The Complex Truth Behind Vaccine Nationalism

No winners in the short term

Vaccine nationalism shows no signs of going away, and moves to re-shoring in certain parts of the pharma industry look certain. While that may bring some benefits in the long-term, there will be downsides. Either way, don’t expect it to deal with drug shortages.

The row continues. With the EU on Thursday stopping short of vaccine export bans but backing more stringent export controls to pressure AstraZeneca to "honour its contract". The rhetoric around vaccine nationalism is not improving. Earlier in the week, the Commission confirmed plans for all vaccine shipments to be assessed on the destination country's rate of vaccinations and exports. Talk now is trying to achieve a win-win, but in truth supplies from the Halix, Netherlands, factory due for delivery to the UK remain at risk.

According to one data analytics firm, a ban could delay the UK vaccine drive by two months – without necessarily bringing much benefit to the EU; the number of vaccines in question would only accelerate its efforts by about a week. It could also impact the capability of other vaccine manufacturers used by the EU, were the UK to retaliate; Pfizer has warned that its production on the continent relies on materials shipped from Yorkshire. In particular, Croda International, a chemicals firm based in Staith, Yorkshire, provides Pfizer's factories with the fatty molecules its vaccine needs.

As the UN-backed global vaccine alliance Gavi has warned, export bans could “prolong the crisis, add to our economic difficulties and lead to further loss of life”. And that’s before we consider any potential escalation into a wider trade war.

Frankly, the bigger problem the EU may face in its drive with the AstraZeneca vaccine is public confidence. That has plummeted in Europe, following the hopelessly mixed messaging from political leaders and public health bodies over recent weeks over its safety and efficacy.

In the short-term, then, there’s little benefit to be discerned from the wave of vaccine nationalism that even the WHO is warning against. In the long-term, though, recognition of the weakness in some supply chains and limited capacity to deal with such a crisis might encourage some useful changes.

Moves to protectionism and export bans only threaten to undermine pharmaceutical supply chains; indeed, a central complaint against the EU is that it is, as one commentator puts it, “taking a sledgehammer to something brittle”. Many EU leaders have urged caution. On the other hand, countries’ efforts to develop domestic production could provide a constructive approach to boosting capacity and building resilience.

A big shift

Well, perhaps.

Certainly, there seems little doubt that the reshoring of some pharma production will outlast the current crisis.

Moves to address this and develop domestic capability, therefore, predate the current row. Last year alone, the UK government announced investments in vaccine manufacture of over £240 million. October saw building of the first national Medicines Manufacturing Innovation Centre (MMIC) begin up in Scotland. The government’s also working with generics Wockhardt on fill and finish services as part of the effort to accelerate vaccine manufacturing in the UK. Other plans are also in the pipeline.

These plans are for the long term. In part, that’s because  Covid may require vaccine production capacity for years to come, with new vaccines and boosters to deal with resurgences and mutations. It’s also because Covid has highlighted just how little production capacity countries such as the UK had in place.

There are long-term trends working against the continued reliance on outsourced centres, too. Outsourcing production to low-cost locations such as China does rely on them continuing to be low cost. With a growing middle class there and rising wages, that won’t last forever. The average wage in the country is around 90,000 yuan – still under US$14,000, but more than double its level a decade ago. And China looks set to have weathered the Covid crisis much better than most: Growth in the country is set to top 6% this year.

However, there is also the issue of drugs shortages, which predates the pandemic and can only be solved by increased capacity and diversity of supply. The last year’s crisis has merely been the jolt to turn plans to address supply chain vulnerabilities into action.

The UK's concerns about outsourcing pharma production are echoed and perhaps magnified across the Atlantic. The US government has made no secret about the fact that it considers reliance on outsourcing drug production a national security issue. A case in point would be The Commissioner of Food and Drugs at the FDA Janet Woodcock’s testimony at the hearing of the US-China Economic and Security Review Commission where she declared: "...use of foreign-sourced materials creates vulnerabilities in the U.S. drug supply".

No quick fix

All this is true as far as it goes. When it comes to supplies and development of sophisticated vaccines, there’s little doubt the UK – and other countries – will be on a better footing for the next crisis if it comes. We should, though, be wary of drawing conclusions that are too broad.

