Initial Stockpile

At the beginning of the pandemic, much of the demand needs to be fulfilled by the existing stockpile of resources, as it takes time for manufacturers and every participant in supply chains to adjust the production rate. The US federal government established the Strategic National Stockpile (SNS) in case of public health crises in 2002. The program was proved to be effective in the 2009 H1N1 pandemic. In the Contingency Planning section, we propose a method for calculating the optimal size of the initial stockpile, which minimizes both the shortage and the waste caused by oversupply. But in reality, the optimal level may not be attained for various reasons. The SNS has only been partially replenished since 2009, and thus getting quickly depleted in this COVID-19 pandemic. After the pandemic starts, it becomes more important for ex-post decision makers to estimate the existing stockpile and utilize it effectively.

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Acquisition Rate

The rate of acquiring additional resources is determined by the production capacity and the capability to procure resources from elsewhere. For certain resources like PPE, studies have shown that although the US domestic manufacturing capacity is able to meet normal daily needs, it is challenging for the supply chain to immediately expand production in case of pandemics. Another source of supplies is the international market, which is associated with much uncertainty in pandemics, since shortages take place in a lot of places. For example, in April, the World Trade Organization (WTO) reported that 80 countries put restrictions on exports of personal protective equipment, such as face masks and gloves .

Moreover, when facing a surge of demands and not being able to fulfill them all, suppliers often have to set priorities for orders, thus making it difficult to guarantee that different regions can all acquire adequate resources to fight against the disease. As an example, in the early stages of the outbreak of COVID-19 pandemic in the US, many state governments, local healthcare systems and the federal government were competing for resources in a price-bidding war , and oftentimes, state governments ended up paying higher prices for less resources. Therefore, at the regional level, the supply of resources can be difficult to predict if there is no coordination among regions, and thus addressing the regional imbalance between supply and demand is challenging.

There is no easy way to change the initial stockpile once the pandemic starts, but remedies can be made through emergency acquisitions. The elasticity in production capacity can be possibly utilized to maximize the resources output. Around the time that SNS got depleted in April, President Trump invoked the Defense Production Act to mobilize manufacturers across the country to surge the production of medical resources like masks and ventilators. For ventilators, the following figure, created based on data from the Advanced Medical Technology Association , shows the drastic increase in production rate since March.

The following graph demonstrates both the frequency and severity of some notable epidemics since 1900.

The graph reveals that there have been thirteen impactful cases of infectious diseases that have occurred in just the first two decades of the 21st century. Some of them are even considered to be pandemic or pandemic-prone(e.g. H1N1 , Dengue , and Covid-19 . One systematic study shows that the diversity and the total number of outbreaks has had a significant global increase since 1980.

"This is a new normal, I do not expect the frequency of these events to reduce." warned Dr. Michael Ryan, the Executive Director of the Health Emergencies Program at World Health Organization in 2019 during an interview with BBC .

This section demonstrates the challenges faced by the economy, businesses, healthcare systems, and individuals during this pandemic.

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The Economy

A pandemic disrupts normal economic activities. Most governments implement public policies to slow down the spread of a pandemic. Their public policies can suppress productivity.

For instance, the policies involving the closure of businesses can negatively impact the economy by causing a drop in consumer spending to about 68% of the normal GDP . In addition, the estimated cost of SARS related to the loss of economic activity is about $40 billion.

A risk facing the economy is the slowdown in its growth, which is indicated by a contraction in Gross Domestic Product (GDP). The U.S. Bureau of Economic Analysis (BEA) has estimated that there has so far been a 4.8% drop in the U.S. GDP.

Additionally, a decrease in economic success results in the loss of tax revenue. The government often must cut down expenditures while fighting against the pandemic and will also reallocate resources to support nationwide healthcare systems.

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Businesses

The risks faced by businesses include supply chain disruption, mandatory shutdown, and decreased labor force participation.

To control the spread of disease, many factories were required to close, which caused a demand-supply imbalance in the supply chain of various industries (such as the transportation industry). Such a disruption in the supply chain damages business material logistics and prevents the normal operation of affected companies.

Large unemployment rates also produce a huge financial burden on national unemployment insurance. For job-seekers, it becomes harder to survive in the job market due to the combination of the decreasing number of unoccupied jobs and the rise of those looking for work

Stores, restaurants, and all other business areas that were profiting from social interactions were also forced into lockdown due to government orders focused on reducing the spread of this disease. Some companies were able to adapt to this change by migrating their daily work to online platforms. Yet, businesses whose success was dependent on physical labor, such as grocery stores and coffee shops , suffered a great loss in their profit.

