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25/07/2024by EOS Intelligence EOS Intelligence No Comments

Lessons for Africa: To-do’s from India’s Successful Vaccine Journey

India, still a developing country, has achieved tremendous success as the world’s largest vaccine producer. This accomplishment leads to many lessons that India can offer to other low- to middle-income economies across the globe, such as Africa, looking to ramp up their vaccine industry. The African continent should capitalize on this opportunity and seek guidance from India, considering that India’s pharma and vaccine sectors are four to five decades ahead of the African continent.

How did it all begin for the Indian pharma and vaccine sectors?

The Indian pharma industry is more than a century old, with the first pharmaceutical company founded in 1901 and started operations in Calcutta. Till 1970, the Indian pharmaceutical industry comprised foreign players with very few local companies. However, driven by the purpose of the Swadeshi (meaning ‘of one’s own nation’) movement during the pre-independence era, some pharmaceutical manufacturing firms were founded in India. Established in 1935 in Bombay, Cipla was one such company, which is now a multinational pharmaceutical firm.

Apart from pharma companies, the presence of the Bombay-based Haffkine Institute (founded in 1899) and Coonoor-based Pasteur Institute of India (founded in 1907) solidified the country’s vaccine industry foundation. These institutes manufactured anti-plague, anti-rabies, smallpox, influenza, and cholera vaccines, among others. Nevertheless, the British colonial government in India withdrew the funds during World War II, which led to the subsidence of a few of these institutes.

The Indian pharma industry’s dynamics began to change, with recognition given to process patents instead of product patents. This created an opportunity for local pharma companies to reverse-engineer branded drugs’ formulations. It also allowed the creation of low-cost medicines since the producers did not have to pay royalties to original patent holders. It fueled the generics market growth in India, along with improving the capabilities of the manufacturers to produce high volume at low cost, thereby increasing the cost-effectiveness of the products. This was followed by the exit of foreign pharma players from the country with the removal of the Indian Patents and Design Act of 1911 and the implementation of the Government’s Patents Act of 1970.

This article is part of EOS' Perspectives series on vaccines landscape in Africa. 
Read our other Perspectives in the series:

Vaccines in Africa: Pursuit of Reducing Over-Dependence on Imports

Why Can India’s Vaccine Success Story Be a Sure Shot Template for Africa?

The structural change in the Indian pharma industry was evident from the drastic increase in the number of domestic companies from 2,000 in 1970 to 24,000 in 1995, leapfrogging 12-fold in a span of 25 years.

Additionally, driven by public sector investment and the central government’s prioritization of localized vaccine and drug production, India had over 19 public sector institutes and enterprises by 1971 that produced vaccines and generic drugs. These public sector institutes included Gurgaon-based Indian Drugs and Pharmaceuticals Limited and Pune-based Hindustan Antibiotics Limited.

Some pharma companies entered the export market owing to the 1991 liberalization of the Indian economy, the experience gained from producing cost-effective generic drugs, and global expansion. With this step, the Indian vaccine industry forayed into the international market between 1995 and 2005.

The reintroduction of the product patent system encouraged foreign pharma firms to return to India as the 2005 Patents (Amendment) Act prevented domestic pharma companies from reverse engineering formulations of branded medicines protected by patents to produce generic drugs.

In the pursuit of staying competitive with their foreign peers, Indian pharmaceutical companies focused on improving R&D thereby increasing investments in this space from 2005 to 2018.

What did India do right in vaccine manufacturing?

From investing in education and R&D to making necessary policy changes conducive to the growth of a sustainable and resilient vaccine sector, the Indian government has always been at the forefront of reducing overall pharmaceutical costs and nurturing the pharma industry.

Experience, expertise, and conducive policies enabled India to achieve cost-effectiveness

Indian government’s concrete action in strategy and policy-making has empowered the pharma industry to grow in a conducive environment. These conditions enabled the sector to become cost-effective by producing low-cost generic medicines and vaccines at high volumes.

This is evident from the fact that Invest India, the country’s investment promotion agency, states that producing pharmaceuticals in India is 33% cheaper than in Western markets due to labor costs being 50-55% lower. The cost of conducting clinical trials in India is also much lower, approximately 40%-80% cheaper when compared to Western markets, according to a 2010 article by the International Journal of Pharmacy and Pharmaceutical Sciences.

Indian pharma firms sometimes reverse-engineer medicines produced by companies making branded drugs and sell the formulation at a much-reduced price. The unique selling proposition of the Indian pharma industry has always been high volume coupled with low costs to make its products more affordable and accessible to patients across low- to middle-income strata of society.

Investments towards a robust scientific workforce helped reduce API import dependencies

Backed by the central government’s prioritization of domestic vaccine and drug production, some pharma companies in India started manufacturing raw materials or key starting materials to minimize the dependencies on API imports.

Other initiatives to strengthen the foothold of the Indian vaccine sector were directed towards building a solid talent pool of professionals who could develop drugs and vaccines independently rather than copy the processes from branded medicines. A result of this approach was the Lucknow-based Central Drug Research Institute (CDRI), which was founded in 1951 and continues to be one of the leading scientific institutes in India.

With the creation of the Department of Biotechnology (DBT) in 1986, India took another massive step towards progressing its pharma industry. Since then, DBT has been at the forefront of providing financial and logistical support for vaccine development and production using new and advanced technologies. The organization is also involved in creating biotech training programs for universities and institutes across India.

Lessons for Africa To-do’s from India’s Successful Vaccine Journey by EOS Intelligence

What can Africa learn from India’s experience?

It would be too ambitious to anticipate Africa replicating the Indian vaccine sector’s strategies and mechanisms in every way and detail. Although the two regions share enough similarities regarding disease profiles, geographies, climates, economies, etc., differences in competition, technology, and market dynamics cannot be ignored.

These differences could benefit and challenge the vaccine sector in Africa. The region must prioritize the creation of a resilient, sustainable, and robust life sciences ecosystem that will support the pharma, medical technologies, and vaccine sectors in the long run.

Development of a strong life sciences ecosystem that nurtures the overall vaccine sector

Africa needs to form close ties with multiple supporting networks, similar to how the Indian vaccine producers networked with the local biosciences ecosystem. These supporting networks must be associated with the production of multiple pharmaceutical products for a region, building a strong scientific labor force alongside reinforcing its regulatory system.

Higher level of autonomy for the leadership teams of government-led vaccine facilities

One of the key learnings from the pitfalls of India’s vaccine sector is that the executive/leadership teams of government-owned vaccine facilities should receive a higher level of autonomy. Interferences from government agencies should be avoided to the maximum extent possible. A classic example from the Indian market is the 2020-2021 downfall of HLL Biotech Limited which could not produce any COVID-19 vaccine owing to government interferences in the technology upgrade and production-related decisions.

EOS Perspective

For the African vaccine development and production industry to embark on a path of growth, it is imperative to learn from the valuable lessons available. However, with limited financial resources and insufficient infrastructure, it is crucial to prioritize the actions taken to ensure maximum progress.

To start building a favorable environment, it might be beneficial for the African markets to develop policies emphasizing process patents more than product patents, at least in the initial few years. This could be akin to regulations in the Indian pharma sector of 1970-1995, which proved quite effective and could fuel the growth of the generics market in Africa. Creating such an environment would waive off patent protection of branded drug manufacturers initially so that the local pharma companies can produce medicines at a low cost without paying royalties for copying the drug formulations of the branded drugs. Therefore, Africa can focus on building their generics market first and utilize the profits from there to reinforce the vaccine industry.

Secondly, African governments should initiate expanding the number of technology transfer hubs across the continent that focus not only on mRNA-based vaccines but also on newer DNA-based vaccines that are more suited for the African climate. Partnerships and collaborations with research institutes that are already working towards this goal can be a good first step.

One crucial step, which should not be delayed, is building a robust, skilled workforce to drive the sector development. Unfortunately, most African countries’ current education curricula are not in sync with the continent’s needs for vaccine manufacturing. Therefore, Africa urgently needs investment in education from various sources to develop the backbone of the vaccine industry so that the new education system can produce employable graduates in this field. It is important to note that the African governments should take a significant portion of this responsibility.

To begin with, new graduates can be something other than tertiary-educated, highly specialized professionals, such as PhDs. Rather than that, some form of vocational training in vaccine manufacturing or bachelor’s programs in relevant subjects, such as pharmacy, chemistry, etc., would help produce sufficiently skilled labor. This manpower can work and train further on the job under the guidance and supervision of foreign high-level talent and local high-level scientists who are present in the continent relatively sparsely.

These vocational programs should be designed in a collaborative effort between educational institutions and the existing and new vaccine manufacturing facilities in Africa. This would increase the chances of the African manufacturing facilities absorbing the graduating trainees.

India’s education evolution demonstrates the significance of having domestically bred relevant talent to augment and strengthen its own pharma and vaccine sector. This can empower Africa to curb the costs associated with foreign talent hunting and be more resilient to situations such as staff shortages, foreign staff availability fluctuations, etc.

Moreover, it is the responsibility of African governments to support the creation of jobs in vaccine manufacturing and R&D to attract the newly-trained workforce. A proven approach to this is to offer incentives for employing local talent to foreign and domestic investors who intend to set up vaccine facilities in the region. The incentives could range from tax rebates, exemptions, or credits, to offering employee training grants, subsidies for insurance coverage, etc. If this can encourage the creation of jobs in the sectors, young Africans will likely be keen on enrolling in related vocational programs.

Looking at the long-term objectives for the continent’s vaccine industry path, Africa’s primary aim should be to meet its own domestic vaccine needs in terms of both volume and disease spectrum.

Africa can learn critical lessons from India’s strengths and weaknesses in the vaccine sector. The weight of kick-starting the industry development inevitably lies on the African governments’ shoulders, and the sector will not develop on its own. It is high time for stakeholders, such as state governments, regulatory bodies, institutes, pan-African organizations, and local pharma companies, to speed up the process of absorbing and implementing these lessons. It is the only way to achieve the goal of 60% domestic vaccine production by 2040.

18/07/2024by EOS Intelligence EOS Intelligence No Comments

Why Can India’s Vaccine Success Story Be a Sure Shot Template for Africa?

Africa is currently facing significant challenges related to limited accessibility to vaccines as well as ongoing vaccine hesitancy. African CDC has identified these problems and is taking concrete steps to achieve its 2040 target of 60% of vaccines available on the continent to originate from domestic production. India is one of the key countries invested in the growth of Africa’s healthcare sector both financially and logistically. Due to similar geographies, climates, disease prevalence, and economies, Africa could take guidance, collaborate, or replicate Indian vaccine manufacturers’ strategies and mechanisms to scale up its vaccine sector.

