Wounded vaccines market needs a Shot in the arm

The Indian vaccine market, growing at close to 20%, is said to have the potential to reach $1 billion by 2012. Private Indian vaccine manufacturers, however, have been finding themselves losing out on the domestic market due to the low national spend on vaccines, sub-standard performance by the government in spreading immunisation coverage through the National Immunisation Programme (NIP), and delay in including more vaccines as part of the programme. Factors like tight price point competition, lack of funds and infrastructure for R&D and low awareness on available vaccines are combining to serve a lethal dose to these manufacturers

While India?s population of over a billion presents manufacturers with literally a world of opportunities here, domestic markets constitutes a miniscule 10% of revenues for the industry, thanks to these home-made hurdles. This is in-spite the fact that almost half of the country still does not have basic immunisation coverage. Exports to over 130 developing and under developed nations across Asia, Africa and South America at a fraction of the price of products from multinational manufacturers constitute the rest.

India?s healthcare woes are no secret. However, many would find it shocking to know that while the government here has managed to provide immunisation coverage to just about 53% of its population, African nations, counted amongst some of the most gruelingly poor regions, have achieved the UN millennium development goal with a coverage of 80%. Neighbouring Bangladesh has close to 95% immunisation coverage. Immunisation programmes aim to increase national immunisation rates and reduce mortality and morbidity due to vaccine preventable diseases (VPDs), particularly in children.

The Centre, immune to such toxic facts, is presently spending Rs 500 crore out of the Rs 25,000 crore healthcare budget on vaccine purchase compared to Pakistan, which spends 75% more at Rs 800 crore, and China, which spends a whopping Rs 9000 crore on the same. ?Low coverage is the main reason India is lagging behind,? says Adar C Poonawalla, executive-director (operations) of Pune-based Serum Institute of India, one of the largest manufacturers of vaccines globally.

?There is an urgent need to improve coverage from 50% to at least 90% and introducing all the crucial vaccines that 120 countries around the world are already using in the government programmes. I am not talking of Europe and US. I am talking about the middle to low income countries that are doing it that and are far poorer than India,? Poonawalla adds.

Currently India covers 6 vaccine preventible diseases including tuberculosis, diphtheria, pertussis (whooping cough), polio, measles, and tetanus in its government programme while countries like Brazil have 15. In addition to the bureaucratic failure, a major challenge faced by vaccine manufacturers to sell in India is tight price point competition. With almost 50% of the domestic market comprising institutional buyers, purchase decisions are primarily cost driven and thus relate directly to market position and production capacity. The 6 listed vaccines are sold at between Re 1 and Rs 1.50. For vaccine companies, big and small alike, making money at such price points, after high import duties on raw materials, most of which have to be imported, and an expensive production and distribution process, is getting to be a near impossible proposition.

?Pricing is the greatest challenge faced by vaccine manufacturers. The industry is volume driven. The low cost?high volume model creates margin pressures. Alongside that, monitoring and managing the very specific, temperature regulated supply chain is a major challenge for vaccine manufacturers,? says Dipta Chaudhury, programme manager?South Asia and Middle East, Pharma and Biotech Practice, Frost & Sullivan.

A direct impact of this business model is being felt on the industry?s R&D capabilities. With margins at a minimum, most companies find it impossible to take from profits and pour it back into research. External funding through loans or private funds is not readily available or practical.

?It is up to emerging nations to solve the problems that are unique to them. Large multinationals do not bother about diseases such as say for instance, chikungunya; R&D for such diseases is expensive. Institutional loans come at very high interest rates and funds from private equity and venture capitalists are hard to wrestle out, given the low return on investments and five to six years of gestation. Add royalties to that, and it makes it impossible for most home grown companies to innovate,? says GS Reddy, a senior official with vaccine manufacturer India Immunologics.

Shortfall in investments for R&D is felt not only by private companies, but in building government held infrastructure as well. Poonawalla of Serum feels that several companies have strong capabilities but are not being backed with the number and quality of clinical centres required for meeting international standards. ?Testing facilities in Delhi needs investment and expansion as volumes are increasing and existing capacities are not enough each batch sent to government labs in Delhi need to be checked before being released in market,? he says.

The Centre, through department of biotechnology had allocated Rs 902 crore for various projects for biologics production in 2009-10. This allocation for 2010-11 was Rs 1,200 crore. ?There is inadequate private funding leading to significant dependence on government for the funds. The private public partnership or partnerships between industry and the academia for basic research are still in the nascent stage and limited. However, the government is encouraging private sector to invest in R&D. There is also a push for building of many bio-tech parks in all major cities to ramp up the research in this area,? says Sanjay Singh, associate director, KPMG.

Vaccine makers are also battling with a consumption issue where in, the lower socio-economic stratas do not see the need for vaccination, particularly for diseases such as H1N1, which are outside the six specified by the government, and the higher strata displays low trust in Indian products. ?Tier II and III consumers are rarely willing to spend on vaccines outside the government programme. Customers in the big cities have been observed to choose international companies such as a GlxoSmithKline over Indian manufacturers due to a perception of these being safer and more regulated,? says Chaudhury from Frost & Sullivan.

In a bid to remedy this dire situation faced by the industry, five major vaccine manufacturers including Serum Institute, Bharat Biotech, Panacea, Shanta Biotech and Biological E, formed the Vaccine Manufacturers Association (VAM) earlier this month. The group plans to to lobby for an allocation of at least 10% of the healthcare budget for vaccine purchase and an increase in public healthcare aid which is currently less than 1% of the GDP.

In addition, the group will also work to bring the vaccination programme under the authority of Drugs Controller General of India (DCGI), the Central Research Institute (CRI), Kasauli, and the National Institute for Biological Standards and Control (NIBSC), so as to get rid of bureaucratic and political interventions.

Trying to get the ministry to add new vaccines in the list of vaccine preventable infectious diseases under the national immunisation programme,charting out plans for increasing awareness on the value of vaccines amongst people and on contributing to healthcare through recommendations on policies, will feature in its other plans.