Because of the loss of profits and the increasing practice of implementing cost reducing plans during lockdown, many companies have been forced to decrease their employee numbers or freeze their hiring processes , which has caused massive pandemic-related unemployment. According to a report by McKinsey , it has been estimated that up to 53 million U.S. jobs are at risk for layoffs, furloughs and payment reduction. While certain expenses are saved due to the decrease in money spent on human resources, this decision for lockdown has decreased the labor force participation rate, making certain companies less productive. This problem can also be detrimental to the development of businesses after the pandemic.

A rapid increase in unemployment also leads to a tremendous burden on national unemployment insurance. Because of the decreasing number of job opportunites and the increase in job applicants, job-seekers are unable to find jobs. Thus, the government must allocate more of its budget towards providing unemployment insurance to protect those that have been affected.

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Healthcare Systems

The main challenge faced by the healthcare system is the lack of medical resources during this pandemic. Medical resources are more likely to not be delivered on time due to the disruption of the supply chain and the lockdown of factories. With the growth of infected cases during the Covid-19 pandemic, most American hospitals have declared shortages of personal protective equipment (PPE). The PPE that are at its lowest stock includes medical masks, face shields, booties, gloves, gowns, hand sanitizer, disinfecting wipes, and thermometers.

Smaller healthcare institutions suffer more from the broken supply chain . During Covid-19, many American hospitals have relied on international supplied, especially those in Asia. Yet, most of the available supplies are required to be sold in large quantities or sell at an inflated price. Due to limited budgets, small healthcare institutions don't have the resource to outbid larger counterparts for medical materials.

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Individuals

Pandemic risks facing common people can be divided into two categories: health related and non-health related

Health related risks include not only the presence of physical health and mental health problems caused by the pandemic, but also related medical costs. Infected individuals are burdened by many issues, such as paying for huge medical expenditures and lose a portion of their income due to hospital bills. Usually, physical health risks usually differ in different age groups of the population. For example, for Covid-19, older adults are at a higher risk for developing more serious symptoms.

The growing public fear of the Covid-19 pandemic generates many mental health problems , such as depression and suicide. The suicide rate is on the rise in certain areas of the United States due to development of mental health caused by social isolation and fear of the pandemic.

The non-health-related risks vary from person to person, but they are all related to financial loss. These include risks such as loss of income due to pandemic-related unemployment and excess expenses from inflated costs of necessary supplies.

Still, the risk management process is highly variable to industry. For example, governments may use risk management strategies to handle issues related to domestic and international defense.

In the insurance industry, risk management is primarily used to assess and quantify the likelihood of events. An example of a potential current misstep in risk management strategizing can be seen through the extreme amount of unemployment uninsurance claims. Although the amount of claims are fairly unprecedented, a more successful plan would have accounted for the potential of surges to this degree.

Small businesses are beginning to implement risk analysis plans; an example of this is improving the security of a local business by installing security cameras around the premises to reduce potential crime.

Even on an individual level, risk management is an important tool. One way many people engage in risk management is by budgeting their expenses on a monthly basis, saving some money each month in case of an emergency.

We are currently living in a crucial time for risk management strategy development. The inevitable truth when dealing with a pandemic is that risk is a certainty. Some of the most urgent risks facing the United States in the midst of the COVID-19 pandemic aside from the obvious medical ramifications are:

These truly only scratch at the surface of the potential risks associated with a pandemic. Proper contingency planning paired with a coherent strategy for resource allocation can greatly manage the severity of some of these risks.

While pandemic risk management is a far reaching subject, we focus on the topic of resources planning and allocation in the work.

Contingency planning in this context refers to risk management strategy developed prior to a pandemic that prepares for the potential imbalance of demand and supply in critical resources. Ideally, a contingency plan can help to control the risk that was accounted for and reduce the impact of its consequences. On the same note, resources allocation strategies are typically part of rapid response plans developed over the course of a pandemic that help to deliver resources to where they can be utilized in the most efficient way.

The CovidPlan team aims to provide insights for public health professionals to develop a comprehensive framework for pandemic risk management strategies. While pandemic risk management is not a new topic, there has been scarce literature on quantitative methods for combined strategies for stockpiling and allocations. It is our hope that this work can contribute to the growing body of scientific knowledge on the subject.