Africa has one of the lowest average vaccine administration rates globally

Unbalanced access to vaccines in Africa compared to other regions became quite vivid during the COVID-19 pandemic. Africa’s average number of coronavirus vaccine doses administered per 100 people was 54.37 as of March 15, 2023. Seychelles administered the highest number of vaccine doses at 205.37 and Burundi the lowest at 0.27.

In contrast, the world average stood at 173, with high-income countries such as the USA and Canada administering 191 and 258 vaccine doses per 100 people, respectively. Interestingly, Cuba, despite being an upper middle-income economy, administered 385, a higher number of doses per 100 people than some high-income countries.

Even some low-income economies such as Vietnam (276), Bhutan (264), Bangladesh (218), Nepal (213), and Sri Lanka (184), among others, administered a higher number of coronavirus vaccine doses than the world average (173), and far more than Africa’s average.

These stark variations in the vaccine administration rates across countries could be attributed to the lack of easy accessibility, especially in Africa, apart from other factors such as vaccine hesitancy.

Africans’ vaccine hesitancy slows down the uptake of vaccination

Vaccine hesitancy is caused by several factors such as personal beliefs, misinformation or myths, healthcare infrastructure and access, religious and cultural beliefs, and vaccine safety concerns. These are typically the main reasons for vaccine hesitancy according to an October 2023 article published by ThinkGlobalHealth, and several of these reasons are likely to apply to the African continent.

In addition to these, another critical factor that cannot be ignored is people’s lack of trust in the health ministries, a relevant aspect in some African countries such as South Africa. This was largely due to the ministries’ involvement in procurement corruption of COVID-related aid according to an article published by GlobalData in November 2023.

Africa’s low vaccine administration rate is driven by limited accessibility

One major reason for the vaccine’s low administration rate in Africa is the limited accessibility to vaccines. This has been an ongoing issue on the continent and was not just limited to pandemics such as COVID-19 and Ebola.

The African continent is overdependent on vaccine imports, with 99% of its vaccine needs being satisfied from abroad. With a total of 13 operational production facilities across the continent, the current vaccine manufacturing industry is in its infancy in Africa and produces 1% of the continent’s vaccine supplies.

African countries have recognized this issue and begun working towards its goal of meeting 60% of the continent’s vaccine needs domestically by 2040, with interim targets of 10% by 2025 and 30% by 2030.

This article is part of EOS' Perspectives series on vaccines landscape in Africa. 
Read our other Perspectives in the series:

Vaccines in Africa: Pursuit of Reducing Over-Dependence on Imports

With some local talent available, Africa needs the right development template

While the local vaccine industry is underdeveloped, to say the least, the continent is not entirely without the talent required to produce home-grown vaccines and other pharmaceutical products such as test kits. For instance, Senegal-based Pasteur Institute developed a US$1 finger-prick at-home antigen test for COVID-19 in partnership with Mologic, a UK-based biotech company. Although the funding came partially from the UK, local talent was predominantly utilized.

To establish a sustainable vaccine sector, Africa does not need to reinvent the wheel. It could utilize lessons and success stories of other countries that have built this industry and share similarities with the African continent.

India is one such country with a vast size, diverse cultures, geography, and administrative structures under one roof, and has a tropical climate and disease profile similar to those in Africa. Additionally, India’s symbiotic relationship with the African healthcare sector would also play a significant role in empowering Africa to leverage the expertise of the Indian vaccine sector. This could be a step in the right direction for the African continent to achieve vaccine sovereignty.

Why Can India’s Vaccine Success Story Be a Sure Shot Template for Africa by EOS Intelligence

Africa’s partnership with India in healthcare is not new

Africa has a long-standing healthcare partnership with India, as the latter has been the largest supplier of generic medicines to Africa. Additionally, some US$3.4 billion worth of pharma products, i.e. close to 20% of India’s total pharma exports, went to African countries as of 2018. In 2020-2021, India’s pharma exports to Africa amounted to US$4.3 billion as per the Pharmaceuticals Export Promotion Council of India (Pharmexcil).

Between 2010 and 2019, India was also the third-largest contributor to Africa’s healthcare investment landscape, after the UK and the USA. During this period, India invested around US$210 million out of a total of US$1.1 billion in global investments into Africa’s healthcare sector, accounting for a 19% share.

In the past, African pharma companies have relied on Indian organizations to pivot and streamline their business in difficult times. For instance, South Africa-based Aspen Pharmacare could not sell a single dose of its COVID-19 vector vaccine owing to multiple factors, such as the rising popularity of mRNA vaccines. Ultimately, the company partnered with the Serum Institute of India (SII) in August 2022 to produce its vaccines to minimize business loss and idle production capacity. This is just one example showcasing opportunities where African vaccine producers collaborated with Indian vaccine makers. This kind of collaboration can also become a source of guidance and knowledge on how to create own sustainable ecosystem for vaccine production.

Collaborations between Africa and India have also extended beyond adverse situations. One example of this is a partnered research to produce a DNA-based dengue vaccine. Scientists from Bangalore and Goa in India and Nairobi and Cameroon in Africa have been working together in a partnership called the India-Africa Health Sciences Collaborative Platform (IAHSP), set up in 2019. The partnership results from a collaboration between India’s ICMR (Indian Council of Medical Research) and the African Union to create this DNA-based dengue vaccine, among other research work involving antimicrobial resistance, per a January 2022 Springer Nature article.

Furthermore, in December 2020, the Indian Healthcare Federation (NATHEALTH) and the African Health Federation (AHF) partnered to foster investment in healthcare and thus promote business opportunities in healthcare between India and Africa.

India’s pharma industry has merits to learn from

The Indian vaccine production sector is rapidly gaining steam in the global market and outpacing multinational players in this industry. A few prominent Indian vaccine producers, such as SII, Bharat Biotech (BBIL), and Biological E, have captured a considerable market share globally.

Interestingly, over 60% of the global vaccine needs in terms of volume are being satisfied by only five producers globally. Three of these five producers are based in India: Pune-based SII, Hyderabad-based BBIL, and Mumbai-based Haffkine. SII tops the list of these five global producers with a 28% volume share globally, and BBIL (9%) shares the third spot with Sanofi, followed by Haffkine (7%), as of 2019.

For many years, India has been supplying cost-effective and high-quality generic medicines and vaccines, which has earned the country the title of ‘pharmacy to the world’. The title is not exaggerated, as India alone accounts for 62% of global vaccines and 20% of global generic drugs’ production by volume as of 2023. The Indian pharma sector holds the third rank by production volume and tenth by value globally.

With an 18% share of pharmaceutical exports and vast needs, Africa is the second-largest importer of pharmaceutical products from India as of 2019.

Indian vaccines’ success in Africa proves that Indian producers understand African needs

In its quest to develop its own vaccine production sector, Africa can learn a host of aspects of vaccine production from India. This includes but is not limited to the cost-effectiveness of vaccines against diseases such as COVID-19, rabies, diphtheria, pertussis, tetanus (DPT), human papillomavirus (HPV), malaria, Ebola, and meningitis. India is four to five decades ahead of Africa in vaccine manufacturing and has already done its homework on how to do it right. That’s a useful source of knowledge for Africa’s budding industry, especially since Indian-made pharma products tend to align well with the needs of the African continent.

Serum Institute of India’s (SII) foothold in Africa

SII is now the largest vaccine producer by the number of doses manufactured and sold worldwide (over 1.6 billion doses across 170 countries in 2020), including for polio, diphtheria, tetanus, pertussis, haemophilus influenzae type b (Hib), BCG, r-Hepatitis B, measles, mumps, rubella, as well as pneumococcal and COVID-19 vaccines. According to estimates, nearly 65% of children across the globe receive at least one vaccine produced by SII.

SII has a strong foothold in Africa, with several of its vaccine products being extensively used or developed specifically for the continent’s needs.

MenAfriVac, manufactured by SII, is a vaccine to prevent meningitis and was rolled out in Africa in 2010. The vaccine was developed specifically to curb the spread of meningitis in Africa to cater to the vaccine needs of its population. The price of the vaccine is less than US$0.50 per dose, with an efficacy of 52% among 12–23-month-old children and 70% among older children and adults. Thanks to the vaccine, over 152 million people were inoculated by MenAfriVac by the end of 2013, enabling the elimination of meningitis epidemics in 26 African countries.

Another example of an India-made vaccine to particularly reduce Africa’s disease burden of malaria and cater to its people’s vaccine needs is R21/Matrix-M. SII, along with Oxford University, has produced this malaria vaccine using the technology of Novavax, a US-based biotech company. The vaccine has been approved for use by some African countries’ regulatory authorities, such as Ghana, Nigeria, and Burkina Faso, as of December 2023. According to a January 2024 press release by SII, the vaccine showed efficacy of around 78% in the age group between five- and seventeen-months children in Burkina Faso, Kenya, Mali, and Tanzania over the first year. The company is planning to roll out the 25 million vaccines produced in the coming four to five months.

In December 2022, SII acted rapidly on the Sudan Ebolavirus outbreak in Uganda by sending over 40,000 doses of the investigational ChAdOx1 SUDV vaccine in a record time of 80 days after WHO declared the epidemic.

These are some examples showcasing the fact that SII, along with other Indian producers, understands Africa’s vaccine needs, which is evident from the success of these vaccines in Africa. Consequently, it makes logical and economic sense for Africa to learn from Indian vaccine manufacturers to develop low-cost, effective vaccines.

Apart from successfully selling its vaccines in Africa, SII also actively contributes to the knowledge transfer into the continent. In January 2024, SII partnered with the Coalition for Epidemic Preparedness Innovations (CEPI) to foster low-cost vaccine production in Global South countries, including Africa (also comprising Latin America and the Caribbean, Asia (excluding Israel, Japan, and South Korea), and Oceania (excluding Australia and New Zealand)) to curb the outbreak of life-threatening diseases. CEPI is a global organization formed as a result of an international collaboration between public, private, philanthropic institutions and NGOs.

CEPI has three other members apart from SII: South Africa-based Aspen Pharmacare, Senegal-based Institut Pasteur de Dakar, and Indonesia-based Bio Farma. With this partnership, CEPI intends to capitalize on SII’s expertise in making affordable, cost-effective vaccines in record time. In this pursuit, CEPI is investing US$30 million so that vaccine developers who are already partners of CEPI can expedite technology transfers to SII within days or weeks of any outbreak. This will enable SII to produce vaccines against the impending disease.

