Center for Global Health R&D Policy Assessment

Two weeks ago I traveled to Hyderabad, India, to attend the annual meeting of the Developing Country Vaccine Manufacturers Network (DCVMN).

This unusual alliance brings together vaccine companies in India, China, Brazil and a number of other mostly middle-income countries. Vaccine manufacturing in these countries is not new—many countries have long had factories, often state-owned, that produced basic vaccines for government immunization programs. But in the last few years more dynamic companies have emerged that have modernized their production facilities to meet international standards, acquired more sophisticated technologies, and entered new markets. This new breed of firms is mostly privately owned, but it includes public-sector manufacturers in Brazil, China, Cuba, and Indonesia.

These developing-country manufacturers are critical to UNICEF’s and GAVI’s strategy for bringing important new vaccines to children in poor countries, where their potential to save lives is the greatest. This is because these companies have shown that they are willing and able to supply large quantities of vaccines at lower prices than the established multinational vaccine firms. According to figures presented at the Hyderabad meeting, DCVMN members now supply half of the vaccines that UNICEF buys on behalf of developing countries. And the hope is that they will bring to market versions of some of the very expensive vaccines that are now sold only by the multinational firms, including those that protect against cervical cancer and major causes of pneumonia and diarrhea in children, making markets for these vaccines more competitive and driving down prices. Vaccine development is always uncertain and it remains to be seen if the so-called “emerging suppliers” can meet their ambitious timelines for these “follow-on” vaccines. But much depends on success: without the new manufacturers, GAVI’s financial prospects, already worrisome, will be very dire indeed.

The developing-country firms could also play an important role in the development of badly needed new vaccines for diseases of poor countries that may not present attractive markets for the multinationals. For example, India’s Biological E and several other firms are working on vaccines against Japanese encephalitis; Brazil’s BioManguinhos and Butantan have dengue vaccine candidates. An important success was announced at the meeting: immunization against meningitis A has begun in three West African countries using a new vaccine developed by a partnership among the US FDA, the Seattle NGO PATH, and one of the most dynamic of the emerging firms, Serum Institute of India. Serum has committed to supplying the vaccine at 40 cents a dose. This contrasts with the $80/dose that multinational firms charge the US government for more complicated meningitis vaccines (prices in the private sector are even higher), although to be fair these companies might well be willing provide their vaccines to poor countries at a substantial discount.

Several talks at the meeting highlighted the critical role that the developing-country manufacturers can play in vaccine access and development and pointed to measures that could help them do more, especially by allowing them to enter markets for important new vaccines more quickly. Among these measures are access to new technologies, greater transparency in intellectual property, more efficient regulatory pathways, and, perhaps most importantly, financial security for GAVI, which provides one of the most important markets for these vaccines.

But can the DCVMN sustain this vision, in which firms based in places like India and China supply the developing world with increasingly sophisticated vaccines at low cost? Can these companies continue to play this role? Will they want to? At the moment, the situation looks promising. But several trends will challenge this model in coming years. To begin with, the model itself contains contradictions. These firms must constantly update their production facilities to meet ever more stringent regulatory requirements—after the meeting we toured the very impressive facilities of Bharat Biotech and Biological E—and must spend more of their resources on R&D if they are to produce more complicated new vaccines. But these costs will make it more difficult for them to supply at low prices. The rapid growth of the “emerging economies” in which most of these firms are based is itself a mixed blessing: rapid development brings more well-trained engineers and managers and growing home markets, but it also means higher salaries and thus higher costs. Over the longer term, moreover, patterns of disease in these countries will diverge more and more from those in the poorest countries and companies are likely to focus on the needs of their more lucrative home markets.

As some of these firms try to enter markets in upper-middle-income countries and even in the US and Europe, and as they become more “R&D-based”, their business models may evolve as well. Instead of focusing on producing large volumes of simple vaccines at low cost, they may turn their attention to the development of more expensive vaccines for markets that can afford them. In this way they may come to more closely resemble the multinationals and may be less willing to play the role that GAVI and UNICEF have in mind for them.

The emerging economies are also an increasingly attractive market for the multinational firms, who may try to acquire local companies (the acquisition of India’s Shantha Biotech by Sanofi-Pasteur is a recent high-profile example). The developing country firms that try to compete on their own have a steep hill to climb, as WHO’s Miloud Kaddar pointed out at the Hyderabad meeting. They still have limited access to new technologies and their marketing and distribution budgets are a tiny fraction of those of the big five vaccine companies. Many emerging-market firms may fail over the next decade; others may be absorbed into larger companies or retreat into protected public-sector home markets. Those that survive and grow may eventually look and act a lot like today’s multinationals. This wouldn’t be an altogether bad outcome, especially if it makes vaccine markets more competitive, but it would mean the demise of a special class of firms with a special role in supplying affordable vaccines to poor countries.

But these are distant concerns, and in Hyderabad it was hard not to share the sense of excitement and possibility.