As the COVID-19 pandemic continues, we hope that the findings from this research work can provide some reference to public policy-makers on a quantitative basis for efficient allocation of limited resources. The allocation algorithms in this work are adaptive to the fast changing dynamics of the pandemic and demand-supply imbalance. The framework of contingency planning presented in this work may also be used by decision makers for developing strategic stockpiling plans for the next pandemic.

Repeated history of epidemics has shown that pandemic risk is inevitable. Contingency plans help us prepare for the eventuality of pandemics. Many businesses nowadays still do not have a developed contingency plan for a pandemic. Based on a study by JP Morgan Chase Institute, companies with fewer than 500 employees have less than a month of cash reserves on average. Moreover, the likelihood for a pandemic to result in a high rate of absenteeism, disruption to supply chains, disruption to business travel could create a devastating impact on companies. Therefore, it is crucial for companies and markets to have a contingency plan to prepare for pandemics.

Contingency planning is recommended by the Center for Disease Control and Protection (CDC) for organizations in all sectors.

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Businesses

Businesses create contingency planning by assessing the impact of a potential pandemic on their operations, and develop concrete plans for employers and customers. The CDC created a checklist for businesses in preparation for a pandemic outbreak based on the following steps:

• Plan for the impact of a pandemic on the business

• Plan for the impact of a pandemic on employees and customers

• Establish policies to be implemented during a pandemic

• Allocate resources to protect employees and customers during a pandemic

• Communicate to and educate employees

• Coordinate with external organizations to help the community

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Education

Universities and other educational institutions set up contingency planning with the priority on personnel safety, preventative measures such as virtual delivery of education. CDC also created a checklist for educational institutions to prepare for pandemic flu. The checklist for educational institutions include following:

• Promote the daily practices for everyday preventive actions at all time

• Provide flu-preventions supplies in the school

• Plan for staff and students' absences and keep track of the flu-related absences

• Plan ways to increase space or limit face to face interactions between people

• Develop a risk-management process for the school

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NIST seven-step process

The National Institute of Standards and Technology (NIST) defines contingency planning as management procedure or policies designed to maintain or restore business operations. The NIST defined a seven step contingency planning process for developing and maintaining a viable planning program.

1. Identify any specific regulatory requirements related to contingency planning

2. Conduct a business impact analysis (BIA) to identify and prioritize critical system, business processes, and components

3. Identify and implement preventative controls and measures to reduce the effects of disruptions, increase availability, and reduce contingency costs

4. Define recovery plans to ensure critical systems can be restore quickly

5. Develop contingency plans containing detailed guidance and procedures to recover from disruptions

6. Plan testing, training, exercises to reinforce, validate, test contingency plan

7. Maintain contingency plan as living documents. Update them regularly to reflect changes to influential factors

Adequate preparation and plan prior to pandemic requires the establishment of infrastructure and capacity, which could take for many years to fully develop. Thus, the government plays a significant role in overall coordination and coummincation to help create contingency planning.

The United States government has developed three tools to guide national, state and local planning and response. These tools align with the World Health Organization's (WHO) global framework of pandemic phases and risk assessment activities for preparedness, response, and recovery.

• Pandemic Intervals Framework (PIF)

  This framework is used to guide influenza pandemic planning and provides recommendations for risk assessment, decision-making, and action in the United States. It describes the progression of an influenza pandemic using six intervals.

• Influenza Risk Assessment Tool (IRAT)

  This is an evaluation tool developed by CDC and external influenza experts that assesses the potential pandemic risk created by influenza.It assesses potential risks of pandemic based on two different scenarios -- "emergence" and "public health impact".

• Pandemic Severity Assessment Framework (PSAF)

  This framework is used when a novel influenza A virus is identified and it is spreading from person-to-person in a sustained manner. It determines the impact of the pandemic based on clinical severity -- how severe is the illness due to the infection -- and transmissibility -- how easily the pandemic virus spreads from person-to-person.

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Pandemic Influenza Plan

In 2005, the United States Department of Health and Human Services (HHS) developed a Pandemic Influenza Plan to coordinate and improve efforts to prevent, control, and respond to A(H5N1) viruses as well as other novel influenza A viruses of animal (e.g. from birds or pigs) with pandemic potential. The plan provides a high-level overview of the approach that government will take to prepare for and respond to a pandemic, which contains three pillars :

1. Preparedness and communication

   The U.S will work to improve the international community’s capacity and the commitment to take coordinated, effective action to contain an outbreak at its site of origin if possible and if not, to slow or limit its spread.