Bharat Biotech’s (BBIL) foothold in Africa

With over 145 global patents and a portfolio comprising over 16 vaccines, BBIL has sent over 6 billion doses of vaccines to 125 countries worldwide. BBIL has produced vaccines against influenza H1N1, rotavirus, Japanese encephalitis (JENVAC), rabies, chikungunya, zika virus, and cholera. The company is also the creator of the world’s first tetanus toxoid conjugated vaccine for typhoid. In addition to these, BBIL has manufactured WHO pre-qualified vaccines, such as BIOPOLIO, ROTAVAC, ROTAVAC 5D, and Typbar TCV against polio, rotavirus, and typhoid infections, respectively.

BBIL has also been offering its products to Africa. In one of the recent examples, the company delivered its rotavirus oral vaccine, ROTAVAC, to Nigeria to immunize the country’s children in August 2022. The vaccine is expected to minimize the occurrence of the disease and death due to rotavirus among Nigerian children below the age of five years by at least 40%, according to research by the Johns Hopkins Bloomberg School of Public Health.

Another example of a vaccine made by BBIL that is aligned with the needs of the African population is MTBVAC. In March 2022, the company announced its partnership with Spain-based biopharmaceutical company Biofabri to develop, produce, and distribute MTBVAC, a novel TB vaccine. Phase 3 trial is currently underway in TB-affected regions of Sub-Saharan Africa such as South Africa, Madagascar, and Senegal. With 25% each, Sub-Saharan Africa and India account for the highest TB burden across the globe. The vaccine is being developed to target TB in these susceptible regions to eradicate the disease.

Several other Indian manufacturers have rolled out successful vaccines against various diseases in Africa that have significantly reduced the disease burden in the region.

EOS Perspective

Achieving 60% local vaccine production within 15 years will be possible only if Africa chooses a robust role model to learn from. India stands out as possibly the only near-perfect choice for that. To foster the development of a seamless and sustainable vaccine ecosystem, Africa should replicate, take guidance, and collaborate with Indian manufacturers as much as possible.

The world has evolved and many steps taken by India in the past cannot be directly transplanted into the current African scenario. However, India’s approach to building self-reliance in pharmaceutical production can undoubtedly offer valuable lessons. Direct know-how and technology transfer, collaborations, approach to talent training, production facilities management, procurement handling, supply chain management, licensing, and IP protection are critical aspects in which Africa could utilize India’s expertise and experience in vaccine making.

By choosing India as a role model and emulating its focus on nurturing a competitive pharma manufacturing industry, Africa could take a significant step towards achieving the goal of self-sufficient vaccine production.

13/06/2024by EOS Intelligence EOS Intelligence No Comments

The Rise and Fall of Cue Health: Market Lessons and Implications

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Cue Health, the portable COVID-19 test maker, reached its zenith during the pandemic’s peak, securing investments and contracts from both government and private sectors. The company was lauded for its user-friendly, rapid-response COVID-testing kits. At its peak, Cue Health’s products were seen as game-changers, with the potential to revamp the healthcare sector by providing accurate at-home diagnostic results within minutes. However, sales of these testing kits plummeted before Cue Health could diversify and establish other revenue streams, leading to a series of layoffs and, ultimately, the shutdown of its operations.

As the public focus shifted away from the pandemic, so did the demand for testing. For Cue Health, the COVID-19 test was essentially their sole product, and this decline in demand marked the onset of turbulent times.

In the past few years, Cue Health struggled to maintain its market position and technological edge, focusing on restructuring and streamlining its operations. The company engaged in talks with potential investors and stakeholders, which did not materialize. It also implemented several cost-cutting measures to remain afloat amid financial turbulence, but these were insufficient to counter the broader economic challenges that Cue Health faced. Its share prices declined steadily, and several rounds of layoffs followed.

The final blow came when the FDA issued a warning letter and a safety alert on May 10, 2024, asking users and healthcare providers to discard Cue Health’s product. The FDA discovered unauthorized changes made to Cue Health’s COVID-19 testing kits. This ultimately led to Cue Health’s winding down operations and filing for bankruptcy in May 2024 after laying off all its employees.

Cue Health’s business failures: A look at three critical oversights

Absence of recurring revenue streams: The company’s COVID-19 testing device was a one-time purchase, and it did not need any consumables or refills. This prevented the development of a recurring revenue model, such as subscription-based services or ongoing product sales, which is essential for financial stability and sustained revenue stream. Dependence on the one-time test kit sales implied that once its demand subsided, there was no consistent income to support operations.

Top-heavy business model: Cue Health employed many individuals in leadership positions, a common mistake that start-ups tend to make. This resulted in high salary costs, even amidst financial turbulence, eventually leading to several layoffs.

Moreover, the company struggled with financial management and strategic planning. Efforts to engage with investors and stakeholders did not yield results, further compounding the company’s financial crisis.

Narrow focus: Cue Health’s business model heavily depended on a single product, the COVID-19 testing kit, which nearly constituted its complete product portfolio. This singular focus left the company vulnerable to the declining demand for COVID-19 testing kits, and it was not able to pivot quickly to diversify product offerings. Moreover, the company was also unprepared for post-pandemic market realities, which led to its decline.

Cue Health’s wind down: Repercussions for diagnostics sector and investors

Regulatory and compliance implications: Cue Health’s regulatory challenges highlight the critical need for compliance and transparency in product modifications. Consequently, other companies in the diagnostics and medical devices sector may now encounter heightened regulatory scrutiny by the FDA. To stay afloat and avoid similar pitfalls, these companies must invest more in compliance, ensuring all products meet regulatory and quality standards. This could result in better overall product quality and safety across the industry, although at a higher cost to the device makers.

Industry lesson: Cue Health’s trajectory – from swift growth to sudden downfall – serves as a case study for industry players to understand the risks associated with over-reliance on a single product and the importance of portfolio diversification. Companies operating in the diagnostics sector should leverage the company’s experience to reevaluate business strategies and enhance risk management practices.

Investor sentiment: Cue Health’s downfall, despite the substantial funding and a successful IPO, could lead to more cautious investor behavior and diminished confidence in healthcare start-ups, particularly those with a singular product focus. For future investments, investors may demand more scrutiny and rigorous due diligence. Consequently, companies may be pressured to build diversified product portfolios and more sustainable business models to mitigate risks associated with market fluctuations and regulatory challenges.

EOS Perspective

Cue Health’s shutdown highlights the volatility and unpredictability of the MedTech sector, underlining the importance of regulatory compliance, portfolio diversification, and market adaptability. While innovation and growth are imperative for staying competitive in the diagnostics sector, striking a balance with robust financial planning and risk management practices is equally important.

For other diagnostics companies, Cue Health’s downfall serves as a cautionary tale, emphasizing the importance of building sustainable business models that can withstand market fluctuations and external pressure. For investors and stakeholders, it accentuates the requirement of stringent due diligence and risk assessment for high-stakes investments in emerging health technologies.

Despite Cue Health’s closure, its journey is important. The company leaves behind a legacy of innovations, diagnostic tools, and resourceful healthcare delivery models. Other diagnostics companies can build on Cue Health’s technological foundation, learning from its experiences to navigate the complex healthcare technology landscape.

21/03/2024by EOS Intelligence EOS Intelligence No Comments

Digital Therapeutics: The Future of Healthcare?

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Although the COVID-19 pandemic seems to be done with its rampage, many people still opt to access all kinds of services, including healthcare, from the comfort of their homes. As this trend is expected to continue, the global digital therapeutics market, with its projected growth at a 20% CAGR from 2022 to 2035, is one important sector healthcare firms should focus on right now.

Digital therapeutics (DTx) are digital health interventions or software applications that are clinically validated and designed to treat or manage medical conditions. They can be used alone or in conjunction with traditional medical treatments.

The Digital Therapeutics Alliance categorizes DTx products into three types: disease treatment, disease management, and health improvement.

Examples of DTx include a solution to manage chronic musculoskeletal pain developed by Kaia Health, a biotechnology company in New York. This motion analysis tool assesses and guides patients’ progress during physical therapy and tailors treatment to individual requirements.

Similarly, Clickotine from Click Therapeutics, a company also based in New York, uses AI to help people with nicotine addiction. This solution offers a personalized plan fully integrated with eight weeks of nicotine replacement therapy, including options such as gum, patches, or lozenges. It tracks critical aspects such as daily cigarette counts, craving triggers, craving times, etc. A trial study conducted by the company in 2016 claimed that 45% of Clickotine users were able to quit smoking.

Adoption of DTx is taking off amid increased investments

The commercial development of DTx started around 2015 and, since then, has grown into a global market of considerable size. The total value of global DTx start-ups was estimated at a whopping US$31 billion in 2022, according to a 2022 report published by Dealroom, an Amsterdam-based firm offering data and insights about start-ups and tech ecosystems, in partnership with MTIP (a Swiss-based private equity firm), Inkef (an Amsterdam-based early-stage venture investment firm), and Speedinvest (an Austrian early-stage investor).

The number of people using DTx solutions is expected to increase over the next few years, according to a 2022 report by Juniper Research, a UK-based research firm. The study found that there were 7 million DTx users in the USA in 2020, a number expected to rise to around 40 million in 2026.

This increase can be attributed to the fact that DTx solutions are highly accessible and distributable due to an increase in the use of smartphones. A 2021 report published by Pew Research Center, a US-based think tank, found that 87% of Americans owned a smartphone in 2021, compared to 35% in 2011. With this, more people will be able to access medical care without having to spend more on hospital visits.

DTx applications have also been attracting numerous investors owing to the applications’ cost-effectiveness, ease of distribution, and better accessibility. According to the same 2022 report published by Dealroom, global venture capital funding in DTx witnessed a fourfold increase in 2022 compared to 2017.

All these studies reveal that, despite certain challenges, the DTx applications hold the promise of developing into a practical and affordable means of treating illnesses and conditions that impact large numbers of people.

Regulatory pitfalls present a major roadblock to DTx adoption

One main challenge DTx companies face is the regulatory environment. All DTx products must comply with the regulations of regional agencies such as the FDA, HIPAA, HITECH, etc.

