Africa has boosted local and foreign business morale around investments in local production, in the post-COVID era. But we must go further.
Two recent events in South Africa have highlighted the opportunities and challenges facing vaccine production on the continent.
The first is the visit of the Director General of the World Health Organization, Dr. Tedros Adhanom Ghebreyesus, to provide an update on the mRNA vaccine production center in Africa. This center was launched in mi-2021 with the aim of facilitating the access of developing countries to the latest vaccine technologies.
The other development highlighted the main problem that African countries continue to face in developing their vaccine production capacities: markets for their products. On this point, the South African government announced that it had awarded a tender for the pneumococcal vaccine Prevenar/PCV13 to the local agent of the Serum Institute of India. The other product, Hexaxim, is now the subject of a new call for tenders. The other successful bidders were GSK (Belgium) and Sanofi (France).
It was widely expected that the tender for Prevenar/PCV13 would be awarded to Biovac, a local company that has developed the capacity to manufacture the vaccine in South Africa through a technology transfer partnership with Pfizer.
The outcome of the tender is truly paradoxical given that South Africa has expressed a strong commitment to local drug production. The tender for the supply of vaccines for the national program which included Prevenar/PCV13 went so far as to make a special mention for locally produced products.
The decision suggests that there is fragmentation of goals and objectives within government agencies in promoting pharmaceutical production in South Africa. This type of mismatch can significantly discourage future investments and partnerships and hinder expansion plans.
The WHO visit and Biovac's decision highlight two major challenges: how to support local vaccine production while meeting national health goals? And how to create markets for new producers in Africa through national and regional procurement policies.
Market access and local production
The tender decision raises important questions about local production and how it is inextricably linked to market access.
Since 2021, vaccine production initiatives in Africa have mainly concentrated on financing and creating partnerships, leaving aside the central question of market access for products produced in African countries.
Market access is crucial for local vaccine production.
First of all, the competitiveness of production in the vaccine sector depends on the quantity produced. The larger the company's production volumes, the lower the price. But to achieve this, local businesses must have access to the market.
Second, market access is key to the survival of new entrants. It allows them to cover their working capital and helps them reinvest in the business for its expansion.
But current vaccine supply systems in the region do not leave much room for African companies. Forty of 54 countries of the continent depend on the vaccines provided by Gavi, the global alliance that provides vaccines to eligible low- and middle-income countries. The vaccines provided by Gavi represent nearly 85% of all vaccines provided in the region. This leaves little room for sourcing through other channels where African companies have to compete with all other global companies.
This situation is problematic. To address this problem, the African Union has asked Gavi to purchase 30% of the vaccines from production facilities located on the continent. This measure is under discussion, but it will not be sufficient.
If the goal is to enable local production of vaccines in Africa, we must ensure that local producers have access to their national markets. This access to the market must be quickly facilitated by national supply policies.
Procurement policies can potentially promote three main objectives:
- reduce the prices of vaccines and medicines,
- eliminate monopolistic tendencies, and
- promote the local manufacture of medicines and vaccines, with the resulting benefits for employment, competition and health security.
But it is not easy to find a balance between these three objectives. Focusing only on the lowest prices can indeed lead to the elimination of local businesses, pushing them out of business.
This is why the countries that have succeeded in developing the local manufacture of vaccines have done so, among other things, by
- by limiting foreign competition when three or more local firms can produce a product. This is what happened in Bangladesh;
- sourcing as much as possible from local companies, or waiting for local companies to develop their capacity to introduce products, as has been the case in Indonesia and Brazil;
- give preference to local companies in the national procurement process. This is the path that Russia has taken.
The use of preferential sourcing by local companies can sometimes have negative consequences. It can lead to inefficiencies such as higher product prices, which become the norm due to weak competition, with a negative impact on public health objectives.
But these consequences can be avoided by developing procurement policies that support local businesses more generally, with an emphasis on promoting competition. Prices can also be set according to a chosen international reference price, to ensure that premiums for local production are not too high to take into account local suppliers. Pricing incentives can also be time-limited to ensure the shift to competitive production.
What Africa Needs
Biovac was created in 2003 as a public-private partnership. She had to face many challenges. In particular, it has experienced periods of uncertainty as the exclusive supplier to the South African Department of Health and changes in product development trajectories to adapt to national protocol choices.
Despite these difficulties, the company was able to resist. Today it employs 450 people, most of whom are highly trained and skilled scientists. It has made over R1 billion (over US$54 million) in foreign direct investment through its partnerships with foreign companies.
But the current base of all the company's manufacturing activities is the local manufacture of Prevenar/PCV13 and the six-in-one vaccine, Hexaxim. This base must be preserved and nurtured to allow the company to grow and to allow the emergence of a dynamic vaccine manufacturing sector in the country, capable of supplying South Africa and the region.
Preventing the company from supplying its own local market is not beneficial for Biovac, and it is not a good decision for South Africa, given the investments made to develop capacity in this sector.
A number of lessons emerge from Biovac's experience.
First, local businesses are better off when they have the certainty of access to national markets. This can help them plan and scale their production efficiently right from the start. Tenders are a good starting point in this regard.
Second, the selection of products in national programs would do well to take into account the local products being developed.
Third, tenders can reconcile public health and local production if they are structured in such a way as to promote cost savings in certain segments through external procurement which can allow local companies to benefit from a slight mark-up. prices in other vaccine categories. This would help local businesses stabilize in Africa, where they are not equipped to absorb the financial risks of losing national tenders.
Africa has come a long way, in the post-COVID era, in boosting local and foreign business morale around investing in local production. But countries on the continent have yet to carefully consider incentives for local businesses, given the stiff international competition and lack of market opportunities for African businesses, both within the region and outside.
Working with Gavi is critical to enabling African businesses to source. But it is equally important that self-sourcing countries commit to supporting efforts to build local production capacity. Without this commitment from African governments, the vaccine manufacturing “project” in Africa is seriously threatened.