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The uneven availability of vaccines for COVID-19 has become an increasingly urgent and burdensome issue. But dealing with the problem of what has been called “Vaccine nationalism” it has become a tough nut to crack.
Drug shortages and fragile supply chains for essential drugs are problems for almost all developing countries. In Africa, specifically, the production capacity is limited. More than 20 countries are completely devoid of it and many regions continue to import at least the 95% of your pharmaceutical needs.
Understanding why this is happening is critical. After all, there is sufficient evidence that governments can be effective economic agents. This includes being able to exert great influence in the production sector, as they can build this capacity through incentives, regulation and regulation, for example. The experiences of other countries They demonstrate that public investment and procurement in the domestic pharmaceutical sector can create production capacity and markets.
A limited pharmaceutical production
These products are generally capital and technology intensive. They also require highly trained staff and reliable supply chains of essential raw materials and specialized equipment. And, in addition, investment in personnel and infrastructure requires a stable long-term market with consumption constant enough to justify the risk.
The absence of this security, even in the continent’s largest markets, such as South Africa, Nigeria and Egypt, limits the development of this essential sector.
We have carried out a study to understand to what extent the lack of availability of financing restricts the development of the production capacity of vaccines and other health materials. Our findings show how governments, companies and donor agencies should join forces to support diagnostic tools, vaccines and treatments as vital resources.
We identify certain approaches that should be explored. These include joint plans for regional production of centers, joint acquisition, direct subsidies, periods of commercial exclusivity, international transfer of technology and redirection of international development aid.
Research in South Africa
As part of study, we have analyzed two practical cases in South Africa: the Ketlaphela Pharmaceutical and the Biovac Institute. Ketlaphela is a state company. It was created for the production of active ingredients in medicines and medical products, mainly for contagious diseases such as HIV / AIDS, tuberculosis and malaria. It has not produced any drugs yet.
Biovac is a public-private partnership between the Government of South Africa and the Consortium of Sanitary Companies. Its capacity is small compared to the Covid-19 vaccine market. However, it provides three important lessons on how a country like South Africa can go about building this kind of capacity.
First of all, it provides long-term business security. This was achieved through an effective 15-year contract with the National Department of Health. Second, Biovac was allowed to charge a higher price as a means of financing the company’s reinvestment in vaccine production. And, finally, it fosters high competition in research and development.
The financing variable
The conditions for financing the production of diagnostic tools, vaccines and treatments are highly variable in Africa. Some countries have liquid financial markets, highly available currency exchange, and sophisticated financial systems. Others face severe restrictions regarding access to capital and foreign exchange.
Similarly, we found that small producers faced different challenges than established large producers. In any case, we find some similarities.
Companies reported clear discrepancies between political aspirations to reduce dependence on imports in the healthcare sector and day-to-day realities. In particular, companies complained about factors that increased their capital costs and made them less competitive. Those factors were related to systemic or infrastructure failures over which they had little control and included:
- High electrical costs and unreliable supplies.
- Lack of clean water.
- Port delays.
- Weak infrastructure.
- Limited availability of qualified personnel.
Our interviews confirmed that these additional costs made it difficult for local companies to cover expenses and recover working capital in highly competitive markets.
Therefore, companies often retreated to more limited product categories or even closed, unable to compete against Indian and Chinese companies.
Public support and local businesses
The study highlighted two critical areas as fundamental for the reform of public support structures in favor of local businesses. First, governments must favor public procurement. They can do this by providing longer-term supply contracts (guaranteed purchase). Second, donor institutions need to review their contracting strategies to favor local productions. Currently, they are based on low cost facilities, mainly in India and China.
Easier said than done. In any case, the essential conclusion of the interviews was that when local companies could generate good quality products they should be able to access markets without being excluded by larger companies that have economies of scale and scope. This could help create a broader range of suppliers in developing countries in the long term.
The role of international financing agencies is essential in building local resilience to global health emergencies. For example, the Global Fund is responsible for finance and procure 21% of HIV drugs. The statistics are similar for tuberculosis and malaria.
Likewise, one of the objectives of the Gavi Strategy for 2021-2026 (GAVI 5.0) is to set up healthy markets for vaccines. This could be reviewed considering these realities, especially given the supply restrictions faced by the mechanism. Covax.
These agencies have market power to diversify sources of supplies without hurting the cost of public health services. Entities could work with national governments to build local capacity and increase resilience.
Interestingly, the mapping of funding flows showed that investment capital is available in global financial markets. This includes funds for investment in diagnostic tools, vaccines and treatments in Africa.
While there are restrictions on financing for production, these are not due to a global shortage of available funds. Institutions such as the World Bank, the International Finance Corporation and the African Development Bank have announced major commitments to support responses against COVID-19. Unfortunately, this funding has not yet reached the projects for African pharmaceutical production.
Likewise, foundations are funding research and development, advance purchase commitments for vaccines and diagnostic tools, and other efforts to address COVID-19. But they have not financed projects to produce in Africa.
Given the impact of the pandemic on the continent’s economy, international institutions and governments must work together to bring pharmaceutical production to African countries.
David Richard Walwyn is Professor of Technology Management at the University of Pretoria. Padmashree Gehl Sampath She is a member and senior advisor for the Global Access in Action program at Harvard University’s Berkman Klein Center. Article was published in The Conversation and translated in collaboration with Africa House. Translation: Javier Barbero Alonso.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.