Many US firms initially faced regulatory obstacles and payer resistance around product reimbursement. Before 2017, the US FDA classified DTx solutions as a SaMD (Software as a Medical Device) and, therefore, made them subject to risk assessment (low, medium, or high). Due to this, DTx solutions needed premarket approval and rigorous clinical trial results to get approval.

This has improved with the introduction of the Digital Health Innovation Action Plan by the FDA in 2017. According to the new plan, the FDA will first consider the company producing the solution. If the producer has demonstrated quality and excellence, it can market lower-risk devices with a streamlined premarket review. Post-market surveillance and data collection are also done to evaluate product efficiency.

Similarly, in the EU, DTx is controlled by national competent authorities and governed by the European Regulation on Medical Devices 2017/745 (MDR). However, no specific framework indicates the evidence required for assessing the performance or quality of DTx solutions or their production standards. This means that the member states may interpret the dossier requirements differently, leading to a fractured regulatory environment.

The COVID-19 pandemic has provided companies with some regulatory flexibility, leading to an increase in venture capital funding. In 2020, the federal government in the USA issued a new rule allowing healthcare practitioners to treat patients across state lines, including the use of digital medicine. This can increase access to healthcare, especially in rural areas, and physicians will be able to offer timely care to their patients traveling in a different state.

The FDA has also loosened regulations during COVID-19, particularly for mental health products, with the Digital Health Innovation Action Plan. This was to ensure that patients received timely care even from their homes while reducing the burden on hospitals. It waived certain regulatory obligations, such as the need to file a 510(k) premarket notification during the COVID-19 pandemic. The 510(k) is a submission indicating that a new medical device is similar to something already approved by the FDA (a predicate device) to ensure safety and efficiency. However, finding suitable comparables can be highly challenging in the case of DTx, which is dynamically evolving. This can result in misunderstandings or overlooking of critical aspects of these solutions, leading to uncertainty and delays in the approval process. The waiver of this regulation offers DTx companies some relief in the future.

Digital Therapeutics – The Future of Healthcare by EOS Intelligence

Patient health literacy is a hurdle in the adoption of DTx solutions

A survey by the National Assessment of Adult Literacy (NAAL) in 2003 has shown that only 12% of Americans possess proficient health literacy skills, making them able to find and understand information related to their health. This lack of awareness among patients can also impede the ease of applying DTx products.

Patient experience is also crucial for the acceleration of DTx adoption. Older patients unfamiliar with using technological gadgets can find it difficult to adopt DTx solutions. However, a 2022 AMA survey has shown that 90% of people over the age of 50 in the USA recognize some benefit from digital health tools.

Similarly, a survey conducted by the Pew Research Center in 2021 indicated an increase in the use of smartphones and the internet among older people in the USA, driven by the pandemic. Older adults are using technological applications for activities such as entertainment, banking, shopping, etc., even after the pandemic, a 2021 survey by AARP Research, a US-based NPO, shows. This indicates that there is scope for an increase in adoption.

Many companies are now trying to increase patient involvement by using gamification, aiming at patient groups for whom DTx use is likely to be more challenging (e.g., older population, children). DTx developers include game-like elements or mechanics into a DTx solution, such as tasks, rewards, badges, points, and leaderboards. An example is US-based Akili Interactive’s EndeavorRx, a prescription DTx aimed at enhancing attention function in children with ADHD aged 8 to 12. It uses an interactive mobile video game to assist children in improving their attention skills and adjusting to their performance levels. The game’s sensory stimuli and motor challenges also help kids multitask and tune out distractions.

Payer reluctance affects many DTx products

Although the number of DTX products on the market increases, payers’ reluctance to cover their costs to the patient can also slow down adoption. The coverage of DTx solutions is limited, even when they are FDA-approved. Only 25% of payers are currently willing to cover prescription DTx solutions, according to a 2022 survey by MMIT, a Pennsylvania-based market data provider, which involved 16 payers.

Akili Interactive’s EndeavorRx is one such solution facing insurance coverage issues. Elevance Health (previously Anthem) denied coverage for EndeavorRx, deeming it medically unnecessary, while Aetna, another insurance provider, considers it experimental and investigational.

A study released by Health Affairs, a health policy research journal, in November 2023 has shown that only two of the twenty FDA-approved prescription DTx solutions on the market have undergone rigorous evidence-based evaluation. This means that no authoritative results indicating the benefits of these solutions for various population demographics are available, making many payers skeptical of their medical claims.

DTx offers solutions for managing multiple conditions

Over the past few years, several prominent players have emerged in the DTx landscape. Around 59% of the DTx market is concentrated in the North American region and 28% in Europe.

Top players, such as Akili Interactive and Big Health, both US-based firms, focus on offering products for managing mental health illnesses, mostly management of anxiety, depression, and stress, according to a report published in 2023 (based on data until September 2022) by Roots Analysis, an India-based pharma/biotech market research firm. With about 970 million people suffering from mental health conditions globally (according to the WHO), the potential user pool is enormous, offering growth opportunities for DTx solutions developed to address mental illnesses and, over time, driving the growth of the DTx market as a whole.

Many top companies also focus on solutions offering pain management and treatment for chronic conditions such as diabetes, obstructive pulmonary disease, and musculoskeletal disorders. An example is US-based Omada’s pain management solution, Omada MSK. This application guides patients through various customized exercises and records their movements, which are then assessed by a licensed physical therapist (PT), who can make recommendations for improvement. It also has a tool that utilizes computer vision technology to help PTs virtually assess a patient’s movement and range of motion, allowing them to make necessary changes in the therapy.

Similarly, several DTx solutions on the market now focus specifically on diabetes, which affects around 537 million adults globally. Some top companies focus on the previously unmet needs of conventional methods, such as weight management or preventing prediabetes, to help with overall diabetes treatment. US-based Omada’s solution, Omada Prediabetes, comes with a weight scale pre-connected to the app, and the weight is added to the app as soon as the patient steps on the scale. A dedicated health coach assesses the patient’s weight, creates a customized plan, and monitors the patient’s progress. In other similar DTx solutions for diabetes, an app can also give insulin dose recommendations based on the patient’s blood glucose levels.

DTx can serve in a range of other conditions, including major depressive disorder, autism spectrum disorder, and multiple sclerosis, to name a few.

The DTx landscape is rife with development

The DTx business landscape has recently seen many developments, from acquisitions to product launches. One of them was Big Health’s acquisition of Limbix, a California-based DTx firm, in July 2023 to bolster its portfolio, including SparkRx, a treatment for adolescents dealing with depression and anxiety. Similarly, in June 2023, Kaia Health launched Angela, a HIPAA-compliant, AI-powered voice-based digital care assistant, to serve as a companion and guide, enhancing the physical therapy experience for patients.

In another development, BehaVR, a DTx company headquartered in Kentucky, and Fern Health, a digital chronic pain management program, merged their companies in November 2023 to create a novel pain management DTx solution that addresses both pain and fear caused by chronic diseases. With this merger, they launched RealizedCare, an app designed to offer a comprehensive solution that collaborates with health plans, employers, and value-based providers to treat a range of behavioral and mental health conditions. This solution provides clinicians with immersive programs specifically designed for in-clinic use. It is initially focusing on chronic pain.

Bankruptcy of Pear and lessons for the industry

However, the most shocking development in the DTx market was the bankruptcy of Pear Therapeutics in 2023. The remains of this once-prominent company were purchased by four other companies for a total of US$6.05 million at an auction. Pear was a big name in the industry since its inception in 2013. It introduced numerous products such as reSET, reSET-O, and Somryst for treating substance use disorder, opioid use disorder, and chronic insomnia, respectively. It was also the first company to receive FDA approval for a mobile app aimed at treating substance use disorders.

Though the company announced layoffs of nearly 20% of its workforce in November 2022, its management expressed optimism about the company’s growth and reduced operating expenses in the third quarter. But in April 2023, the company filed for bankruptcy.

The demise of Pear has opened the eyes of industry experts to the challenges faced by DTx players. Certain issues were unique to Pear itself, such as the comparatively higher prices of its products and the focus on treating challenging conditions such as substance use disorders. However, the bankruptcy of Pear also brings attention to the obstacles that can be faced by any other DTx company. One crucial roadblock is that physicians and payers still approach these products with caution. Additionally, achieving profitability for DTx might be challenging for all types of players, particularly for small start-ups lacking substantial market influence. The bankruptcy of Pear and the challenges it faced can be used by budding DTx companies as a road map as they navigate this complex sector.

EOS Perspective

DTx is all set to revolutionize the medical industry, with a 2020 McKinsey report suggesting it could potentially alleviate the global disease burden by up to 10% by 2040. Given the impact of emerging treatments on stakeholders, pharmaceutical and healthcare companies should consider expanding their portfolio to include DTx solutions.

With telehealth companies seeing good growth in the pandemic and post-pandemic years, an increase in investment can be expected as they are uniquely placed to support prescription DTx. With the growth of the digital health industry, prominent telehealth providers may also choose to acquire DTx businesses or create their own in-house DTx solutions.

Read our related Perspective:
 COVID-19 Outbreak Boosts the Use of Telehealth Services

An increase in industry M&A activities can be expected in the next few years, with growing incidences of chronic illnesses, improved technology penetration across all age groups, and a maturing market. Big names such as Bayer, Novartis, and Sanofi are also entering into partnerships with DTx companies, indicating a bright future for the sector.

Mental health and behavioral therapy are great fields to branch out for companies starting in the DTx landscape, especially in this post-pandemic era. Demand for such services is likely to be sustained, considering the National Institute of Mental Health Disorders estimates that one in four adults in the USA suffers from a diagnosable mental illness, with many suffering from multiple conditions.

Similarly, diseases such as diabetes, cancer, heart, and respiratory ailments are on the rise. Healthcare companies can effectively address these medical areas through the use of DTx applications, providing personalized care for patients. This approach has the potential to manage not only chronic conditions such as diabetes but also terminal illnesses such as cancer.

Many DTx players will likely focus on areas with unmet needs, including pediatrics and metabolic disorders. With seven DTx-based diabetic management solutions already receiving 510(k) clearance as of December 2022, it can be expected that more products addressing the treatment gaps might flood the market.

The DTx industry is gradually maturing and has been receiving significant investments in recent years (US$8 billion in 2022). While experts view it as a profitable market, hesitation remains, particularly following the bankruptcy of Pear Therapeutics.

Nevertheless, due to the COVID-19 pandemic and subsequent lockdown measures, technology adoption among older adults has increased significantly. Hence, strategic investments in DTx by pharmaceutical and healthcare companies, taking into account market conditions, can expect to establish a stronger presence in this industry in the future.

