Written by James Zhan, Director, Division on Investment and Enterprise, and Christoph Spennemann, Chief, Intellectual Property Unit, UNCTAD
Remarkable efforts are underway to ensure effective research and development (R&D) of COVID-19-related diagnostics, treatments and vaccines, inter alia at last week’s World Health Assembly, and in the context of a recently announced WHO voluntary technology pool. But the international COVID-19 response is largely lacking a comprehensive strategy on how to ensure the missing link between R&D and distribution, i.e. large-scale manufacturing.
Already this has been plainly evident in the shortages of face masks, gloves and gowns for health workers in Africa – items that are generally simple to manufacture and yet often had to be shipped from thousands of miles away. A total of 40% of the global market in personal protective equipment (PPE) is supplied by manufacturers in only three countries outside of Africa, and 35% of globally available medical products are sold in only three countries outside of Africa, according to UNCTAD. At least 47 countries have implemented one or more measures affecting exports of products or sub-products used in the public health response to COVID-19.
Once a treatment or vaccine for COVID-19 is available, massive demand is likely to outstrip supply even more rapidly and visibly – with huge consequences for health equity. Earlier hopes that, due to climatic conditions, countries in the global South might be less affected, are vanishing quickly. The pandemic is now hitting LMICs, with Latin America being considered a new epicenter of the pandemic, according to a WHO statement of 22 May.
Boosting local productive capacity therefore becomes a necessity to ensure public health security in LMICs (SDG 3). As the virus knows no borders, productive capacity in LMICs in return contributes to global health security.
In a longer-term perspective, local productive capacity nurtures expertise and creates quality jobs in LMICs, thus contributing to structural transformation and economic growth (SDGs 8 and 9), as well as pandemic preparedness.
Need to Act Urgently – So No Country Is Left Behind
We need to act urgently. For vaccines, for instance, The Economist notes that worldwide vaccine production – which is currently at over 5 billion doses a year – will not be sufficient to meet the massive new demand. Repurposing existing facilities is not a solution: this is not always feasible and would also reduce the capacity to make regular vaccines to address life-threatening diseases like measles and polio.
Diversifying the sources of pharmaceutical production could be of particular value for the supply of active pharmaceutical ingredients (APIs). Producers in LMICs, but also the global pharmaceutical industry are too dependent on suppliers in a very limited number of countries, and more diversified API production could increase overall health security.
We need to avoid a scenario where poor countries are left behind. This necessitates new industrial alliances, parallel manufacturing by multiple companies in multiple locations, and creative approaches to IP to ensure rapid availability of new technologies for high volume production. To boost productive capacity in LMICs, it is critical to engage in global partnerships among governments, local producers, development partners, and international investors and technology holders.
Not every LMIC is ready for this. But some have succeeded in establishing a local pharmaceutical or vaccines industry that can comply with international quality standards. Other countries are actively supporting the development of their domestic pharmaceutical industry to ensure public health security.
Many more countries should be able to engage in the production of personal protective gear that is equally vital in the COVID-19 battle.
However, local investors and producers alone cannot fulfill the daunting task of changing production patterns on their own. They are typically faced with five key bottlenecks.
Lack of capital, technology and skills. The key objective of any pharmaceutical production is to meet requirements related to drug safety, quality and efficacy, as well as WHO-based Good Manufacturing Practice (GMP). This requires technological capacity and know-how that is missing in most low income and some middle-income countries. Upgrading these capacities requires upfront capital. Commercial banks are often hesitant to provide loans to pharmaceutical projects considered highly risky.
Low quality and standards. In many LMICs, drug regulatory authorities lack the capacity to check and enforce companies’ adherence to quality standards and GMP. This is a major barrier to potential investment by GMP-compliant firms, which are concerned about unfair competitive advantage from non-GMP-compliant firms that can produce at lower cost.