For a start, as the current dispute is showing us vividly, there are no quick fixes. As we noted last month, the problems illustrate the enormous complexity and uncertainty of some of the manufacturing processes involved. Ramping up and establishing production lines in existing facilities takes time; building new facilities takes even longer. In many cases, we’re talking long-term capital projects, taking 18 months or more before even opening the doors. The current efforts will have an impact on national capabilities, but the changes won’t all happen overnight.

Efforts to boost pharma production capacity are also likely to come up against constraints – not least because we’re seeing so many countries seeking to boost their capabilities at the same time. Traditional pharma production centres such as India are also ramping up production; the Serum Institute in India (which makes the AZ vaccine) is the largest vaccine production facility in the world.

Among the key challenges is going to be finding the labour they need. The UK, in common with other countries, faces a long-term shortage of skilled workers to fill engineering and other key technical roles. Even before the pandemic, the Association of the British Pharmaceutical Industry warned that the UK risked falling behind the rest of the world in terms of students studying STEM subjects. With the advent of Covid, there are likely to be fewer opportunities to recruit internationally to make up for domestic shortages. Brexit might not help, either, if it limits businesses’ ability to recruit from abroad.

Quality not quantity

But will they even want to?

The key question is where the investment needed to reshore pharma manufacturing capacity will come from – and how well that’s going to match up with the UK’s needs. The answer may be, not quite as much as some expect.

On the one hand, there’s little doubt that the UK government’s actions, in common with others around the world, will significantly boost our capabilities to product vaccines for Covid and other similar diseases. We can speculate, too, that a wider resurgence of onshore pharma production might benefit from support as part of the government’s “levelling up” drive to spread growth across the UK.

The problem is that there’s a fundamental mismatch between the sort of production that’s likely to be attractive to governments and the products where we most often see a problem with supplies. Outside the pandemic period, it’s not new, cutting-edge vaccines and drugs we run short of: It’s low-cost, low margin generics. They’re hardly the engines of growth and highly skilled jobs that governments tend to promote. Production of these moved to low-cost offshore centres for a reason.

So, if not governments, then what about the pharma industry itself? Well, if the sounds coming from the US are anything to go by, there’s little appetite there. As this piece notes, pharma companies aren’t convinced by the economics; “The industry's reasoning isn't complicated: Manufacturing stateside would likely cost a princely sum compared with the cheaper wages and lower costs abroad, and would upset the balance of pharma's global supply chain.” Moving all manufacturing to Western markets is “impractical and likely not feasible”, according to the Pharmaceutical Research and Manufacturers of America (PhRMA).

There’s little reason to suspect European manufacturers will feel any differently. If anything, all the talk of export bans is likely to make them even less keen to relocate much of their manufacturing capability to more tightly controlled markets.

That’s not to say there will be no benefits from the renewed interest in domestic development and production in markets like the UK and US. Government support is likely to help the industry develop. It’s not just promoting new vaccines and treatments, but also prompting improvements in technology and production processes – helping the drive to continuous manufacturing, for example.

But it’s more likely to be an evolution than a revolution. Dependence on cheaper offshore production centres for many drugs will remain for the time being – as will the risk of shortages of generics on which so many depend. The vaccine wars will eventually see a truce. When it comes to tackling wider supply chain vulnerabilities, though, the industry faces many battles ahead.

Who’s to Blame for the Vaccine Wars?

Vaccines and Vindictiveness: Why Pushy Politics Won’t Fix Production

With potentially thousands of lives at stake, vaccine supply has become a highly charged issue. In truth, however, pointing the finger is not going to fix the real challenges facing supply chains. Intersys Risk Director Catherine Geyman takes a close look at the current conflict between first-to-market vaccine manufacturers and the EU, and what we can learn from this difficult episode for governments and pharmaceutical businesses.

With threats on export bans and the reignition of Brexit debates, the contractual dispute with AstraZeneca has taken a decidedly political turn. In that context, a bit of pharma bashing is the easy option. After all, some may say, it is AstraZeneca that’s failed to deliver. But there’s just a couple of problems with that…

First, even its supporters would concede that the EU is not entirely without fault. More bluntly, as Matthew Geyman argues, the EU ordered too late, paid too little and has delayed too long even to approve the vaccine. (It only did so on January 29.) And it’s not just AstraZeneca saying this. Some of the German press agree.