27/02/2024by EOS Intelligence EOS Intelligence No Comments

Bridging the Gap between MDx Testing and Point-of-care

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The COVID-19 pandemic brought innovation and investment to the in vitro diagnostics (IVD) market, opening new pathways to simplify and expand testing. The previously complicated and time-consuming molecular testing gradually started moving towards rapid testing, changing how we manage healthcare. The growing popularity of rapid testing gave way to self-sampling and at-home sampling, which is set to bring molecular testing closer to patients. Another noticeable transformation the industry witnessed post-pandemic was the rise of molecular testing at point-of-care (POC), which is set to disrupt the way clinicians deliver accurate diagnoses in record time.

The latest generation of IVD devices is focused on providing quick diagnosis and being cost-effective. This has led to IVD companies focusing on developing simpler and less invasive sample collection methods, such as self-sampling tests.

IVD innovation is also transforming molecular testing to make healthcare more accessible. To a certain extent, dependence on laboratories is gradually decreasing with molecular testing available at POC. A key development in this area is the use of multiplex assay, which allows to test for multiple pathogens simultaneously, allowing for early diagnosis.

Molecular testing moving near-patient

After using antigen tests during COVID-19, demand for molecular testing for a variety of diseases at POC has risen drastically. In 2023, the industry faced an acute shortage of skilled laboratory staff, further increasing the need for molecular testing to move near-patient. This has resulted in physicians and patients preferring molecular tests at POC (MPOC). Some prominent industry players, such as Cepheid, Abbott, and BioFire, offer CLIA-waived PCR instruments and multiplex assay tests for the POC setting. A CLIA-waived certification allows tests to be performed at a doctor’s office by a non-technician instead of other more complex MDx tests requiring specialized technicians.

Moving these multiplex molecular tests near-patient is revamping the IVD landscape, positively impacting both the patients and payers. Early diagnosis with POC diagnostics empowers physicians with evidence-based decision-making at an early stage. Moreover, with multiplex assays increasingly being used for MPOC and delivering results within 10-25 minutes (in the case of respiratory assays), the wait time for patients to receive the correct diagnosis has reduced substantially. This results in clinicians being able to start with proper treatment on the patient’s first visit, thus reducing the total number of patient visits. Consequently, physicians are also able to accommodate a higher number of patients.

In fact, MPOC could become a critical element of the value-based care model in the USA. The value-based program incentivizes healthcare providers/physicians to provide quality healthcare. With MPOC offering quicker turnaround time and lower testing costs, physicians/payers will likely be better incentivized and motivated to deliver high-quality services.

Growing demand for self-sampling/at-home sampling

The pandemic raised public awareness regarding the use of self-sampling kits and increased demand for them. Further, the FDA granted Emergency Use Authorization to multiple assays during the pandemic to quickly onboard self-test kits and penetrate the US households with this novel testing method.

Driven by the convenience, cost-effectiveness, and accessibility offered by self-sampling kits, they are becoming increasingly popular, particularly amongst the aging population that needs tools and technologies to manage health at home. It is also proving to be a sustainable testing method, as it can be used for preventative screening as well as allows for discretion for patients who may not prefer to get tested in a laboratory or by a physician, particularly in case of sexually transmitted infections (STIs).

Additionally, unlike OTC tests, molecular diagnostic tests allow for better accuracy in results and are recognized by the FDA for clinical diagnosis use. This has given confidence to healthcare providers to advocate self-sampling, as they stand to benefit from bringing care to patients’ homes, eventually reducing healthcare expenses. In a value-based setting, at-home testing proves to particularly benefit physicians who are able to eliminate unnecessary patient visits.

For the prominent industry players, at-home testing represents a key opportunity area to grow in the niche direct-to-consumer testing segment. Companies are also using these tests as an opportunity to target the rural population who do not have easy access to laboratories. Besides infectious and respiratory diseases, companies are now trying to foray into other treatment areas, such as human papillomavirus (HPV). Self-sample collection for HPV has begun in Europe with BD’s Onclarity HPV assay.

EOS Perspective

Establishing a strong foothold in both self-sampling and MPOC segments is seen as a sizeable business opportunity for stakeholders of the IVD market. In the near term, it is likely for the IVD players to continue launching new assays and technologies to expand offerings.

For self-sampling, MDx players have been focusing on infectious diseases, and there still is a vast untapped market for self-sampling at home, specifically when testing for STIs. In November 2023, LetsGetChecked became the first company to secure FDA approval for chlamydia and gonorrhea at-home sample collection. This has opened doors for other players to enter this niche market, and they are likely to jump on the bandwagon by seeking FDA approvals for their STIs self-sampling kits. Major players, such as Hologic, are already gathering data to launch a self-collection device for STIs. Hologic’s Aptima Swab for STIs multi-testing is approved in the EU, and the company is now conducting trials to get approval in the USA.

In the near term, a noticeable trend in the MPOC segment is expected to be the focus of MDx players on developing multiplex assays that follow the ‘one-size-fits-all’ approach. There is a growing demand from physicians for multiplex assays that allow them to test for multiple viruses and deliver results in under four hours. Companies have already started to take matters into their own hands by focusing their R&D efforts on developing panels and preparing them for FDA approval and CLIA waiver. Becton Dickinson announced the launch of its first molecular diagnostics POC instrument, BD Elience, by 2025. The device is expected to allow panel testing for respiratory and sexually transmitted diseases.

Although the self-sampling and MPOC segments present many opportunities for the IVD stakeholders, some roadblocks may hinder their development and adoption. For instance, multiplex assay reimbursement schemes may hamper their widespread adoption in the POC setting. Per the latest guidelines, reimbursement schemes for multiplex assays are less favorable than those for singleplex assays. Furthermore, at present, there are no reimbursement schemes in place to reimburse for self-sampling at home, so patients are required to pay out-of-pocket.

Several players face a crucial challenge for at-home collection: proving to the FDA that the self-sample collected is not contaminated or poorly taken. FDA requirements for approval of these tests are very stringent and demand that companies prove the adequacy of the sample collected by patients to match that of laboratory collection.

Despite these challenges, self-sampling and MPOC present untapped opportunities for many IVD players seeking to expand their capabilities and offerings to position themselves better in the MDx market.

21/02/2024by EOS Intelligence EOS Intelligence No Comments

Vaccines in Africa: Pursuit of Reducing Over-Dependence on Imports

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Pandemics such as COVID-19, Ebola, and the 2009 influenza instilled the need for a well-equipped domestic vaccine manufacturing industry in the minds of African leaders. Currently, due to insufficient local production, the continent depends heavily on imports from other countries, with the imports satisfying about 99% of vaccine demand in the continent. However, thanks to recent significant FDI, the vaccine industry in Africa had a market potential of around US$1.3 billion as of 2021 and is expected to range between US$2.3 billion and US$5.4 billion by 2030, as per McKinsey estimates.

Vaccine sovereignty is the need of the hour for the African continent

One of the most important lessons the COVID-19 pandemic has given to Africa is the pressing need to ramp up vaccine production locally. Biotech firms, such as Moderna and Pfizer, developed COVID-19 vaccines faster than any other producers. However, these vaccines were not easily accessible to most African countries.

Africans, in general, lack access to affordable and quality healthcare. Preventable diseases, such as pneumonia, malaria, and typhoid fever, have high fatality rates across the continent. This calls for localized production of pharmaceuticals and vaccines to lower the economic burden of these diseases and facilitate better access to affordable healthcare.

Currently, Africa relies heavily on other countries, such as China and India, for its pharmaceutical needs. The paucity of localized pharma production aggravates healthcare and vaccine inequity across the continent. To substantiate this, the COVID-19 vaccination rate at the beginning of 2022 in 16 African countries was less than 5% on average.

Currently, Africa consumes around 25% of the global vaccine production, whereas it produces less than 1% of its vaccine needs locally, as per the African Union (AU). Therefore, a lot remains to be done to materialize the goal of achieving 60% of vaccine needs to be satisfied locally by 2040, the vision of the Partnerships for African Vaccine Manufacturing (PAVM) under Africa CDC.

Increasing the vaccine production capacity from 1% to 60% in 15-16 years is not an easy task. Considering this, PAVM designed a continental plan for creating a vaccine production ecosystem capable of achieving the 60% target. This plan, called the PAVM Framework for Action (PAVM FFA), assessed that the African vaccine manufacturing industry would be expected to have increased the number of their vaccine production factories from 13 in 2023 to 23 (11 form, fill, finish, or F&F factories and 12 end-to-end factories) by 2040 providing a total of 22 priority products by 2040. It will require dedicated efforts from all involved stakeholders, such as producers, biopharma companies, industry associations, regulatory bodies, and academia.

Vaccines in Africa Pursuit of Reducing Over-Dependence on Imports by EOS Intelligence

Significant FDI will aid in driving localized vaccine production in Africa

The continent is attracting considerable FDI from the USA and Europe for vaccine development. Several foreign biotechnology firms are partnering with African governments to venture into localized vaccine production.

In March 2023, US-based biotechnology company Moderna partnered with the Kenyan government to set up a production facility for making messenger RNA (mRNA). The proposed annual capacity of Moderna’s first-ever facility in Africa is around 500 million doses of vaccines. The facility is expected to produce drug substances or active pharmaceutical ingredients and the final product for the entire continent.

In another example, a Germany-based biotechnology company, BioNTech, is contemplating commencing production of mRNA-based vaccines in its Rwanda facility in 2025. The construction of the facility began in 2022. With an investment of around US$150 million, this is Africa’s first mRNA manufacturing facility built by a foreign company. The proposed annual capacity of BioNTech’s mRNA facility is about 50 million vaccine doses. BioNTech also plans to set up mRNA factories in other African countries, such as South Africa and Senegal, and plans to produce vaccines for malaria, tuberculosis, HSV-2, and HIV in the future.

In September 2023, the South African government partnered with the KfW Development Bank of Germany. As per the agreement, South Africa will receive €20 million from Germany’s KfW Development Bank over five years for developing and manufacturing mRNA vaccines. The fund will be utilized for equipment procurement and API certification for vaccine production in South Africa.