Weak enabling policy frameworks. Cooperation with foreign investors and technology holders is essential to ensure the transfer of relevant technology and know-how. Unfavourable rules on investment, IP and drug regulation may discourage foreign investment or upset the balance between protection and technology dissemination. Tariffs and taxes imposed on ingredients needed for local production make local manufacturing less attractive.
Small markets and unstable demand. Many LMICs have relatively small population and weak purchasing power. Economies of scale are an important factor in attracting investment. But countries often fail to agree on harmonizing medicines procurement, thus missing an important opportunity to combine purchasing power and stabilize demand.
Poor infrastructure. The “last mile” to the patient is often difficult to stride, especially in low income countries with poor infrastructure. Many low-income countries are struggling with infrastructure challenges, including electricity cuts and cold chain interruptions.
To address these bottlenecks, we suggest ten major actions to create a national enterprise ecosystem:
1. Investment in skills development to ensure GMP-compliant production
GMP-related skills can be promoted by attracting know-how transfer from foreign investors, by hiring foreign consultants and by exploiting existing technologies. Uganda has used multi-year government purchase commitments to ensure training of local pharmacists by an Indian investor for a Kampala-based plant. Firms in Bangladesh have relied on hiring foreign experts to transfer know-how. In the COVID-19 context, LMIC investment promotion agencies could put together a “grey corps” of retired engineers from advanced countries willing to offer their assistance. And national patent offices should promote scientific understanding of COVID-19-relevant technologies in patents that are no longer valid, or which have been abandoned by their holders, such as AbbVie’s patent on the antiretroviral combination drug Kaletra (currently in clinical trials for a potential COVID-19 treatment).
2. Sharing COVID-19-related technologies to enable affordable mass production
New COVID-19 technologies should be shared with LMIC-based producers, accompanied by know-how transfer programs to ensure the rapid uptake of quality high volume production. Various initiatives can contribute, e.g. the recently announced WHO voluntary technology pool and the UN-supported Medicines Patent Pool, the Coalition of Epidemic Preparedness Innovations (CEPI), and philanthropy programs of the R&D-based pharmaceutical industry. The results of any publicly funded COVID-19-related R&D should be available and affordable to all, as a global public good, and existing IP rights should be waived for the territory of LMICs or be licensed at reasonable fees. LMIC governments need to establish stronger linkages between domestic producers, foreign investors and domestic research institutions, inter alia through voluntary IP licensing, and they need to be aware of the tools available to promote public health under the WTO TRIPS Agreement.
3. Target impact investors to access necessary capital
Impact investment by the end of 2018 had reached a global value of USD 502 billion. Time is here to ensure that this enormous financial resource is made available to help the world’s poor access essential COVID-19 treatments and vaccines as soon as they are available, inter alia through local production. For instance, Swedish asset investors recently contributed USD 319 million to a social bond issued by the International Finance Corporation to help LMIC-based producers involved in the production of medical equipment and pharmaceuticals. Intergovernmental organizations, such as UNCTAD and its World Investment Forum, can play a key role in reaching out to impact investors to facilitate investments in social bonds.
4. Build partnerships to initiate “lighthouse” projects on low-hanging fruit
Successful short-term projects on simple technologies, especially in the production of test kits, personal protective equipment and ventilators, can set good examples to attract subsequent investment in more ambitious projects such as the production of treatments, diagnostics and, to the extent possible, vaccines. Investment promotion agencies should reach out to development banks, impact investors and social entrepreneurs to forge partnerships to fund initial “lighthouse” COVID-19 projects.
5. Improve investment incentives to increase local firms’ sustainability
Various measures can be considered, such as financial or fiscal incentives to produce COVID-19-related products. A very important investment incentive is medicines procurement, which in an infant industry context can be designed to include a price preference for local producers. Ethiopia, for example, allows a preferential margin of up to 25% on bids from local producers. To provide some predictability, preferential procurement should aim at a time span of five to ten years and include foreign investors that assist in local production. Advance purchase commitments as in the referred Ugandan case could be useful to kick-start manufacturing new products, such as COVID-19-oriented vaccines, where the market is unpredictable and companies need guaranteed purchases.
