10 actions to boost low- & middle-income countries’ productive capacity for medicines
Remarkable efforts are underway to ensure effective research and development (R&D) of COVID-19related diagnostics, treatments and vaccines, inter alia at last month’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. 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 COVID19 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 epicentre 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.
However, local investors and producers alone cannot fulfil 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.
•
•
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 lowincome countries are struggling with infrastructure challenges, including electricity cuts and cold chain interruptions.
Ethiopia, for example, allows a preferential margin of up to 25% on bids from local producers.
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.
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.
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.
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
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.
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. 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.
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. 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.
We envisage a two-pronged strategy to pursue our ten actions.
1. 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.
2. 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.
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.