing but more about ensuring that the provider delivers on time and at the agreed quality level. 

If there had been penalties by contract, AstraZeneca would have had the incentive to deliver on time. But there were none, so they didn’t. 

The delay is not a question of morality or the company’s failure, it is more about a poor contract. As head of AstraZeneca: What would you do if it didn’t pay off to build another plant to produce faster? Or if you had to fulfil contracts, but due to short supply, you couldn’t satisfy anyone? Of course, you would shorten where it hurts you least, and that is where a breach of contract has minimal effect. So it seems with the EU treaty.

What remains to be done? Of course, you cannot change the treaty in hindsight. But you can still change the incentives for AstraZeneca to fulfil their promise as fast as they can. The solution: extra money. The EU should promise a higher price per dose depending on the delivery date. The sooner, the higher the price. That might lead to rethinking at AstraZeneca and supply faster because it would pay off. 

LINKS

https://www.ifo.de/DocDL/sd-2021-digital-03-fuest-impfstoffproduktion.pdf (German)

https://ourworldindata.org/coronavirus-data-explorer?zoomToSelection=true&time=2020-12-20..latest&country=USA~DEU~GBR~ISR~BHR~ARE~SYC&region=World&vaccinationsMetric=true&interval=total&perCapita=true&smoothing=0&pickerMetric=total_vaccinations_per_hundred&pickerSort=desc

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