6. Use streamlined regulation to facilitate investment
To stimulate investment in COVID-19 medical products and ensure fast delivery to the needy, swift marketing approval is essential. Drug regulators should explore ways of fast tracking COVID-19-related applications, with support from WHO. In addition, current scenarios in many LMICs, where a producer needs to pursue multiple registration procedures with a multitude of different national agencies, paying multiple different registration fees, should be avoided in the future. Electronic procedures should be enabled for easy and swift registration of business activities, with support from UNCTAD’s e-regulations program.
7. Invest in infrastructure
Investment incentives financed by national governments and development partners should prioritize the building of essential infrastructure for local production projects, such as ensured electricity supply. Innovative approaches such as the use of drones in Rwanda to fly needed medicines to patients in remote areas illustrate the importance of investing in digital connectivity.
8. Emphasize the regional approach to reduce costs
Regional cooperation will make the measures suggested above more sustainable. Regional economic areas such as the EAC, SADC and COMESA, and in particular the newly created African Continental Free Trade Area (AfCFTA) have the potential advantages of establishing regional value chains to enable small economies in the region to collectively build the productive capability. Different countries have different comparative advantages, and together they can participate in a value chain that generates the medical supplies and medicines that they need to fight major pandemics. The regional groupings should aim at abolishing tariffs and non-tariff barriers, while promoting transparency of non-tariff measures. In a similar vein, regional coordination of IP rights and their enforcement will promote legal certainty and predictability for traders, including those dealing with pharmaceutical products. Regional approaches to procurement enable the pooling of purchasing powers, and regional drug regulation substantially eases producers’ expenses and efforts for filing and processing multiple applications for the same pharmaceutical product.
9. Seek funding from official development assistance
Important amounts of official development assistance will be made available for the new Access to COVID-19 Tools (ACT) Accelerator Global Response Framework. Donors when operationalizing this initiative should consider the contribution that LMIC-based producers can make to global public health security. The statements made by global leaders at the 4 May pledging conference indicated will for a new approach: UN Secretary-General Guterres and French President Macron referred to the need to have COVID-19-related R&D results as global public goods, and German Chancellor Merkel emphasized the need to discover new paths toward the production of vaccines. Boosting productive capacity in LMICs is indeed a case in point.
10. Ensure sustainability of efforts despite an unpredictable market
This is a key concern in areas such as COVID-19, where investors cannot know for how long the pandemic will pose an actual threat to societies. It has been observed that many countries have failed to ensure pandemic preparedness, as past pandemics (Ebola, SARS) ceased rather quickly and made any further investment undesirable. An international coalition of governments, development banks, impact investors and like-minded stakeholders is needed to address this market failure and to define future roles in protecting humankind from the next pandemic.
Building and expanding local productive capacity cuts across multiple policy sectors and requires concerted actions by all stakeholders in order to effectively address the five key bottlenecks. Together, we can create a global enabling framework and national ecosystems to enable local manufacturing to contribute to both the local and global public health endeavor, and ultimately to achieving SDGs 3, 8 and 9.
The Way Forward
We envisage a two-pronged strategy to pursue our ten actions.
Our proposal addresses a gap in the international COVID-19 response by boosting productive capacity in LMICs. UNCTAD will closely coordinate and cooperate with existing initiatives, especially the WHO voluntary technology pool and the ACT Accelerator Global Response Framework, with a view to adding value and creating synergies.
UNCTAD will intensify collaboration with our five partner agencies, i.e. WHO, The Global Fund, UNICEF, UNIDO, and UNAIDS to implement the May 2019 Interagency Statement on Promoting Local Production of Medicines and Other Health Technologies. Other partners will also be welcome to join us at our World Investment Forum later this year to mobilize key global players to commit to longer term productive capacity building. Drawing the lessons from the COVID-19 crisis, we intend to increase LMICs’ resilience in pandemic preparedness beyond the pandemic.
Read the original article on Health Policy Watch