March 12, 2022 PAO-02-022-CL-04
Harsh as it may sound, our world is often divided along economic data sets representing existential realities. The World Bank classifies countries into four categories: low income, lower middle income, upper middle income, and high income. There is a significant income disparity among these groups. Average per capita GDP in a high-income country like the United States is 63 times that of an average per capita GDP in a low-income country.
Unfortunately, this staggering disparity is also determining who gets vaccinated first and who is last. As of December 2, 2021, 75.8% of those in high-income countries had received at least one dose of the vaccine, whereas only 6.2% of those in the low-income countries had received at least one dose.2 On the basis of this data set, if you are born in a high-income country, not only do you earn 63 times as much, your likelihood of survival in a pandemic event based on immunization rate is 13-fold that of someone born in a poor country.
A simple fact of birth location determining access to lifesaving immunization is morally problematic. The following maps of the globe present further proof of this strong relationship between immunization rate and income level. Poor countries with blue shades also have the lowest vaccination rate, indicated by tan colors, whereas wealthy, red-shaded countries also have green shades on the vaccination map, indicating high COVID-19 immunization rates. India and China are two outliers to this pattern, which will be analyzed below.
Our World by Income Levels FY20173
COVID-19 Vaccine Doses Administered per 1,000 People4
This disparity is not necessarily due to a vaccine shortage at a global scale. It is estimated that we have a supply of over 10 billion doses of COVID-19 vaccines as of today and that we are producing 1.5 billion doses per month.5 Factors such as vaccine nationalism and the tendency to ignore the global nature of the pandemic are to blame.
In a globally interconnected world, quickly ending the pandemic is proving to be elusive. The virus is airborne, highly infectious, and virulent. Rich nations mistakenly believe that life can go back to normal without addressing the pandemic at a global scale. Ongoing research by economists suggests that it is in the financial best interest of the high-income countries to push rapid vaccination efforts on a global scale. Their argument is based on three reasons: loss of GDP, mutations, and high return on investment (ROI) on global vaccination.
Loss of GDP
Global GDP was projected to grow at 2.9% in 2020. Due to the pandemic, it contracted by 3.4%. The net impact is a loss of 6.3%.6 The GDP of the United States has changed as follows: 2019 (+2.3%) 2020 (–3.4%) 2021Q1 (+1.5%) 2021Q2 (1.6%).7 These GDP losses are in fact much worse, since the governments around the globe have injected capital into their economies by borrowing money. These drastic measures are helping to stabilize economies. However, in the process, the countries are amassing large debts. In 2019, the global fiscal deficit was at 3.9% of GDP.8 In 2020, IMF data suggests that it increased to 10.2%. The deficit is projected to remain elevated over the next few years as the economies improve.
Fiscal Deficit as Percentage of GDP9
Wealthy nations have the most to lose, owing to their international trade linkages and large economies. The change in fiscal deficits due to the pandemic for a few wealthy nations is as follows:10
United States: –5.7% (2019) to –14.9% (2020): +261%
France: –3.1% (2019) to –9.2% (2020): +297%
Germany: +1.5% (2019) to –4.3% (2020): +387%
United Kingdom: –2.3% (2019) to –12.5% (2020): +545%
Mainland China: –6.3% (2019) to –11.2% (2020): +178%
G20 nations have already spent $10 trillion on support during the pandemic. Nations rely heavily on the import and export of goods and services to create wealth and employment opportunities. Failure to vaccinate poor nations has global financial consequences. Economists estimate that, when the dust settles, half of the total financial loss will be borne by developed nations.
ROI on Global Vaccination
Global equitable access to COVID-19 vaccines is estimated to generate economic benefits of at least U.S. $153 billion in 2020–2021 and U.S. $466 billion by 2025 in 10 major economies, according to a new report by the Eurasia Group.11
The Organization for Economic Co-operation and Development (OECD) estimates that it would cost as little as $50 billion to vaccinate the world.12 The International Chamber of Commerce (ICC) estimates the global vaccination cost to be half as much. Against this data, the ROI for 10 major economies was roughly 400% in 2020–2021 and will be over 1,000% by 2025.13 The ICC estimates that the trade losses borne by the rich countries due to their international linkages could be U.S. $0.2 trillion to U.S. $2.7 trillion, depending on the strength of trade and production linkages.14 With such a high projected ROI, concerted efforts against global immunization should be a no-brainer. We have so much to gain in the long run by simply shifting focus to global eradication efforts in the short run.
