Profiteering from the pandemic?

As the country suffers through the health and economic consequences of the pandemic, the last thing we need are corporations profiteering from it.

I just learned that the Department of Health (DOH) is outsourcing all aspects of the cold logistics chain for the national vaccination program. With a budget of P1 billion, the DOH has solicited bids from the private sector to receive the vaccines from their point of entry, clear them through customs, provide temperature-controlled warehousing and facilitate final delivery to the vaccination centers, nationwide.

Government has ordered 140 million doses of vaccines and it should arrive in tranches within the next 10 months, barring any complications.

However, the Request for Quotation (ROQ) issued by the DOH lacked many important details. It was silent on the timelines, quantities and final drop-off points of the vaccines, among other vital considerations. All these were left to the bidders to assume. How can the bidders meet the needs and expectations of the DOH if they were not defined in the first place? I wouldn’t be surprised if the bidding would be declared a failure due to this. The inadequacy of information on the ROQ is indicative of the DOH’s level of preparedness.

Despite incomplete data, ten logistics firms submitted bids for the P1-billion contract. Three were immediately disqualified due to incomplete documents. Two submitted bids were absurdly low, while two others submitted bids that were not considered credible. These seven bidders will likely be disqualified. The three credible bids that remain are that of Royal Cargo, who bid P380 million; Air 21 who bid P530 million and Zuellig Pharma who bid P999 million.

As of this writing, the DOH has not awarded the contract yet. However, experts in the logistics business tipped me off that the cost of brokerage, warehousing and hauling for 140 million vaccines to some 4,500 vaccination centers across the country should not cost lower P300 million. Hence, bids below this amount are unrealistic, while bids way in excess should be looked upon with trepidation.

Some aspects of this tender raises red flags. See, among the requirements of the DOH is that the logistics supplier must provide a dedicated temperature-controlled warehouse of no less than 3,000 square meters, sufficient for 2,000 pallet positions. In addition, the logistics supplier must have 750 units of thermal boxes in which to transport the vaccines from one point to another.

These requirements are suspect because they are exaggerated. One pallet, which is approximately 1 cubic meter in volume, can contain 327,000 Pfizer vaccines if using a 949-liter Fisher ULT chiller, or 163,000 Pfizer vaccines if using a 728-liter Haier ULT chiller. The capacities can vary depending on the size of the vaccine’s box. So 2,000 pallet positions is sufficient for 326 million to 645 million vaccines, depending on the type of chiller used. This is flagrantly excessive, considering that government had only ordered 140 million vaccines and not all of it will be arriving at the same time. Even if it does, the stocks will be immediately deployed to the various vaccination centers. Either way you look at it, to require 2,000 pallet positions is unwarranted.

As for the thermal boxes, each thermal box can contain 9,800 Moderna, 600 Sinovac or 4,875 Pfizer serums. The difference is due to the size of packaging. For brevity, let us assume that each thermal box can contain the average of the three – which is 5,092 vaccines. The thermal boxes are reusable and experts say that they can be deployed 60 times over a period of ten months. This means each box has a total transport capacity of 305,520 vaccines. Hence, to transport 140 million vaccines, the logistics supplier only needs 458 thermal boxes, not 750.

I learned that among all the bidders, it is only Zuellig Pharma that has a temperature controlled warehouse that is larger than 3,000 square meters sufficient for 2,000 palette positions. It is also the lone bidder with 750 thermal packaging on hand. Curiously too, its bid is 2.6 times the amount of that of Royal Cargo and 1.9 times that of Air 21. Could the DOH be engineering the requirements of the bid so that Zuellig bags the deal? I hope not, but we must watch this deal closely as it unfolds.

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Certain private entities have been given permission by the government to import vaccines. One of them is the ICTSI Foundation. ICTSI is in the process of importing 20 million Moderna serums,13 million of which will be “donated” to the state while 7 million will be appropriated to institutional buying groups at (supposedly) no profit. The Management Association of the Philippines (MAP) has been appointed the distribution partner of the ICTSI Foundation.

The cost of the vaccines vary according to the date of delivery. If one places an order for delivery in the second quarter, the jabs will cost $42 per dose. Deliveries for the third quarter cost $28 per dose while those for the fourth quarter cost $24 per dose. Payments must be made in US dollars and in advance. The ICTSI Foundation offers no guarantee as to how many vaccines will arrive per quarter since this depends on Moderna’s production. However, all available stocks will be distributed on a pro-rated basis in the spirit of fairness.

But here’s where things get murky. Zuellig Pharma was appointed the logistics chain partner of the ICTSI Foundation. At first, Zuellig charged $2 per dose for logistics services but subsequently lowered it to $1.04 per dose (or approximately P50). This raises red flags again. Why? Because if we look at Zuellig’s DOH bid, they offered to handle the entire logistics chain of government for only P7.14 per vaccine (P999 million divided by 140 million vaccines).

The difference in cost is too large to ignore, especially since buyers of the ICTSI Foundation are mostly based in Metro Manila. Does this mean that Zuellig is making a windfall profit of P42.86 per jab on this deal? I sent Zuellig an email twice for them to air their side but received no reply.

Look, I have no problem with private companies making money whenever they can, but profiteering on the back of a national crisis and/or in the guise of a non-profit initiative is foul. Zuellig must come clean with its cost structures.

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Email: [email protected]. Follow him on Facebook @Andrew J. Masigan