Procurement Power

All governments spend money, typically siphoned from their citizens’ pockets and nominally for the good of those citizens and society in general.  Governments in developing/emerging economy countries have increased their spending on improving health, although the amount varies widely, from tens of US dollars to several hundreds per person per year (Guardian datablog).  One action governments take to increase access to and affordability of medicines, vaccines, and other tools for better health is to procure large quantities of these products for use in their public health systems through a competitive bidding process.  If done right with clear specifications and rational minimum pricing (and no graft), procurement contracts can create a market for products and result in lower-cost, improved health care.  (For some background about procurement for global health, see my post, “More Bang for the Buck”, May 2012).

One of the world’s major emerging economy countries, Brazil, is apparently pursuing a multi-year plan to leverage its governmental health care spending to increase the capacity of the government and domestic companies to produce needed drugs and medical equipment.  However, I found only limited information on the plan and no analyses by the health economics community, leaving me wondering if its goal is production of low-cost products for domestic use only or if those state-subsidized companies will also become international suppliers of low-cost drugs and vaccines.

The most complete description of the plan I found was in a press release issued by the Brazilian Ministry of Health (MOH) last month (MOH press release).  To quote:  “In April this year, Minister Padilha announced a package of initiatives aimed at providing a further boost to national production.  Eight partnerships between public and private laboratories were entered into for the manufacture of medicines and equipment. … Through partnerships for productive development between public and private laboratories, the Ministry of Health aims to ensure access to high-cost treatments and expand services to SUS patients [the SUS is the national health service that has 180 million beneficiaries, or almost the entire population, see SUS facts].  63 partnerships are currently in place between 15 public and 35 private laboratories for the national production of 61 medicines and six types of equipment.  These partnerships account for R$ 5.9 billion [about US$2.6 billion] in public procurement and approximate annual savings of R$ 2.5 billion to the public coffers.”  But what drugs were being procured (patented? generic?), over what period of time, and at what price and how were the savings calculated?  Are the participating companies all domestic and how large?  Was the selection process competitive or political?

A key government agency for health in Brazil is the Oswaldo Cruz Foundation which does R and D, runs hospitals, educates and trains, publishes, and produces vaccines, drugs, reagents, and diagnostic kits (Fiocruz portal), and it does the last at a large scale.  According its Production and Innovation page, Fiocruz makes 40% of the drugs purchased by the MOH, hundreds of million of vaccine doses, and reagents for millions of diagnostic kits.  But other than lists of Brazilian and international company “partners” (Brazilian companies and international companies), I found no details on these partnerships.

From other sources, I learned that one important element of Fiocruz’s partnerships with non-Brazilian companies is a requirement that the procurement requires transfer of manufacturing technology for the product to Fiocruz.  As I noted in a post in July 2010 (“Fio Cruising”), Fiocruz and Chembio Diagnostics Inc. of Medford, NY, closed a procurement and tech transfer deal for HIV diagnostics, and in September 2009, Fiocruz and GlaxoSmithKline (GSK) completed a similar deal for GSK’s pneumococcal vaccine.  In the press release for the latter, GSK noted that since 1985 the company has had Fiocruz manufacture the its vaccines for Brazil for polio, Haemophilus influenza type b, measles, mumps, rubella, and rotavirus (GSK press release).  Another big pharma company has also transfer a drug and its manufacture to Fiocruz.  In 2011, Bristol-Myers Squibb, a long-time provider of HIV drugs to Brazil, agreed to transfer its process to make HIV drug, atazanavir, to Fiocruz under undisclosed terms (BMS press release).

More recently, the MOH demonstrated an interest in biologics other than vaccines when it completed an agreement to acquire a drug for a rare disease and a highly novel manufacturing technology.  As I mentioned in my post last week (“Soup to Nuts”), in June Fiocruz made a commitment to buy up to $280 million of an enzyme replacement therapy the rare lysosomal storage disorder, Gaucher’s disease, made by the Israeli company, Protalix Biotherapeutics, in exchange for transfer of the manufacturing process to a government facility over a seven-year period (GEN article).  Interestingly, the biotherapeutic is made in plant cells, not mammalian or yeast cells, the industry standards (Protalix platform).  Even more interesting (and curious), is that the MOH is also acquiring a plant-cell-based, biologics manufacturing technology from the US company, iBio, and putting it into a $170 million facility which will be built through a contract with GE Healthcare (iBio April press release and June press release).  Apparently, this deal was a follow-on to licenses granted in 2011 by iBio to the Brazilian government for use of its technology in making Fiocruz’s yellow fever vaccine (which is exported 70 countries) and other vaccines (Pharmaletter article).  And to add to its deal-making, last month the MOH announced that it plans to make an H1N1 vaccine using technology transferred from Sanofi and it initiated “27 partnerships with public and private labs to produce biopharmaceuticals, including an allergy vaccine, a growth hormone, a cicatrizing drug, and medications to treat cancer, arthritis and diabetes.  Through the partnerships, Brazil expects to produce a total of 25 biopharmaceutical drugs.” (Antara News article).

Clearly, Brazil is aiming at self-sufficiency, but this level of investment could lead to over-capacity for domestic needs and possibly an industrial base capable of producing low-cost pharmaceuticals and vaccines for non-major market, rest-of-world consumption.  As was noted in a Financial Times article on the 2009 pneumo vaccine deal with GSK, “Paulo Gadelha, president of the Fiocruz institute, which will produce the vaccine, stressed that the technology received could also be used to help it make other vaccines in future.  He said his institute was already pledging to provide technology transfer to make low-cost drugs and vaccines for African countries, in what could provide a challenge for large pharmaceutical companies” (Financial Times article).  More to follow, I hope.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s