The longer the virus stays in unvaccinated host populations, the more frequently it will mutate. With multiple mutations and a less than ideal pace of vaccination, we continue to experience high mortality and infection rates from COVID-19. As of the writing of this article, more than two years since the viral outbreak, current stats indicate a fairly active pandemic state.15
Daily new cases (world): ~700,000
Daily new deaths (world): ~8,000
Daily new cases (United States): ~140,000
Daily new deaths (United States): ~1,500
Mutations account for almost all of these new infections. The delta variant was discovered in India a year ago and now accounts for the majority of cases in the United States. The omicron variant was detected in southern Africa in November 2021, and in just four weeks it spread to almost 30 countries, thanks to our global lifestyle. On November 9, 2021, we had a total of 500,000 daily infections globally and fewer than 1,000 daily infections within the United States. In four weeks, these numbers have grown by 200,000 and 500, respectively. The rapid spread of the variant is causing a new round of travel bans and shutdowns across the globe.
For both economic and humanitarian reasons, global immunization must be at the forefront of our collective efforts against COVID-19 in the near term and other diseases in the long term. The World Health Organization estimates that vaccines for all preventable diseases save 2–3 million lives each year. The next section discusses major hurdles that we must overcome in order to achieve vaccine equity.
The key challenges in our battle for rapid global immunization are a lack of regional vaccine manufacturing capacity, tech transfer challenges, and high cost of goods (COGs.
Lack of regional manufacturing capacity
There is a strong correlation between the capacity to manufacture vaccines locally and immunization rates. The first map below indicates the locations of COVID-19 vaccine manufacturers (red dots) and distributors (orange dots) across the globe. The second map indicates current immunization rates. Low immunization in Africa corresponds with a complete lack of local manufacturing capacity.
Geographic Distribution of COVID-19 Vaccine Manufacturing
COVID-19 Vaccine Doses Administered per 1,000 People.
This disparity is applicable to all vaccines. Only 100 countries export vaccines, whereas more than twice as many import them. Moreover, the top 10 exporters account for 93% of global export value (80% in terms of volume). Ireland exports the most, with 28% by value, followed by Belgium, which exports 21% by value.
Share of Global Vaccine Import and Export by Values
and Volumes in 201816
With the lowest vaccination rate in the world, 99% of the vaccines administered in Africa are manufactured elsewhere. A lack of vaccine manufacturing capacity in low- and low-middle-income countries means that during a global pandemic, local production is not an option. Absence of regional vaccine access leads to a very slow immunization pace, prolonging the prevalence of the disease in the community. It should be noted that India and China are outliers in the sense that their immunization rates far outpace their peer countries in the same economic brackets. Strong manufacturing setup is the only reason for their successful immunizations against COVID-19.
In a pandemic event, countries serve their people first and foremost. Countries with a high concentration of manufacturing capacity, such as the United States, are focused on controlling the regional spread of the virus. Until a country has the domestic outbreak under control, it will not shift focus toward another region. Such vaccine nationalism affects the supply chain as well. Not only do countries hoard vaccines when in dire straits, they also hold on to items, such as glass vials, that are critical to vaccine manufacturing and fill-finish.
As a global society, we must accept this reality and focus on developing local, regionally distributed manufacturing.
Tech Transfer Challenge
Tech transfer is a term in the pharmaceutical industry referring to when a certain medicinal product is manufactured in an alternate location, wherein the new manufacturer must prove that the product quality made in the new location matches the quality of the originally approved product. Tech transfers require intense time commitments from developers and recipients to be successful. In 2020, the number of vaccine doses produced were well below projected counts, mainly due to tech transfer challenges.
Expanding vaccine manufacturing to multiple locations is not very different from opening a second location for a top-rated restaurant. Creating a replica of a very complex product requires not only explicit knowledge, such as the recipe, but also tacit or intuitive knowledge that can only be gained by doing it yourself, over and over.18
The typical hurdles faced during tech transfer are as follows:
Lengthy Duration: Before COVID-19, most tech transfers took more than 18 months to complete, and products were transferred to a single new facility. During COVID-19, many companies aimed to complete tech transfers within six months to as a many as 12 new facilities
Establishing Close Partnerships: Tech transfers require access to IP and know-how, as well as extensive collaboration between the developer and recipient manufacturer to ensure regulatory approval.
Regulatory Hurdles: Without adequate comparability, new companies would need to rerun clinical trials and submit new regulatory packages, adding millions of dollars and many months to the supply timelines.
Quality Control: The process at a new facility might exactly adhere to the documentation, but slight variations in raw materials, such as water composition between sites, could cause issues establishing analytical comparability and require costly and time-consuming action.
Starting a completely new industry in a low-income country or lower-middle-income country, such as Senegal, is going to involve a large capital investment with a potential for no immediate returns. This challenge is exacerbated, because low-income countries are at a fundamental disadvantage when it comes to manufacturing complex products, such as drug substances and drug products, due to the following region-specific issues:
Demand Estimation: Unlike a mature market, low-income countries are undergoing significant changes in population due to rapid growth. It is difficult to estimate an accurate demand that is required for planning a vaccine manufacturing facility. They also have very low purchasing power and therefore rely heavily on other countries to subsidize vaccine costs. Uncertain demand and lack of financial self-reliance make it very difficult for a low-income country to start a complex manufacturing industry.
