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The global pandemic threat is growing

An ability to create globally worthy products could open up export opportunities for India’s domestic vaccine manufacturers generating global welfare effects during times of national health crises

analysis Updated: Oct 12, 2018 13:24 IST
pandemic
A patient with a suspected case of swine flu at a screening centre in New Delhi(Hindustan Times)

As of October 8, 2018 Gujarat had reported more than 50 new cases of swine flu. Bengaluru was on a high alert after 46 new cases were reported within the previous few weeks. India’s latest swine flu scare now has also spread to states such as Maharashtra, Punjab and Uttar Pradesh, while 29 people have tested positive for Zika virus in Rajasthan in an associated public health crisis. While national and state administrations seem alert to prevent the recurrence of either pandemic in a way H1N1 struck India in 2009-2010, it is worthwhile to remind healthcare policy makers of findings from a recent paper that we wrote and published in this context.

We find in this study that when the 2009-2010 H1N1 pandemic struck, it was domestic vaccine manufacturing firms in India that seized the opportunity and entered the Indian market with new products . They appropriated a sizeable share of the increase in the market away from multinational firms (who had a dominant market share pre-pandemic), and this effect lasted beyond the pandemic. In addition, we also found that while the Government of India tried to incentivise R&D in H1N1 influenza vaccines among domestic vaccine manufacturing firms by issuing advanced market commitments (AMCs) or soft loans, these actually had limited effect. Additionally, when we tried to match the products that were launched by domestic firms with their patents or publications, we couldn’t make much progress.

While our findings have to be treated with caution since they are based on data from the private vaccines purchasing market in India, we also discuss how during such times of international health crisis, foreign multinational firms are under pressure to supply vaccines globally (including donating vaccines to the least developed countries) from multilateral health organisations such as WHO (apart from the incentives of higher purchasing power in their home markets). This could translate into voids in the markets of emerging economies such as India, Indonesia, China and Brazil, creating a business opportunity for the entry of domestic firms conditional on their prior existing manufacturing capabilities in other vaccine markets.

That said, a few policy lessons immediately arise from our findings given the latest swine flu and Zika crisis that may escalate in India. First, it may be useful to set up systems to track retrospectively (and not just prospectively) health outcomes of patients who are detected for swine flu or Zika and monitor their recovery post administration of vaccines. Second, while as a policy instrument, it may appear an attractive option for the government to issue a commitment in advance to domestic firms to partly buy newly developed vaccines at pre-determined prices (should they come up with new vaccines given a health shock), it may ultimately not pay off for either side given that existing demand shifters would have already created the necessary incentives to spur firm innovation. In addition, enforcement of AMCs is something the regulator should carefully pay attention to along with making these contingent on demonstration of fundamental upstream research happening within a firm. Third, domestic vaccine manufacturing firms may want to treat this latest episode as a reminder for engaging in more basic research and investing in discovery of vaccines that are not just new to the firm but also new to the world.

While India’s domestic vaccine industry continues to progress on a growth trajectory, in other emerging market economies like Brazil or Indonesia the sector maybe lagging behind. An ability to create globally worthy products could thus open up export opportunities for India’s domestic vaccine manufacturers generating global welfare effects during times of national health crises. This will also embolden pandemic preparedness that has concerned philanthropists such as Bill Gates (who has discussed the need for an international pandemic preparedness effort in his recent Shattuck Lecture), and India can take a lead in this effort.

Chirantan Chatterjee is a faculty member at IIM Ahmedabad, where he holds the ICICI Bank Chair in Strategic Management.

The article has been co-authored by Arzi Adbi (Doctoral Student, INSEAD) and Anant Mishra (Associate Professor, Carlson School of Management, University of Minnesota)

The views expressed are personal

First Published: Oct 12, 2018 11:42 IST