The market configuration failure behind Covid vaccine supply

Published on 28 October 2021

Anabel Marín

Research Fellow, Cluster Leader

The Covid-19 health crisis will continue to disrupt societies globally until the rollout of vaccines can accelerate the end of the pandemic. The development of Covid-19 vaccines in record times is an incredible scientific achievement but, over a year and a half on, something is wrong when more than half of the population in the world are left without any access. Issues of unequal and unfair distribution are being acknowledged but they are considered in terms of a lack of global solidarity rather than a result of market configuration failure. Ahead of the G20, it is time the world’s leading economies tackle systemic problems including the regulatory barriers that prevent  distributed innovation needed to unlock vaccine equity.

Global inequity in vaccine distribution has so far been mainly discussed in terms of problems related to allocation and distribution. Advanced countries bought up supplies until some had enough to vaccinate their populations more than twice over, creating a situation where 61% of the eligible population in high-income countries are fully vaccinated compared to only 1.3% of people in low-income countries.

International efforts and incentives that included COVAX and Gavi, the Vaccine Alliance have not been enough to stop failures in global vaccine supply. As the Lancet commented “COVAX was a beautiful idea, born out of solidarity. Unfortunately, it did not happen. Rich countries behave worse than anyone worst´s nightmare”. Described by the World Health Organisation as a “catastrophic moral failure” it also has profound consequences in worsening the global health risks of new variants emerging and extending the economic disaster. Already, the World Bank has estimated that losses from the Covid-19 pandemic are approximately $500 billion every month.

Vaccine market configuration failure

To achieve vaccine equality, we must move beyond trying to explain the failure of the UN mechanisms like COVAX and instead address what has taken us to a market configuration that is enabling a limited number of global pharmaceutical firms supported by their national governments to control supply.

The failure of global systems of innovation and production to deliver the scale and diversity of vaccine products needed is clear from the early phases of the Covid-19 vaccine market. At the end of 2020,  a small number of pharmaceutical companies from more powerful countries began to leverage the support (regulatory and financial) of national governments and first mover advantage to become technological leaders in vaccine supply.

Their dominance of the market continues to be supported by their governments despite these companies delivering just 3 per cent or 30 million of the 800 million vaccine doses they promised to produce (Evenett et al 2021).

Very rapidly, the blame for this under production was placed on the lack of manufacturing capacity distributed around the world  but this was not true. The Coalition for Epidemic Preparedness Innovations (CEPI) identified between 260 and 300 companies from 40 countries that had the expertise and capacity to manufacture Covid-19 vaccines (including fill-finish).

At the same time, more than 300 manufacturing deals for approved vaccines were being signed in a diversity of countries and regions as registered by  Airfinity in August 2021. These licensing agreements included a number of middle and low-income countries such as India, Argentina, Brazil, Mexico, Thailand, Egypt, Morocco who rapidly were able to develop the critical manufacturing capabilities and produce Covid-19 vaccines for their domestic markets and for export.

Clearly, there was specialist vaccine manufacturing and technological capacities available in well distributed areas around the world with the potential to produce and even improve the vaccines authorised to be commercialised.  The problem was a  lack of critical  knowledge sharing and a refusal to waive patents so that  Covid-19 vaccine production could be scaled to guarantee supply. These demands were strongly contested by representatives of the pharmaceutical companies who argued that patents were a key incentive to innovation and that any waiver would not have material impact on vaccine production. However, existing theoretical debates in innovation literature and empirical evidence does not support such arguments.

The decision by regulators in the middle of a health crisis with clear shortages of supply to protect global pharmaceutical firms  control of knowledge and information rather than open up global knowledge sharing and promote distributed vaccine production capabilities in part could be explained lobbying. Data from the USA where data is collected on the health sector’s (registered) expenditure on lobbying shows it increased 140 percent in the first quarter of 2020 with 138 new registrations related to Covid-19 filed and $63.0 million spent (Olson, A. et al. 2020).

