Wednesday, 11 November 2015

Pfizer/Biovac deal potentially good for everyone

This month Pfizer announced a deal with Biovac that would see it transfer skills and technology and license the manufacture of its Prevnar 13 vaccine in South Africa for ultimate distribution throughout Africa. In this play Pfizer is the well known global pharmaceutical and lesser known Biovac is a South African company set up to boost local pharma capability to address severe local needs. Also important is that South Africa’s government has a major stake in the ownership of Biovac and that Naledi Pandor (the Minister of Science and Technology) has been vocal in commenting on the deal.

On the face of it, this deal seems to be a very good one.

For South Africa it has real potential for positive outcomes; it will create jobs, it will upskill workers, it has the potential to reduce the cost of the vaccine and give greater access to it, it could enable Biovac to become the access point for those vaccines into Africa, it is sustainable in the sense that the need is great and competitive drugs appear to be few, it has the potential to reinforce a positive message to other pharmaceuticals that South Africa is a viable destination for trials and drug manufacturing (not that the likes Adcock Ingram or Aspen have done a bad job) despite the restrictions on IP developed locally through public funds and exchange control, and it is welcome news (politically and economically) in contrast to South Africa’s recent woes reflected by the continuing fall in the rand over the past few years.

So what’s in it for Pfizer? Why would Pfizer transfer manufacturing skills, risk the fact that any IP it helped developed locally may never be able to leave RSA, help reduce the cost of a drug that it has spent the R&D developing (and still appears to be under patent) and therefore possibly reduce potential revenue streams and help create another drug manufacturer which could potentially produce generics in competition to it? Afro Leo suggests that there is quite a lot in it for Pfizer.

This blog has reported for some time on the pressure that has come to bear on big pharma to provide solutions for developing and least developed countries which account for a considerable percentage of the need for critical drugs. This pressure has also spilled over to the patent system per se and has called to question the very idea behind intellectual property (upon which big pharma rely) and its place in developing countries. Added to that is the idea of integrated reporting for sustainable businesses where value is not just measured on bottom line profits but in the concept of value to society and corporate responsibility, and an increasing general awareness by the consumer in supporting companies and brands who do so, and are seen to do so. This deal creates material for Pfizer to use to address these issues.

There are bottom line reasons too though. A decline in the rand makes imports expensive which will affect current demand for the drug based on affordability. Creating a manufacturing partner in South Africa therefore starts to make sense. Not only does the initial $ investment go much further but it creates potential for drugs to be exported into Africa more cheaply. In addition the deal creates options for Pfizer once the drug goes off patent. The potential cheap production of off patent drugs under a locally known brand name that would have captured market share, should be a shrewd move to ensure longer term demand, not only for Prevnar 13 but potentially others.

Admittedly, one would have to consider the close detail of the deal especially on the extent and effectiveness of the technology transfer and any competition restraints. Is Biovac likely to be beholden to license to use the name and a supply of the active ingredient even post the technology transfer, for example? There are other risks too such as labour unions, quality and supply but overall, the deal does seem encouraging.

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