A consortium of the Global Alliance for Vaccines and Immunizations (GAVI), AU, and Africa CDC established the African Vaccine Manufacturing Accelerator (AVMA) with the intent of fostering a sustainable vaccine industry. The formation of AVMA involved donors, partners, industry stakeholders, and non-governmental and not-for-profit organizations. GAVI planned to expand its supplier base, mainly in Africa, in 2021. Furthermore, the global alliance announced the commencement of around 30 vaccine manufacturing projects across 14 African countries.

Moreover, as of December 2023, over US$1.8 billion is planned for investment by a collaboration between the French government, Africa CDC, and other European and international investors to streamline the development and production of vaccines across the continent.

Desire to ensure vaccine effectiveness is seen as a biased vaccine preference

African governments are not only proactively putting in dedicated efforts to attract considerable FDI to build and strengthen the continent’s vaccine manufacturing industry, but they also focus on good quality, effective vaccine types. However, some perceive this as a lack of interest from the African governments to buy non-mRNA vaccines made by local companies.

For example, Aspen Pharmacare, a South Africa-based biotechnology company, put significant investments in ramping up the capacity of its manufacturing facility to produce viral vector vaccines against COVID-19. The company announced in November 2020 that it would be formulating, filling, and packaging the COVID-19 vector vaccine made by J&J. It also received €1.56 million investment from Belgian investors, BIO, the Belgian Investment Company for Developing Countries, which is a JV between the European Investment Bank (EIB) and several European DFIs.

However, millions of J&J COVID-19 vaccine doses made in South Africa were exported to Europe by J&J without the knowledge of the South African government, to support Europe’s domestic vaccine demand in August 2021, not complying with the initial agreement of vaccine distribution within the African continent. This created a political impasse between European and African governments over the distribution of the vaccines, which, in turn, delayed their production as the standoff resulted in a long waiting time for Aspen Pharmacare to produce the COVID-19 vaccine.

Ultimately, by September 2021, the European countries agreed to return 90% of the J&J vaccines to Africa. In March 2022, J&J gave Aspen Pharmacare the license to manufacture and distribute the vaccine under its brand name, Aspenovax. The expected production capacity of Aspenovax was around 400 million doses. However, not a single order came from African governments.

According to Health Policy Watch News, the reason for this was the rising production of Pfizer and Moderna’s mRNA COVID-19 vaccine distributed by COVAX that was being opted for by most African governments. Thus, in August 2022, Aspen Pharmacare had to close its production line, stating non-existent demand in Africa, partly due to the subsidence of the pandemic and partly due to African governments’ lack of interest in non-mRNA vaccines. The company could not sell a single dose of the vaccine, owing to multiple factors, starting from what was perceived as the lack of government’s intent to purchase home-grown vaccines to delayed production due to the Europe-Africa political clash and the rising inclination of the world towards mRNA vaccines.

It is interesting to note that of the total Covid-19 vaccines Africa administered to its residents, 36% were J&J vector vaccines, shipped directly from the USA.

Technology transfer hub and know-how development initiatives are set

To strengthen vaccine production capacity in low- and middle-income countries (LMICs), the WHO declared the establishment of a technology transfer hub in Cape Town, South Africa, in June 2021. In February 2022, WHO said that Nigeria, Kenya, Senegal, Tunisia, and South Africa will be among the first African countries to get the necessary technical expertise and training from the technology transfer hub to make mRNA vaccines in Africa.

Afrigen Biologics, a South Africa-based biotech firm, is leading this initiative. As Moderna did not enforce patents on its mRNA COVID-19 vaccine, Afrigen Biologics could successfully reproduce the former company’s vaccine, capitalizing on the data available in the public domain. As per an article published in October 2023, Afrigen Biologics reached a stage where its vaccine production capabilities are appropriate for “phase 1/2 clinical trial material production”. Additionally, in collaboration with a Denmark-based biotech firm, Evaxion, Afrigen is developing a new mRNA gonorrhea vaccine.

Besides setting up a technology transfer hub in South Africa, academic institutions are partnering with non-profits as well as companies to reinforce the development of necessary technical know-how and training required for vaccine manufacturing. One such example is the development of vaccines in Africa under the partnership of Dakar, Senegal-based Pasteur Institute (IPD), and Mastercard Foundation. Approved in June 2023, the goal of MADIBA (Manufacturing in Africa for Disease Immunization and Building Autonomy) includes improving biomanufacturing in the continent by training a dedicated staff for MADIBA and other vaccine producers from Africa, partnering with African universities, and fostering science education amongst African students.

Read our related Perspective:
Inflated COVID-19 Tests Prices in Africa

Although significant initiatives are underway, challenges exist

With 13 vaccine manufacturing companies and academic organizations across eight African countries, the continent’s vaccine industry is in its infancy. However, the current vaccine manufacturing landscape includes a mix of facilities with capabilities in F&F (10 facilities), R&D (3 facilities), and drug substance (DS) or active pharmaceutical ingredients (API) development (5 facilities).

One of the challenges African vaccine producers face is not being able to become profitable in the long run. In 2023, a global consulting firm, BCG, in collaboration with BioVac, a South Africa-based biopharmaceutical company, and Wellcome, a UK-based charitable trust that focuses on research in the healthcare sector, conducted a detailed survey exploring stakeholder perspectives on challenges and feasible solutions. The respondent pool consisted of a diverse set of stakeholders spanning across Africa (43%), LMICs (11%), and global (46%). A total of 63 respondents from various backgrounds, such as manufacturers, industry associations, health organizations, regulators, and academic organizations, were interviewed across the regions above. According to this research, most vaccine producers in Africa who were interviewed said that profitability is one of their key concerns. This leads to a lack of foreign investments required for scaling up, which in turn creates insufficient production capacity, thereby increasing the prices of vaccines. Therefore, these producers are unable to meet considerable demand for their products, and their business model becomes unsustainable.

Continued commitment and support from all stakeholders are necessary for achieving a sustainable business model for vaccine producers in Africa and, consequently, for the industry at large. However, it has been observed that the support from global, continental, and national levels of governments and other non-government stakeholders, such as investors, donors, partners, etc., tend to diminish with the declining rampage caused by epidemics in Africa. Therefore, this poses a severe challenge to strengthening the vaccine production industry in Africa.

In another 2023 study, by a collaboration between the African CDC, the Clinton Health Access Initiative (CHAI), a global non-profit health organization, and PATH, formerly known as the Program for Appropriate Technology in Health, involving 19 vaccine manufacturers in Africa, it was suggested that the current vaccine production capacity including current orders to form/fill/ finish using imported antigens is nearly 2 billion doses. In contrast, the current average vaccine demand is 1.3 billion doses annually. In addition, there is a proposed F&F capacity of over 2 billion doses. Thus, if Africa can materialize both current and proposed plans of producing F&F capacity vaccines from imported antigens, the study concludes that the continent will reach a capacity of more than double the forecasted vaccine demand in 2030. Overcapacity will lead to losses due to wastage. Thus, not all vaccine producers will be profitable in the long term. This may challenge the African vaccine manufacturing industry to be profitable.

Moreover, Africa’s current domestic antigen production capacity is lower than what is required to meet PAVM’s vaccine production target of 60% by 2040. In addition, a large part of the existing antigen capacity is being utilized to make non-vaccine products. Although antigen production plans are underway, these will not suffice to narrow the gap between demand and production of antigens domestically in Africa.

EOS Perspective

To create a local, financially sustainable vaccine manufacturing industry with output adequate to support the continent’s needs, it is necessary to create an environment in which producers can achieve profitability.

Initiatives such as technology transfers and funding will only be fruitful when their on-the-ground implementation is successful. This will require the involvement of all stakeholders, from the state governments to bodies that approve the market entry of vaccines. All stakeholders need to be steadfast in their actions to achieve the ambitious target of 60% of vaccine needs to be met from local production by 2040 without compromising on the accuracy and quality of the vaccines.

One of the most vital aspects of the necessary planning is for stakeholders to ensure that even after the pandemic and its aftermath are entirely gone, the effort towards establishing facilities, creating know-how, and training a workforce skilled in vaccine development and production does not stop.

The focus should extend beyond COVID-19, as there are many other preventable diseases in Africa, such as malaria, pneumonia, tuberculosis, and STDs, against which vaccines are not yet produced locally. These areas provide a great opportunity for vaccine producers and associated stakeholders to continue being interested and involved in vaccine production and development in Africa.

12/12/2023by EOS Intelligence EOS Intelligence No Comments

Medicine Shortage in the EU: A Deep-dive into Its Causes and Cures

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With the proposal of the deeply revamped new EU pharma legislation in April 2023, the EU initiated an attempt to tackle the medicine shortfall that the union has been experiencing for over two decades now. Europe has witnessed a 20-fold rise in reported drug shortfalls from 2000 to 2018, as per research conducted by the Mediterranean Institute of Investigative Reporting (MIIR).

According to the European Data Journalism Network (EDJNet), the problem of drug inadequacies is not novel, although it got under the spotlight during the 2020-2022 COVID-19 pandemic, the energy crisis that started in early 2022, and the beginning of the Russian invasion of Ukraine in early 2022. Ironically, the fundamental reasons responsible for the medicine shortages in the EU are not solely these three events but a mixture of structural, economic, and regulatory factors that the governments often refuse to agree on.

In terms of the magnitude of the shortage during the five-year period from January 2018 to March 2023, Italy experienced the highest inadequacy in absolute terms to the tune of 10,843 medicines, followed by Czechia with 2,699 medicines and Germany with 2,355 medicines. Although Greece witnessed the lowest shortage, with 389 medicines between 2018 and 2023, the median duration for which the shortfall existed was the longest for this country, with 130 days, followed by Germany with 120 days, and Belgium with 103 days. This means that, for instance, in Greece, it is likely to take about four months and eight days for a medicine to be back on the market.

According to a survey regarding medicine shortages in the EU members organized by the Pharmaceutical Group of European Union (PGEU) between mid-November and end-December 2022, all 29 EU countries surveyed recorded drug shortfalls during the past 12 months among community pharmacists (pharmacists in retail pharmacies where the general populations have access to medications). Moreover, around 76% of the respondents agreed that the situation had worsened compared to 2021, and the remaining 24% said the situation remained the same compared to 2021. Not a single country registered any improvement in the situation compared to 2021. Furthermore, the survey also revealed that 83% of the respondents concurred that cardiovascular drugs were in short supply during the last 12 months in community pharmacies, followed by medicines treating nervous system diseases and anti-infectives for systemic use, such as antibiotics (79% each). Owing to the sample size of this survey of 1 response per country covering 29 EU countries, the findings might not be accurate but are likely to illustrate the overall trends correctly.

