The following statement by MSF and Oxfam is in response to a post by Owen Barder on the Center for Global Development's Global Health Policy blog entitled,"Should We Pay Less for Vaccines?".
We (Dr Kamal-Yanni of Oxfam and Daniel Berman of Médecins Sans Frontières) wanted to respond to Owen Barder's post as part of the continued debate about vaccines and about GAVI.
In pressing for reform, our aim is of course that GAVI will become a more efficient organization that reaches more children with appropriate vaccines than it has been able to do in the past. Vaccine prices are key to determining how far taxpayer money will go to save lives.
Owen's basic argument in his post is that he would rather err on the side of making markets too congenial for pharmaceutical companies than risk vaccines not making it to markets as quickly as possible.
We would certainly agree that vaccinating the world's poorest people must make business sense for pharmaceutical companies. But we believe GAVI should do more to make better use of the valuable aid resources they are entrusted with and are a lot less sanguine than Owen about paying too high a price for vaccines.
How real is the fear that Pharmaceuticals will abandon the vaccine market?
Owen is concerned that innovator companies will disengage in vaccine production if they are undercut by manufacturers making copies of the new product, having borne none of the development costs. This implies that low-cost manufacturers do not engage in their own research, which is not actually the case, and it also neglects to recognize the return on the cost of most new vaccines comes from wealthy countries, since research and development (R&D) is targeted to those markets. Rotavirus and pneumococcal vaccines-- two top priorities of GAVI were first developed for and have impressive sales in rich country markets. In 2008, Pfizer earned over $2.8 billion in annual revenue from the sale of its pneumococcal conjugate vaccine, Prevnar. A New York Times article notes Prevnar sales are expected to top $5 billion annually by 2015.
For those vaccines that already earn multinational companies high returns on investments in the developed world, there is no risk to the viability of vaccine supply from low-cost production. In other words, companies will not necessarily abandon the market if the price is lower in developing countries if they are making healthy profits in rich markets. Indeed, market segmentation is already a core principle, well established in the orthodoxy of innovator companies, therefore it is difficult to see why vaccine prices for such products should not be as low as they possibly can in the poorest countries and for the poorest people.
How best to ensure new vaccines are developed for the diseases of the poorest?
Beyond existing vaccines, there is also no fear that drug companies will abandon the market for vaccines designed especially for diseases of developing countries. This market has never been occupied! Simply put, those diseases that have high prevalence in developing countries but are not a priority in wealthy countries do not generate R&D for vaccines, because the populations that need them cannot afford to pay a high price.
We feel Owen doesn't identify a number of separate possible policy measures to generate new vaccines. An entirely different set of tools and incentives, beyond a focus on higher prices, are needed to stimulate development of new vaccines specifically designed for the world's poorest countries.
Owen's point is that vaccine producers need to be incentivised by the prospect of higher than optimal prices in order to be drawn into developing new vaccines adapted for developing countries. We disagree. We believe that big players like GAVI can provide significant enough incentives in terms of guaranteed markets and large scale purchases without having to resort to higher than optimal pricing. Such funding can assist with technology transfer to develop adapted products and, like the recent and successful project to develop the meningitis A vaccine for Africa, pre-set target price and product specifications.
The Advance Market Commitment (AMC) is a mechanism that could have been championed by our organizations if it had been designed properly, and used to stimulate affordable innovation for a neglected vaccine. The basic idea here was if companies develop a successful vaccine, GAVI and donors will guarantee a market for that vaccine.
Sadly instead the design of the AMC in the end did not focus on new vaccines but on existing pneumococcal vaccines, a move that gave unnecessary subsidies to multinational companies for products that already had blockbuster sales.
For vaccines needed only in low-income countries, the nature of the market means these products must be developed from the start with an affordable price in mind. The good news is that while demand is increasing, so is capacity and sophistication of emerging country producers. These producers, which have already received WHO pre-qualification to supply key vaccines, are also experts at simplifying production processes and thereby lowering prices. Emerging producers are also well placed to adapt vaccine products to developing countries needs by, for example, improving heat stability and reducing the need for cold storage, a major challenge in resource poor settings. If emerging country producers are supported with transfer of technology and know how, they can quickly meet demand for low-cost, high quality products. Stimulating price-lowering competition makes sense for donors and developing countries that need to pay their own way. Competition has time and again shown to be far more efficient than price negotiations with one or two manufacturers.
No commercial Conflict of interest?
We feel Owen is least convincing on the governance issue, resorting to pointing out that elsewhere things are apparently even worse! There is no doubt that GAVI needs to work closely with all players, including the pharmaceutical industry. But it is one thing to work closely with another stakeholder, and another entirely for them to have voting power on the GAVI board.
It is difficult to see how the presence of pharmaceutical companies as Board members, who also receive money for their products from GAVI, can be anything other than a clear commercial conflict of interest. GAVI's earlier resistance to price transparency, willingness to offer large industry subsidies and failure to adequately reduce prices speaks volumes about how GAVI organisational thinking has been permeated by a pro-industry approach. We recognize that companies have much to offer by way of experience and insight, and that GAVI needs to create mechanisms for ongoing consultation and information exchange, without including companies in decision-making processes.
The UK government's multilateral aid review is clear that whilst delivering value for money, GAVI could do more to drive down prices. The majority of GAVI stakeholders now agree that since it was formed GAVI has failed to do this adequately. We think a new approach to should be underpinned by a new independent governance structure as a clear break with the overly cosy relations to date.
Being a critical friend to pharma (and Owen)
For the record, we firmly believe that companies cannot be expected to act as charities, we do not support donations or even selling at cost as this is neither a sustainable nor an appropriate way to reduce prices. Providing vaccines to the poorest countries has to make business sense. We want GAVI to foster healthy competition and a diverse supplier base. Owen is welcome to give pharma lots of love, and I am sure they will be very pleased. On our side we will continue to remain a critical friend to both GAVI and pharma, constructively engaging with companies to push for strategies that ensure people in developing countries have ongoing access to the medicines and vaccines they need.
We will continue to press for GAVI to take a staunchly pro-public health approach that ensures more children can get immunized with appropriate and affordable vaccines.
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