Don’t forget that AstraZeneca is not making a profit; it is supplying the vaccine at cost. If the EU then chooses to spend months beating down the price and AstraZeneca has set up separate supply chains to serve local markets, it follows the EU will not be served by an over-abundance of manufacturing capacity and that EU capacity will simply not have had enough time to optimise its processes (which, as we note below, are complex).

According to the rapidly withdrawn tweet by Belgian minister Eva De Bleeker, the EU is paying €1.78 per dose compared to the UK’s $3-4 per dose. Both are far cheaper – by orders of magnitude –than any of the other vaccines.

Perhaps more importantly, though, pharma bashing ignores just how incredibly complex and expensive it is to produce vaccines and ramp up capacity. Sometimes, as AstraZeneca has explained, it simply can’t be done. It’s not a case of just trying harder.

As a headline writer puts – Even Presidential Pressure Might Not Get More Vaccine to Market Faster. One expert in the piece, Lawrence Gostin, a professor of global health law at Georgetown University, explains, “The big problem is that even if you can get the raw material and get the infrastructure set up, how do you get a company that is already producing at maximum capacity to go beyond that maximum capacity?”

Screen shot of tweet about cost of covid drugs
Belgian minister Eva De Bleeker revealed in a tweet, later deleted, that the EU is paying €1.78 per dose compared to the UK’s $3-4 per dose. Both are far cheaper than any of the other vaccines.

Nothing new under the sun

Scaling up from clinical trial-sized batches to full scale production is difficult for any novel medicine, but vaccine processes are particularly complex and challenging. Unlike the more predictable chemical synthesis of traditional drugs, biologics processes for vaccine production usually involve the reproduction of living cells. Sometimes these processes don’t behave predictably and the amount of useful cells produced (aka yield) can be disappointing. AstraZeneca’s delivery commitment to the EU back in August is not very different from a farmer pledging a supply after planting a crop in the spring: he may hope for the right weather conditions, but he can’t know for sure the exact size of any harvest in the autumn.

The lower-than-expected yields AstraZeneca has experienced are hardly unique, and the EU is not the only customer to have been affected. Supply chain issues have been a concern for Pfizer since December, and the UK contended with its own AstraZeneca shortages last year.

And it’s not just an issue amid the massive demand prompted by the global pandemic. We saw these sorts of shortages with swine flu over a decade ago and more recently in the run-up to the winter 2019-20 regular flu season, before Coronavirus hit.

But if this should encourage some cooler thinking in the EU, we should also acknowledge that its response is not entirely unprecedented. Vaccine nationalism is nothing new; part of the 2009 swine flu shortage occurred because an Australian company decided to satisfy its own country’s needs first. Nor are export bans new: it’s worth noting that the UK itself put restrictions on exports for some covid drugs (for treatment rather than vaccination) early last year – and this wasn’t the first time.

In the heat of a race to save the lives of thousands of their populations, it’s not surprising tempers run high. Rather than who to blame, though, we should look at what can we learn.

A syringe extracting covid-19 vaccine from a vial.
Vaccine production can result in unpredictable - and sometimes disappointing - yields.

Political risks back for supply chains

Not all of those lessons will be encouraging.

The first and most obvious one is that political risk remains a major factor in pharma businesses’ supply chains and those that rely on them. Of course, this isn’t new either – even if concerns around US-China trade disputes seem a long time ago now. The Belgian medical regulator’s raid on AstraZeneca’s vaccine production factory near Brussels at the behest of the European Commission certainly brings the point home, however.

It’s easy to say we should keep politics out of vaccinations, but that is probably unrealistic. In some cases it may even prove unhelpful. The politicisation of the vaccine roll-out isn’t just about potential export bans; we’ve also seen how political will and urgent need can smooth the path to market. Israel is leading the world in its vaccine drive and reportedly has the interventions of its prime minister and health minister to thank: their conversations with Pfizer’s chief executive led to the country promising to rapidly roll-out its vaccine drive and share the data with the company on its impact in return for plentiful supplies. Today, more than half the country has had at least a first dose of the vaccine, against 12% in the UK and three per cent in Germany.

Whether for good or ill, recent weeks have shown that businesses cannot ignore the role of politics in times of crisis.

 

Contractual complications and onshoring

Other issues are likely to come out of the recent debates. One is a renewed focus on contract terms. Certainly terms such as “best efforts” are coming under a new level of scrutiny, and we may end up seeing some legal clarity on what commitments such phrases actually compel of each party. Who knows how impartial any decision on that will be if the AstraZeneca contract is ultimately contested in the European Courts.