The problem of medicine shortages is not just limited to EU countries, as the UK is also experiencing acute drug inadequacies, including HRT (hormone replacement therapy) medicines and antibiotics, among other medicines.

In December 2022, the European Medicines Agency (EMA) announced that most EU countries are confronted with drug shortages. The question that arises is what led to the medicine shortfall in the EU and how the EU members can attempt to combat the issue at hand.

Medicine Shortage in the EU: A Deep-dive into Its Causes and Cures by EOS Intelligence

Factors responsible for medicine shortages in the EU

The attributing factors to drug shortages in the EU are mainly a combination of economic, regulatory, and production or supply chain-related causes.

Economic factors

Price cap regulation on generics amidst rising costs hindering production

One of the key reasons for the drug shortfall of medicines, including antibiotics (such as Amoxicillin) in the EU is the fact that generic drug makers are not paid sufficiently for increased production of the medicine to cover the associated costs such as production, logistics, and regulatory compliance costs that are rising steeply.

To add to the woes of most European generic drug makers, the prices of the generics that the respective countries had set have remained unchanged for the past two decades, making the situation much worse.

Additionally, due to regulated prices of generic drugs, numerous European drug producers have shown a lack of interest in boosting their production capacity. This has become particularly relevant during the Russian invasion of Ukraine, which has caused a rise in energy costs. This cost increase affects the smooth functioning of factories that produce everything from aluminum for medicine bottle caps to cardboard for packaging medicines, indicating a rise in drug insufficiencies in the foreseeable future.

According to a Reuters report, six European generic drug industry groups and trade associations, as well as 13 European producers, revealed that many smaller drug makers are battling to be profitable and, therefore, are contemplating if producing antibiotics would be feasible, let alone expanding production capacity.

Government tenders indirectly force generic producers to cut production

Before inviting quotations or tenders, many European governments tend to weigh the generic drug prices with prices in other regional markets or prices of similar drugs in the home market to establish a reference price point that can be used in negotiating with producers. These governments give contracts to those producers who quote the lowest price, resulting in “further downward pressure on prices in subsequent tenders,” as per generic drug producers.

According to many European generic drug producers, the price cap regulation and the tender system of generics have spurred a ‘race to the bottom’. The European generic drug makers bear the brunt of Asian generic drug producers charging less for the same products. Consequently, some European firms were compelled to either decrease production or choose offshore production (of generics and APIs required to produce them) to low-cost locations such as India and China.

Parallel exports aggravate the shortages in low-price markets

Although some European countries have started prohibiting parallel exports (cross-border sale of medicines within the EU by sellers outside of the producer’s distribution system and without the producer’s permission) to other countries, this practice of buying drugs from low-price markets and selling them in high-price markets has resulted in the exhaustion of medicine supplies in low-price markets. This has been noticed in some EU countries such as Greece, Portugal, and Central and Eastern European member states where legislations have been put into effect that make the re-export of pharmaceuticals harder. For instance, drug shortages in Greece have been attributed to the re-export of imported medicines to regions where these medicines are sold at a higher price point than in Greece, as per a news report by the Turkish news agency, Anadolu Agency.

According to a report published by the Centers for European Policy Network in May 2021, the magnitude of parallel imports of medicines occurring in the European Economic Area (EEA) was to the tune of €5.7 billion in 2019. Furthermore, the share of parallel-imported pharmaceuticals varied considerably across European countries. To cite a few examples, Denmark’s share of parallel-imported pharmaceuticals was around 26.2% in 2018, while the corresponding figure for Austria was 1.9% in the same year. Similarly, in 2018, the share of parallel-imported medicines was around 12% in Sweden and 2% in Poland.

Production and supply chain factors

The current lack of a sufficient number of production facilities in European countries can increase the chances of drug shortfalls in the region at the time of any production problem. To illustrate this, the European Medicines Agency (EMA) cited that drug shortages in the EU are caused by production factors, raw material shortages, distribution issues, and high demand due to respiratory diseases and inadequate manufacturing capacities.

Furthermore, many pharma producers utilize the just-in-time concept of inventory management, which improves efficiency, reduces storage costs, and minimizes waste, thanks to producing goods as needed. Due to this, producers often face challenges such as the inability to adapt to changing demand volumes.

Moreover, owing to the innate reliance of drug producers on APIs, variations in the “supply, quality, and regulation” of APIs have affected medicine supplies, according to a report by the Economist Intelligence Unit. To cite an example, pharmacies in Italy have attributed the decline in the making of APIs in China to the shortfall of medicines in Italy, according to a report by Anatolia Agency, the leading Turkish news agency.

Reactions from various stakeholders in the EU pharma market

Starting from proposing a revision of the EU pharma legislation to banning parallel exports of medicines in some European countries, there are many reactions to drug shortages in the EU from various pharma market stakeholders.

New Pharma legislation in the EU by the European Commission

The proposal of the new pharma legislation in the EU by the European Commission in April 2023 came as a reaction to the acute medicine shortage in the region. It proposes measures for producers to provide early warnings of drug shortfalls and necessitates producers to keep reserve supplies in sufficient quantities for times of crisis, such as acute shortages.

Read our related Perspective:
 New EU Pharma Legislation: Is It a Win-win for All Stakeholders?

Price capping cannot facilitate sustainability

European lobby groups supporting generic medicine makers argue that price limits won’t be effective due to growing production and regulatory expenses. There was no system to review medicine prices and adjust them for inflation or when APIs became scarce in most European countries. Moreover, it is exceedingly complex to continue to keep medicines competitive after 10 years of their launch.

Ramped up production by bigger generic drug producers

The pricing framework in Europe is the primary concern of generic drug makers in the long term, not production costs. According to the global supply chain head of Sandoz, Novartis’s generic division, the current inflexible pricing framework prevents generic drug producers from adjusting prices for essential drugs according to changes in input costs.

To illustrate this, the price of 60ml of pediatric amoxicillin in 2003 in Spain was around €0.98 (US$1.05). In the following ten years, the only change that was made was to reduce the quantity of the medicine to 40ml of pediatric amoxicillin, still pricing it at €0.98 (US$1.05). However, no change has been made since 2013.

Some larger generic drug companies are ramping up the production of certain medicines, such as amoxicillin, that are in short supply. To cite a few examples, Sandoz is planning to add extra shifts in its factory in Austria to meet their increased production target of amoxicillin by a double-digit percentage in 2023 vis-à-vis 2022. Additionally, the company plans to start the operation of another expanded factory by 2024. Similarly, GSK also recruited a new workforce and increased shifts in its amoxicillin factories in the UK and France. However, for companies with smaller market shares, such as Teva, things are different as increasing production capacity is not a viable option for them as they are struggling to be profitable, and thus, there is no way they can ramp up production to bridge the market gap.

National governments and drug regulators making big changes

Some European governments are considering making legal changes to ease the current procurement system of medicines in their respective regions. Additionally, some European governments are also striving to ban the re-export of imported medicines. Germany’s government is set to contemplate making legal changes to its tender system for generic medicines in 2023, whereas the Spanish government is planning to review its pricing scheme for certain medicines, which might cause patients to pay a higher price for medicines, including amoxicillin, on a temporary basis. The Netherlands and Sweden have put in place a law that requires vendors to stock six weeks of reserve supplies to mitigate shortfalls.

Several European countries are taking initiatives to prohibit parallel exports or re-exports of imported medicines to preserve domestic medicine supplies. To cite an example, in November 2022, the medicines regulatory body in Greece expanded the list of drugs whose re-export to other countries is prohibited. Another example is Romania, which halted exports of certain antibiotics and pediatric analgesics for three months in January 2023. Also, in January 2023, Belgium issued an official order allowing the respective authorities to stop the export of medicines to other countries during crises such as shortages.

EOS Perspective

Tender or procurement and pricing strategies of medicines in the EU and the UK must be improved after in-depth analysis. This is the only way to improve production in the European region so that future shortages of drugs can be avoided, in addition to curbing heavy dependence on Asia for essential drugs.

Secondly, there needs to be a centralized EU system in place that is designed to track the supply of essential medicines in all member countries, allowing for the identification of early signs of upcoming risks or shortfalls.

The new pharma legislation in the EU is expected to help improve the availability of drugs in situations of health crises, including drug shortages. The EU could reduce medicine shortages across the region over time as it has awarded the EMA more responsibilities and established a new body called HERA that can purchase medicines for the entire union.

Inflated COVID-19 Tests Prices in Africa Why and What Now by EOS Intelligence

13/10/2023by EOS Intelligence EOS Intelligence No Comments

Inflated COVID-19 Test Prices in Africa: Why and What Now?

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With the subsidence of COVID-19 and the announcement of the ending of the Global Health Emergency by WHO in May 2023, the world has started to move on and embark on its path back to pre-COVID normalcy. However, some of the lessons the pandemic has brought are hard to forget. One such lesson, and more importantly, an issue that demands attention and action, is the prevalent price disparity of COVID-19 tests in low-income regions of the world, such as Africa, compared to some more affluent countries, such as the USA.

High test prices across Africa, in comparison with prices in more developed parts of the world, such as the USA, have become evident after the onslaught of COVID-19 on the African continent. To illustrate this with an example, the average selling price of SD Biosensor’s STANDARD M nCoV Real-Time Detection kit comprising 96 tests per kit in the USA is US$576 compared to US$950 in African countries. This translates to a unit price of US$6 in the USA compared to US$9.9 in African countries, amounting to a 65% difference between the price points in the two regions. The price disparity in Africa vis-à-vis the USA ranges from +30% to over +60% in the case of PCR-based COVID-19 tests in our sample when compared to the prices of the same products that are being sold in the USA. This leads to the crucial question of why these tests are so costly in a place where they should be sold at a lower price, if not donated, owing to the continent’s less fortunate economic standing.

The Why: Reasons for inflated price in Africa

Several factors, such as Africa’s heavy dependence on medical goods imports, a limited number of source countries exporting medical goods to the continent, paucity of local pharma producers, higher bargaining power of foreign producers enabling them to set extortionate prices, shipping and storage costs, and bureaucratic factors drive the inflated prices of COVID-19 test kits in African countries.

Africa is heavily dependent on imports for its diagnostic, medicinal, and pharma products. To elucidate this, all African countries are net importers of pharma products. Additionally, the imports of medicines and medical goods, such as medical equipment, increased by around 19% average annual growth rate during the span of 20 years, from US$4.2 billion in 1998 to US$20 billion in 2018.

