Novartis: Why we can't give free flu vaccine to poor countries

Jul 21, 2009
By Pharmaceutical Executive Editors

Timing is everything. When Novartis Vaccines began to plan its two-day 'Rethinking Influenza' meeting in March this year, the words 'swine' and 'flu' were not two that the media or the general public would have immediately put together. Fast-forward to the end of April, and the world's newswires are awash with the term. Before long, the World Health Organisation (WHO) had raised the swine flu outbreak to a level 6 global pandemic; three months after its initial appearance in Mexico, well over 100 countries have now reported cases. The UK authorities, for one, are predicting 100,000 new cases a day in the country by the end of August.

In the face of a mounting crisis, the Novartis Vaccines influenza meeting went ahead earlier this month (at the company's research facility in Siena, Italy) with the hastily revised title, 'Can Planning Avoid the Panic?'

Between the planning and the hosting of the meeting, the questions about tackling the new strain of the virus had inevitably taken on a more political dimension. Only last month, Novartis's CEO Daniel Vasella added fuel to the fire by rejecting the idea of free swine flu vaccines to poor countries. In the light of decisions by GSK and Sanofi-aventis to do exactly that, the announcement looked, on the surface at least, like a bit of a PR faux pas.

But Novartis is ahead of the game as far as producing a vaccine is concerned. At the meeting, Novartis Vaccines CEO Andrin Oswald confirmed that the company's first swine flu clinical trials are set to start this month, with the first results available in September. The first batch of swine flu vaccines will be made available around the same time. Still, the company is shouldering a very high degree of risk, even with the pandemic set to escalate. Upgrading and expanding its facilities, and making further investments in R&D, has cost $2 billion.

Novartis is all too aware of the over-production problem that occurred in the wake of the avian flu outbreak of 2003–04. Before this, there was no interest in flu vaccines from governments. Then, suddenly, there was a flurry of new investment in vaccine capacity. By 2008, vaccines were being overproduced and going unused. This business model, Novartis Vaccines says, is not sustainable.

Nevertheless, the company is well aware of the urgency. "If we don't go ahead and produce the vaccine now, it won't be ready for October," says Oswald. And the implications of the virus mutating are massive. "Even if the possibility of this happening is very low," Oswald adds, "you're talking of a $50–70 billion global impact."

The cost of swine flu
The financial cost of influenza, in addition to the human cost, is of course a vital consideration; societies need to balance the cost of vaccination programmes with the cost to society of the spread of the disease. Healthcare costs such as vaccine purchase, administration, dealing with side effects, are compounded by non-healthcare costs such as worker absenteeism and reduced productivity.

Debates about the global cost of a pandemic are, inevitably, weighted to the concerns of the developed world. As a response, calls to provide the treatment free to the poorest countries are never far behind. But donating vaccines to the poorer countries for free is not sustainable or, ultimately, cost-effective for anyone, says Oswald.

Oswald points to the "huge outcry" a few years ago for Novartis to supply its malaria vaccine, Coartem, to African countries for free. As a result, "we ramped up our capacity dramatically, but what we saw in the first years was that what was ordered and distributed was much, much lower than what was asked for and what was produced," he says. "So we had big write-offs to make at the beginning. In a pandemic situation, taking a vaccine to developing countries is something we need to understand better."

Oswald underlines that the price of the vaccine can be reduced for poor countries, but giving it for free is not an option. "With the flu situation, we have made a loss every year for the last three years. It has not been profitable; there is no 'wealth' we could donate and redistribute. The message we are sending out is not a message to the poor countries that can’t afford it, but a message to our partners to expand flu production capacity in a sustainable way so that maybe one day we will be able to vaccinate everybody on the planet if a pandemic were to happen. This costs money, and while we don’t want to make a huge profit, it has to be sustainable and not loss making. And this is why we felt, at this point in time, that saying we were going to give it away for free would send out the wrong signal."

The sentiment has support from industry commentators. Writing in the Financial Times (18 June), John Gapper put it succinctly: "Giving vaccines away free sounds like a generous approach, but the hidden cost is too high." For example, "one-off gifts of childhood vaccines," he said, "can cause more harm than good. Developing countries obtain far greater benefits from being offered guaranteed low prices for a vaccine over several years, enabling them to plan vaccination properly."

Oswald emphasises that Novartis Vaccines are nonetheless committed to offering the vaccine to poor countries at a significantly discounted price. "If an NGO or the WHO wants to finance that discounted low price, we'd be happy to work with them," he adds.

But with or without support, at this point in the pandemic it looks like Novartis's financial risk is likely to pay off, at least in the developed world. Although the company's dealings with governments are confidential, Oswald confirms that there are "35-40 countries who have requested a vaccine." Of course, no-one actually wants the pandemic to hit the hysterical levels some observers are predicting, but it remains vital to be prepared. And, as Oswald points out with a clear-headed logic, for all the financial burden and uncertainty, who would take the risk of not producing a vaccine?

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