2. Surveillance and detection

   The U.S will develop, enhance, and encourage early implementation of international screening and monitoring mechanisms to limit the spread of viruses with pandemic potential. Additionally, the government will work to ensure effective surveillance, rapid detection, and transparent reporting of outbreaks internationally by strengthening scientific and epidemiological expertise abroad.

3. Response and containment

   The U.S will work to ensure nations and relevant international organizations agree as soon as possible on a doctrine of international response and containment to implement in the event of a human outbreak.

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Contingency Planning Development

While a full fledged contingency plan requires more sophisticated planning, this research work focuses primarily on the stockpiling of medical resources. In particular, we consider healthcare contingency plans for stockpiling to contain three steps:

1. Identify key resources needed

   Critical medical resources can typically be categorized into therapeutic resources, preventative resources, and diagnostic resources. Different organizations may require varying quantities of these resources.

2. Forecast demand

   To avoid the shortage of supply to meet a surge in demand, we need to predict and assess the magnitude of demand for various types of critical resources. Such demand forecasts require the modeling of multiple factors driving the demand.

3. Develop a stockpiling strategy

   The next essential planning strategy is to develop a stockpile or repository of these medical resources, which can provide a buffer to increase supply at the time of an actual pandemic.

When a pandemic occurs, the Federal Government responds to the situation as quickly as possible to provide guidelines, make sure enough medical funding, and implement policies such as travel restrictions, social distance, etc. Local health authorities also need to cooperate with each other to provide leadership and guidance on the actions that are necessary.

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Fiscal

The U.S government issued a $483 billion by establishing Paycheck Protection Program and Health Care Enhancement Act . The legislation includes:

• $321 billion funds for additional forgivable Small Business Administration loans and guarantees to help small businesses that retain workers

• $62 billion for the Small Business Administration to provide grants and loans to assist small businesses

• $75 billion for hospitals

• $25 billion for expanding virus testing

In addition, the government issued $8.3 billion for Coronavirus Preparedness and Response Supplemental Appropriations Act and $192 billion Families First Coronavirus Response Act . Both of them help the medical supplies for COVID-19, including:

• Virus testing

• Transfers to states for Medicaid funding

• Development of vaccines, therapeutics, and diagnostics

• Support for the Centers for Disease Control and Prevention responses

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Monetary & Macro-Financial

• Federal funds rates were lowered by 150bp in March to 0-0.25bp. Purchase of Treasury and agency securities in the amount as needed.

• The Federal Reserve also introduced facilities to support the flow of credit.

• Federal banking supervisors encouraged depository institutions to use their capital and liquidity buffers to lend, to work constructively with borrowers affected by COVID-19.

• Lower the community bank leverage ratio to 8 percent. Provide extension transition for the Current Expected Credit Loss accounting standard.

A centralized stockpiling strategy is intended to provide a stopgap measure to meet the surge in resources demand at the early stage of the pandemic. A practical stockpiling strategy is often based on an act of balance between adequate supply and economic cost. During a pandemic outbreak, the central authority needs to secure additional resources based on forecast of future demand and to allocate existing resources across various subsidiaries in accordance to their local conditions.

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Strategic National Stockpile

An example of Centralized Stockpiling Strategy is the Strategic National Stockpile (SNS) , which is a repository of antibiotics, life-support medications, IV administration, airway maintenance supplies, and medical/surgical items. It is designated to support healthcare systems with any public health threat. The role of SNS is to supplement medical or protection supplies during public health emergencies. It serves as a buffer when there is a shortage of medical equipment like ventilators during pandemics like COVID-19.There is $7-8 billion worth of emergency supplies stored in 12 different secret warehouses located strategically around the country.

If a healthcare facility needs supplemental ventilators or other medical supplies from the SNS during a public health emergency, it should work through the state public health department. State health officials are the ones who can request federal assistance for supplies, including ventilators.

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Existing Problems with Current National Stockpile Strategy

Medical countermeasures (MCMs) are medical supplies that supervised by the U.S. Food and Drug Administration (FDA) that can be used to diagnose, prevent, protect from, or treat conditions associated with chemical, biological, radiological, or nuclear (CBRN) threats, emerging infectious diseases, or a natural disaster.

Several existing problems with the SNS have been discussed at the Nation's Medical Countermeasure Stockpile Workshop , where the nation's top experts addressed opportunities to improve the efficiency, effectiveness and sufficiency of current national stockpile. Among many other matters, the following are most relevant to the purpose of this research work.

