Panic buying is definitionally price insensitivity. You can also look at people like preppers, who consider hoarding a positive virtue. Despite a spike in demand, they won't be arbitraging. These are common human behaviors in a crisis.

> but not before anybody can start manufacturing more PPE

I think you really aren't coming to grips with how people think and behave differently in crises. Possibly having more PPE in a few months is only valuable for reducing hoarding and profiteering now to the extent that people are confident that will happen.

> What allocation process are you proposing that would avoid things like that happening?

Letting local and state public health officials allocate scarce medical supplies is the obvious start. Point-of-sale purchase controls are another one that's easy to implement. In the long term, transparent rationing where needed. Fining, arresting, and imprisoning disaster profiteers are all excellent options when it's severe.