Another long-term impact we’ve already seen as a result of the pandemic, though, is also likely to be reinforced by the recent battles: the move to onshore production.

Britain started 2020 with little vaccine manufacturing capability. The last year has seen massive investment in developing its domestic capabilities in England, Scotland and Wales. These include:

The UK is still dependent on overseas covid-19 vaccines, not least for the Pfizer supplies from Belgium that the EU is threatening to block. However, that dependence is far lower than even a year ago, and will likely decrease in future. It’s no accident that the new Novavax vaccine is to be manufactured in Stockton-on-Tees.

The pandemic has seen a massive increase in onshoring, and that’s likely to stay. In light of the recent disputes and the uncomfortable ongoing dependency on India and China for API Production, few countries now will risk not having substantial domestic capacity. The UK’s efforts signal a good start but the level of investment pales into insignificance next to the financial onshore incentives already injected into the US economy.

Back to Brexit

Finally, the recent spat has once again raised issues for pharma from Brexit. Unlike in previous instances, however, we now have greater clarity about the impacts of leaving the EU in practice. There is, it’s fair to say, something for everyone.

On the one hand, the faster UK roll-out was, at least in part, made possible by the UK’s exit from the EU. Early approvals by the UK’s Medicines and Healthcare Products Regulatory Agency contributed significantly to the speed of the UK’s programme. The European Medicines Agency has been much slower. Had the UK still been in the EU, it could theoretically have opted out, but since no EU member has, that seems unlikely. The UK would also almost certainly have relied on the Commission’s procurement programme – subject to so much current criticism.

It is hard to escape the conclusion that the UK’s improved vaccine roll-out represents an unexpected Brexit dividend.

On the other hand, the threats of export bans from the Commission underline quite how different the UK’s relationship with the EU now is, and the new risks that has introduced.

In this – and perhaps in future other areas – Brexit provides the UK with opportunities to carve its own path. That will sometimes give it opportunities for faster, nimbler responses. But it’s also a road that it will sometimes have to travel alone.

Catherine Geyman, Director, Intersys Risk

Head shot of Catherine Geyman, Director, Intersys Risk Ltd

 

 

Analysis: Pharma Supply Chains and Covid-19 - The Story So Far

How pharma supply chains are faring during the global pandemic

A close look at the data reveals that it is not supply chain breakdown that has led to drug shortages, but increased demand, says Intersys Risk Director Catherine Geyman

It’s too early for pharmaceutical supply chains to declare victory against the threat of Covid-19. If nothing else, the world remains wary of a second wave and further lockdowns. The industry can, however, make a good case that for now it’s avoided defeat. Despite some initial fears at the outset of the crisis, most pharma supply chains have kept producing.

Operations and procurement teams across the pharma industry have worked hard to ensure that their supply chains have held up well over the crisis. Mostly it’s paid off. In fact, that’s generally true for businesses across industries – particularly given the scale of the crisis. As a recent piece in The Economist put it, “In the face of Covid-19 [the] sinews of business have, for the most part, held up remarkably well… Systemic risks such as those which brought the banking industry crashing down during the financial crisis have, as yet, failed to materialise.”

That is not to say that we haven’t seen problems. As we’ve detailed before, drug shortages are now a persistent feature in the market. In January, even before the scale of the crisis became clear (though its prevalence was growing in China), the US Food and Drugs Administration posted new shortages for 19 companies (covering 11 drugs). Nor does it mean we didn’t see a significant increase in this number as the crisis took hold. February saw the first problems triggered by active pharmaceutical ingredients (API) supplies impacted by Covid-19. By April the number of new shortages reported had rocketed to 71.

Hand affixing label to cardboard box containing drug supplies.
Drug shortages had been a persistent feature in the market before the arrival of Covid-19.

Supplies and demand: causes of drug shortages

A study of FDA Drug Shortage reports performed using SCAIR® tells a more complicated story, however. In particular, it shows increased shortages driven by demand, not by Covid-19 supply chain failures.

At the start of the year, new FDA Drug Shortage reports were, in fact, all discontinuations – simply notifications of manufacturers taking commercial decisions to cease production of a drug. They were not shortages in the common sense at all. That is not unusual, and February through to May saw between 10 and 16 discontinuations added each month.