• The SNS lacks sufficient resources to maintain existing inventory. Since March 2020, U.S hospitals have already reported shortages of critical equipment needed to care for seriously ill patients. However, at the same time, SNS only has about 10 percent of its total inventory stockpiled, since the inventory was not replenished quick enough prior to the COVID-19 pandemic and the lack of resources supply.

• The SNS should not only deliver Medical Countermeasures (MCMs) to local public health authorities, but also support local-level dispensation efforts , provide clinical guidance about the use of MCMs, and implement the appropriate systems to monitor treatment compliance during adverse events.

• The current SNS model is not sustainable: the SNS cannot continue to buy MCMs for an ever-expanding list of material threats; it needs to integrate across these threats in conjunction with the Public Health Emergency Medical Countermeasures Enterprise (PHEMCE) , which is designated to coordinate Federal efforts to enhance Chemical, and Biological threats,as well as disease preparedness, and make critical decisions about what to buy and what not to buy given its resource constraints.

The purpose of this research work is to provide new quantitative models to develop stockpiling and allocation strategies. While it is unrealistic to assume that these new models would address all of the above-mentioned issues, we hope this work could contribute to the public knowledge on the subject and inspire decision makers to utilize more quantitative tools in their efforts to combat pandemics.

Supply and Demand

The increase of total system supply may not keep up with the surge in demand over a short period of time. When the demand far exceeds the available system wide supply, the system can experience a spatial competition of resources.

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Expense

It is expensive to stock up regional inventories to meet the demand over a short period of time, due to transportation, disruption to supply chains, etc. One may have to take a cost-benefit analysis to assess its stockpiling strategy.

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Different Shelf Life

Medical resources have different shelf life. Many sterile medical devices have short expiration dates. Disposable devices are typically intended for use on a single patient on a single procedure. On the other hand, durable medical resources such as hospital beds and ventilators last a while.

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Anticipated Demand

Central authority may anticipate a surge in demand at a later time and need to reserve a portion of newly acquired supplies/raw material for future distribution or production. One aspect of resources allocation is to manage temporal competition of resources.

There are two sects of resource allocation : macro level resources pooling and micro level rationing. Macro level resource pooling describes resource allocation at the macroeconomic level. In macro level resource pooling, a central authority acts in the best interest of a union of many regions to increase supply as well as coordinate the distribution of existing and additional resources among different regional healthcare providers. Micro level rationing describes resource allocation at the microeconomic level. In micro level rationing, individual hospitals have to make difficult but necessary decisions to ration limited existing resources as well as new supplies.

While in both cases the aim of allocation is to deliver limited resources to where they are most needed, the macro level pooling addresses more of the spatio-temporal differences and the micro level rationing addresses more of the healthcare effectiveness and justice. The setting of standards, protocols, and policies can have a profound impact on the functioning of a healthcare system at the time of a crisis. Therefore, the best practice of resource allocation should be based on scientific assessment and evaluation rather than in the moment decisions. To put it more simply, resource allocation must follow a set of rules.

Holistic Approach

A holistic approach aims to take into account many different facets of hospitals and patients in order to decide where the resources are best put to use. It seeks to strike a balance among different objectives for various stakeholders.

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Optimization Objectives

The optimization approach aims to follow a set of conditions that optimize the way that resources are distributed. There are many different ways optimization conditions can be formed.

GetusPPE.org Statistics

The statistics from GetusPPE.org showed a lot of resource shortages. For example, 22% of institutions surveyed reported that they had no N95 respirators remaining. Additionally, 36% of institutions surveyed had no face shields remaining. A quote from an institution surveyed by GetusPPE.org emphasizes the severity of the situation saying, "We are out of everything. Providers using one mask for 3+ weeks. Many COVID patients. Zero gowns. Great need. Large academic hospital."

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Peru Oxygen Shortage

There is a shortage of oxygen in Peru, where coronavirus is hitting hard. Oxygen is one of the main tools keeping patients alive. As a response to the shortage of oxygen, black markets have emerged which has led to immense price gouging. Before the price gouging, one cylinder of oxygen cost $353, but now on the black market it costs as much as $1,470. Many people are dying because they are unable to find or afford oxygen. A quote from someone in Peru in desperate need of oxygen exemplifies the severity of the situation in Peru saying, "I feel helpless, angry, and furious, I feel like my hands are tied. My father is sick and we cannot afford something that is so essential for him to survive." In addition to the oxygen shortage, Peru faces an extreme lack of hospital beds having less than two hospital beds per 1000 people.