Skill Shortage: A majority of the local workforce lacks the education in the technical fields that is necessary for high productivity. In drug substance and drug product manufacturing, productivity is a key lever to lower costs and improve yields. COGs can see large variations, depending on the productivity of a typical full-time equivalent (FTE) at the plant. Lacking in skill and training, FTEs produce at the low range of the industry, making the COGs unfavorable for the investors.
Productivity is a Key Lever to Lower Costs and Improve Yields19
Manufacturing Technology: Technology is undergoing rapid change in the vaccine industry. Egg-based vaccines have lower costs but lower yields. Cell culture–based technologies using bioreactors have higher costs for higher yields. The latest mRNA technology has much higher costs with the highest yields. Therefore, technology has a direct impact on COGs. Finding the right technology that can be supported by local talent while achieving profitable COGs is no small feat in a low-income country.
Profitability Calculator: The following chart analyzes the relationship between profitability, total production volume, and unit cost of product sold. Net present value (NPV) is the cost of dollars invested. The investment is profitable at a certain sales point for a product, as well as at certain minimum production volumes. The blue area is where the NPV is positive or the investment is making business sense. For an investor to be able to make money, a minimum number of dosages needs to be produced. The higher the production volume, the more profitable the venture is. Similarly, as the unit cost of drugs sold increases, the profit margin grows. The higher the COGs, the lower the profitability for a certain price point.
As the chart below shows, there is a sweet spot when it comes to the number of doses to be produced and sold and the cost of each dose. If we hit this range by leveraging the right technology, the cost of goods to manufacture the vaccine would make financial sense to the investors. Demand uncertainty, financial dependency, low productivity, and a lack of technical skill sets make it extremely difficult for LICs to hit this range of a positive NPV.
Vaccines Made in Bioreactors Can Show Positive NPV at Sufficient Scale19
Low-income countries are fundamentally different in their population characteristics, skill sets, and infrastructure. Replicating what works in the United States or India will not work in Africa. Research indicates the following key strategies as we establish vaccine manufacturing in low-income countries: regionally distributed manufacturing, flexible plant design, and modular vaccine technologies.
Regionally Distributed Manufacturing
Vaccine manufacturing is a very large operation requiring multiple complex steps: drug substance manufacturing, fill-finish, packaging, and labeling. To start a vaccine manufacturing plant with all of these steps together in a low-income country is going to be an insurmountable task. A more practical approach would be to decouple these steps and create regions of excellence wherein drug substance is manufactured in one location and fill-finish is done in another location.
Decentralization reduces the burden on a single entity while creating more efficient operations. When a certain region focuses on one step, such as drug substance manufacturing and builds specific infrastructure and talent, it can pivot to manufacturing “vaccine adjacent” products, such as monoclonal antibodies (mAbs) or other sterile injectables. This approach maximizes utilization of the manufacturing plant, and high-demand products can be made in lieu of manufacturing larger quantities without demand certainty.
With decentralization, less-complex partnerships with foreign manufacturers can be established and enable faster executions. In the wake of the pandemic, several manufacturers and nongovernmental organizations (NGOs) have committed resources and funds toward such initiatives.
Lastly, a center for excellence can be duplicated within the region once infrastructure and talent have been sufficiently developed. A scale-out versus scale-up approach also favors modular and flexible set-up, cited as a second key strategy below.
Modular and Flexible
Technology is rapidly evolving toward modular, small-scale manufacturing. Modular platforms may be smaller in scale, but they provide the flexibility of producing at different scales. A large-scale production would simply mean building multiple lines by scaling out. These scaled-out modules can produce multiple products at a small scale, if that’s what the market needs. Initial investment can be smaller in terms of plant size, utilities, land, and staff.
Tech transfers are easier since the initial tech transfer will take place at a smaller scale using known platforms. Some of the most promising existing investments with proof-of-concept technologies are shown below. It should be noted that they are still under development. However, it is only a matter of time before they gain a large market share, owing to strong support for their implementation from the global pharmaceutical community-at-large.
The pandemic has highlighted how globally interconnected our world has become. Until all nations are immunized, our lives cannot fully normalize. It has also highlighted the lack of lifesaving vaccines in the poorest parts of the world. Lastly, a healthier, more productive global population is better for business for high-income countries. For these as well as humanitarian reasons, it is time to invest our excess capital into building vaccine infrastructure in the low-income countries.
Komal has two and a half decades of experience designing a range of building types for the pharmaceutical industry. She specializes in pharmaceutical manufacturing facilities and research facilities. She launched a new product iLAB during the Annual Conference of ISPE in 2020. iLAB is a digital dashboard for laboratory management and strategic planning and won Pharma Innovation Award in Fall 2021. An avid learner, she holds B. Arch., M. Arch., and MBA degrees.