Moreover, according to the reasons reported by the manufacturers, the increase of shortages in April wasn’t the result of delays or API shortages caused by Covid-19. It was almost entirely due to a surge in demand. The number of new drugs shortages from companies as a result of demand increases rose from none in January and February, to six in March and 40 by April. In May, there were 15 reported.

Of course, that’s not to argue that the pandemic didn’t result in drug shortages. The surge in demand was driven by the virus: the analysis shows the highest demand was for anaesthetics, with new shortages for drugs such as Propofol and Midazolam – both used to treat Covid-19 patients requiring mechanical ventilation. Requirements for some sedatives and anaesthetics was up by half. Even before this, in March demand-driven shortages had begun to increase for anti-infectives. This coincided with speculation that antivirals such as chloroquine phosphate might protect against the virus.

Coronavirus and supply chains

There were some shortages as a result of supply chain issues in the first quarter, but the reasons given by manufacturers do not directly blame Covid-19. The FDA announced in February that it had seen the first shortages caused by the outbreak (although it refused to name the drug). Still, the supply of Pindolol due to API shortages was categorically not related to China. More supply problems saw new shortages in March, caused by supply chain issues: Teva’s Amoxapine tablets (due to manufacturing capacity constraints); Nizatidine capsules (supply interruption following other manufacturers discontinuations); and Alkaloida Chemical’s Hydroxychloroquine Sulfate Tablets (shipping delay). None can be linked explicitly to Covid-19, though, despite reports that reopening Chinese factories were operating at only 50-80% capacity.

In fact, according to the SCAIR® analysis, it’s not until April that a drug  shortage can be definitively attributed to the pandemic’s impact on supply chains: Teva’s Propofol, which suffered delays to shipping. At that point, some two dozen or more countries were on lockdown. The majority of shortages – 40 out of 71 – were still down to demand increases, however. And most of the rest of the drugs in question were discontinued.

In what would seem the biggest test of pharmaceutical supply chains for years, the industry can be reasonably pleased, or at least relieved, with its performance.

A new environment

Or perhaps only partly.

It’s true that things could have been much worse and that the paralysis of supply chains some feared as a result of the pandemic did not materialise. Even adding another in April and three more in May, the number of new shortages reported to be as a result of Coronavirus supply chain issues since January is just five.

We should note several facts, though. First, the FDA data lists new shortages. Many of these persist, so any shortages are often degree cumulative. Second, concerns over API shortages from China and, more particularly, India are real. The dependency on these two countries for APIs remains a real concern. The number of problems due to APIs, even if not explicitly linked to Covid-19, more than doubled in May to five. Overall, there have been ten since January.

Finally, even if supply chains have not collapsed in the face of the pandemic, it would be hard to argue they’ve proved entirely up to the task. The dozens of shortages we’ve seen as a result of demand increases are something that will require a hard look.

When the ReMediES project consortium looked at the causes of all ongoing drug shortages in 2018, the reasons for shortage reported by the manufacturer was not taken at face value. More in depth research into the health of the reporting company’s supply chains was undertaken. Previously published non conformities (recalls, certificate suspensions, inspection results) were analysed and an adverse FDA inspection was established as the most frequently occurring pre-cursor.  The study revealed that an FDA inspection OAI preceded 69% of drug shortages  – and almost three quarters if we exclude product discontinuations. Demand was a factor, but not the main issue.

(For a greater insight into the causes of supply chain interruptions, based on 2018 data, visit the SCAIR® ReMediES page where you can download the ReMediES white paper.)

The pandemic has changed that. Onsite inspections by the FDA are suspended, and regulators in the US are doing all they can to keep supply chains moving to satisfy essential demand. What we’ve seen is that regulation, or at least its application, is flexible in a time of crisis. Supply chains, perhaps less so.

The issue is not merely that production was unable to keep up. We must probably accept there will always be limits to what can be achieved in the face of an unexpected and massive surge in demand. But the lack of transparency of those supply chains, both internally and externally, makes it that much harder – and that much more likely that shortages will result. As analysts noted at the time back in March, the lack of clarity about companies’ supply chains made predicting the impact of Covid-19 on drug availability more difficult. And that has consequences for planning for and mitigating any shortages.

Ultimately, the supply side of the biopharma industry has generally proved resilient to Covid-19; it is unprecedented demand that has created the most disruption. Considering the current circumstances, the outcome is an endorsement for the work of supply chain managers who invest in designing and maintaining robust supply chains.