Equity requires system transformation

The next phase of Covid-19, including the shift to lift restrictions and encourage economic recovery, has moved attention on from global vaccine supply. This means that opportunities to transform a system that currently is configured so it cannot deliver vaccine equity are being missed.  Fundamental questions related to supply, barriers to entry and technological ‘lock ins’ where there is path-dependency based on sub-optimal technologies are being ignored yet these are fundamental to resilience in this crisis and possible future ones.

The questions that need global attention include whether the existing vaccines that are allowed to be manufactured are the best options and if so on what basis? Is it about efficacy, are they the ones that work better? What about value, accessibility, adaptation? And should we allow for more alternatives, particularly as new variants emerge,  and vaccines are applied in more diverse contexts? Who and how should make these decisions on new vaccine products and emerging markets?

If these questions were to be included in negotiations happening between global leaders, and between national governments and pharmaceutical companies, discussions would focus on how to create processes that facilitate new technologies to flourish and create a diversity of options. In other words, they would focus on how can processes could be created to improve market configuration, reducing concentration of producers for vaccines and facilitating the development of distributed capabilities for resilience to face this and future crisis.

Negotiations shaped by geopolitics

Instead of this happening, critical negotiations are being shaped by competition between powerful countries and pharmaceutical firms seeking to shape this new market. This leads to product selection mechanisms that force a concentration of the market around a limited number of vaccine options and leaves potentially viable alternative solutions behind.

Currently, there are 322 Covid-10 vaccines in different stages of development in 41 countries with 30 well advanced. To date, however, only four vaccines have been approved and then promoted by USA and EU firms who are aiming to shape the global market. This evidences how product approval processes have the effect of perpetuating the historic dominance of these regions in a global market.

This could worsen still further if current disputes over market dominance between Astra Zeneca vs Pfizer increase the dominance of one or other Covid-19 pharmaceuticals in the vaccine market.

There is evidence that health and safety regulations are being used by governments to make the vaccine market function in the benefit of their domestic producers while shutting out global competitors.  This is illustrated by the Chinese Covid-19 vaccines that were approved by the WHO and approved then used by 105 countries around the world (65 countries have approved Sinopharm and 40 Sinovac), especially within developing countries who because of lack of supply could not access the USA/EU manufactured vaccines. However, Chinese vaccines are not recognised as safe in the USA or EU. In a similar way, vaccines developed by the Gamaleya Research Institute in Russia were approved and used again effectively in 71 countries, but not accepted by global institutions and regulators.

In fact, delays to the approval of alternative vaccines enables regulators in advanced countries to support their domestic companies to gain time.  This allows them to position as technological leaders in the global vaccine market, building alliances, training manufacturing companies and developing suppliers that ultimately means they will ‘lock in’ their advantage with no other company able to easily compete. In this instance, the functioning of the innovation system to reinforce the power of first movers ‘finishes the job’ for the large pharmaceutical company.

For example, regulations about exclusivity of use of data on clinical trials then allows the first mover firm to protect the data they generate – often funded by government – and build a huge barrier to entry for new entrants that are not allowed to use the data already generated (existing knowledge) to support their applications.

While other developing countries are now producing vaccines, such as in India, Cuba, Brazil, Argentina, and now Egypt, the race to gain approval is expensive, demanding and, in this market configuration, highly uncertain.

There is also limited incentive when countries including the UK have introduced restrictions that mean citizens who have received non-domestic vaccines (including from countries that have successfully managed the health crisis such as China) are considered unvaccinated, which makes very difficult to enter.

A need for truly global innovation

When it comes to the inequity of vaccine distribution, discussions about the lack of distributed scientific, technological, and productive capabilities while relevant seem secondary when we consider the other processes that lead to a market configuration that prevents fair distribution.

The issues of vaccine supply demonstrate what happens when in the early stage of a new market emerging, production capabilities are concentrated in a few firms and countries with mechanisms that perpetrate this concentration disguised as regulations or policy.  It illustrates how economic power is applied by advanced countries in regions used to dominating global markets. If we are to achieve vaccine equity, we must remove historic geopolitical imbalance in the market and allow the global innovation system to function properly. The question is then which global institutions are needed to make this happen.



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