In 2019, medical goods accounted for 6.8% of total imports in Sub-Saharan Africa (SSA), whereas they accounted for only 1.1% of exports. The SSA region experiences a varied dependence on the imports of medical goods. This is evident from the fact that Togo and Liberia’s share of imports of medical goods was around 2%, while that of Burundi was about 18% in 2019.

The 2020 UNECA (United Nations Economic Commission of Africa) estimates suggest that around 94% of the continent’s pharma supplies are imported from outside of Africa, and the annual cost is around US$16 billion, with EU-27 accounting for around 51% of the imports, followed by India (19%), and Switzerland (8%). This means that only 6% of the medicinal and pharma products are produced locally in the African continent, creating a situation where foreign producers and suppliers have drastically higher bargaining power.

This became particularly evident during the 2020-2022 COVID-19 pandemic, when the demand for COVID-19 tests was extremely high compared to the supply of these tests, making it easier for foreign suppliers to set an exploitative price for their products in the African continent.

The lack of competition and differentiation in the region aggravated the situation further. There are only a handful of suppliers and producers in the continent that provide COVID-19 tests. To elucidate this further, there were only 375 pharmaceutical producers in the continent as of 2019 for a population of over 1.4 billion people. When compared with countries with similar populations, such as India and China, which have around 10,500 and 5,000 pharmaceutical companies, respectively, the scarcity in the African continent starts to manifest itself more conspicuously. To illustrate this further, only 37 countries in Africa were capable of producing medicines as of 2017, with only South Africa among these 37 nations able to produce active pharmaceutical ingredients (APIs) to some extent, whereas the rest of the countries had to depend on API imports.

Furthermore, the SSA region gets medical goods supplies from a small number of regions, such as the EU, China, India, the USA, and the UK. As of 2019, over 85% of the medical goods that were exported to SSA were sourced from these five regions. It is interesting to note that the source countries slightly differ for the SSA region and the African continent as a whole, with the EU and India being the common source regions for both. With a 36% share in all medical goods imports to the African continent in 2019, the EU is the top exporting region of medical goods to SSA, albeit with a declining share over the last few years. India and China share the second spot with a 17-18% share each in all medical goods imports supplied to SSA in 2019. Considerable concentration is observed in the import of COVID-19 test kits to SSA, with a 55% share in all medical goods imports supplied by the EU and a 10% share by the USA in 2019.

To provide a gist of how the above-mentioned factors attributed to the inflated prices of COVID-19 tests in the region, Africa’s medical goods industry, being import-driven, is heavily dependent on five regions that supply the majority of the medical goods needs of SSA. In addition to this, the scarcity of local pharma producers across the continent aggravated the situation further. This, in turn, gave an opportunity for foreign producers to charge a higher price for these COVID-19 tests in Africa.

Additionally, storage and shipping costs of COVID-19 tests also play a significant role in the pricing of these tests. The actual share of shipping and storage costs is difficult to gauge owing to the fact that there is not enough transparency in disclosing such pieces of information by test producers and suppliers.

Another aspect contributing to the inflated prices of these tests in African countries is bureaucratic factors. According to Folakunmi Pinheiro, a competition law writer based in Cambridge, UK, some African state governments (such as in Lagos) take exorbitantly high cuts on the sale of COVID-19 tests, allowing labs to keep no more than 19-20% of the profits per test after covering their overhead costs such as electricity, IT, logistics, internet, salary, and consumables costs including PPE, gloves, face masks, etc.

Since labs in Africa must purchase these tests from foreign producers, they have limited room for maneuvering with their profit margin, given the high test price and the cuts imposed by the local governments. Pinheiro further simplifies the profits in absolute terms. The cost of a PCR-based COVID-19 test, analyzed in laboratories (not at-home tests), in Lagos in February 2022 was around NGN45,250 (~US$57.38), and the labs selling and performing these tests on patients would make a profit of around NGN9000 (~US$11.41) per test which translates to 19.89% of the total cost of the single test. It is believed that this profit is after the overhead costs are covered, implying that the majority of the profits go to the state government of Lagos.

Inflated COVID-19 Tests Prices in Africa Why and What Now by EOS Intelligence

The What Now: Reactions

To combat the inflated prices of COVID-19 tests developed by foreign producers, many African price and competition regulatory organizations undertook efforts to reduce the prices of these tests to a significantly lower level in their respective countries. While R&D was ongoing for the making of groundbreaking low-priced alternative testing technologies that were ideal for African climate and economic conditions, many academic institutes tied up with foreign companies to launch these tests in the African markets. Additionally, the African Union (AU) and Africa CDC had set new goals to meet 60% of the vaccine needs of the continent domestically by fostering local production by 2040. Lastly, many African countries were able to eliminate or reduce import tariffs on medical goods during the pandemic for a considerable amount of time.

From price or competition regulatory bodies

As a response to the high PCR-based COVID-19 test prices in South Africa, the country’s Competition Commission (CCSA) was successful in reducing the prices for COVID-19 testing in three private laboratories, namely Pathcare, Ampath, and Lancet by around 41%, from R850 (~US$54.43) to R500 (~US$31.97) in January 2022. The CCSA asked these private clinical laboratory companies for financial statements and costs of COVID-19 testing as part of the investigation that started in October 2021. CCSA further insisted on removing the potential cost padding (an additional cost included in an estimated cost due to lack of sufficient information) and unrelated costs and thus arrived at the R500 (~US$31.97) price. Furthermore, the CCSA could significantly reduce the price of rapid antigen tests by around 57% from R350 (~US$18.96) to R150 (~US$8.12). However, it is believed that there was still room for further reduction in rapid antigen test price because the cost of rapid antigen tests in South Africa was around R50 (US$2.71). Although the magnitude to which this price reduction was possible is hard to analyze owing to the fact that there was not enough transparency in revealing the cost elements by these test producers.

From local producers, labs, and academia-corporate consortia

The fact that Africa is a low-income region with lower disposable income compared with affluent countries, in addition to its unfavorable climate, has driven local scientists to develop alternative, low-cost testing solutions with faster TAT and minimal storage needs.

African scientists were believed to have the potential to develop such cheaper COVID-19 tests, having had the necessary know-how gained through the development of tests for diseases such as Ebola and Marburg before. The high prices of COVID-19 tests in the African markets have compelled local universities to tie up with some foreign in-vitro diagnostic (IVD) producers to develop new, innovative, low-cost, alternative technologies.

To cite an example, the Senegal-based Pasteur Institute developed a US$1 finger-prick at-home antigen test for COVID-19 in partnership with Mologic, a UK-based biotech company. This test does not require laboratory analysis or electricity and produces results in around 10 minutes. This test was launched in Senegal as per a December 2022 publication in the Journal of Global Health. Although this test’s accuracy cannot match the high-throughput tests developed by foreign producers, the low-cost COVID-19 tests proved to be useful in African conditions where large-scale testing was the need of the hour and high-temperature climate was not conducive to cold storage of other types of tests.

Countries such as Nigeria, Senegal, and Uganda tried to increase their testing capacity with their homegrown low-cost alternatives as the prices of the tests developed by foreign manufacturers were exorbitantly high. Senegal and Uganda stepped up to produce their own rapid tests, while in remote areas of Nigeria, field labs with home-grown tests were set up to address the need for COVID testing that remained unaddressed because of the high prices of the foreign tests.

Dr. Misaki Wayengera, the pioneer behind the revolutionary, low-cost paper strip test for rapid detection of filoviruses including Ebola and Marburg with a TAT of five minutes, believes that a low-cost, easy-to-use, point-of-care (POC) diagnostic test for detecting COVID-19 is ideal for equatorial settings in Africa providing test results within a shorter time span while the patient waits. He spearheaded the development of a low-cost COVID-19 testing kit with a TAT of one to two minutes, along with other Ugandan researchers and scientists.

From the African Union and CDC Africa

As an aftermath of the adversities caused by the COVID-19 pandemic, the African Union (AU) and African Centers for Disease Control and Prevention (CDC Africa) put forth a goal of producing 60% of Africa’s vaccine needs locally by 2040. A US$ 45 million worth of investment was approved in June 2023 for the development of vaccines in Africa under the partnership of Dakar, Senegal-based Pasteur Institute (IPD), and Mastercard Foundation. The goal of MADIBA (Manufacturing in Africa for Disease Immunization and Building Autonomy) includes improving biomanufacturing in the continent by training a dedicated staff for MADIBA and other vaccine producers from Africa, partnering with African universities, and fostering science education amongst students in Africa.

Additionally, the US International Development Finance Corporation (DFC), in partnership with the World Bank Group, Germany, and France, announced in June 2021 a joint investment to scale up vaccine production capacity in Africa. The investment was expected to empower an undisclosed South African vaccine producer to ramp up production of the Johnson & Johnson vaccine to over 500 million doses (planned by the end of 2022).

From FTAs such as the Africa Continental Free Trade Agreement

Intra-regional trade within Africa (as opposed to overseas trade) from 2015 to 2017 was only 15.2% of total trade, compared to 67% within Europe, 61% within Asia, and 47% within the Americas. While supply chain disruptions hampered the availability of COVID-19 testing kits, many African nations could develop home-grown solutions locally to address the issue. Africa Continental Free Trade Agreement (AfCFTA) was set up on January 1, 2021, with the intention of improving intra-regional trade of goods, including medical supplies. AfCFTA, the largest FTA after WTO, impacts 55 countries constituting a 1.3 billion population in an economy of US$3.4 trillion. Inadequate intercontinental collaboration is one of the primary restraints for medical supply chains. In order for health systems to fully capitalize on AfCFTA, partnerships with the African Union’s (AU) five Regional Collaborating Centers and current global healthcare organizations need to be increased.

From state governments

Sub-Saharan African countries have the highest MFN (most favored nation) tariff rate (9.2%) on medical goods, compared to developed nations’ tariffs (1.9%) as well as emerging economies’ tariffs (6.6%). However, out of 45 countries in Sub-Saharan Africa, only eight countries could remove or decrease import tariffs and value-added taxes on medical goods on a temporary basis to aid the public health situation during the pandemic in 2020, as per Global Trade Alert. These eight countries include Angola, Chad, Malawi, Mauritius, Niger, Nigeria, South Africa, and Zambia. In three of these eight countries, these measures had already expired as of April 2021. Furthermore, to promote intra-regional trade, 33 Sub-Saharan African countries provide preferential tariff rates of around 0.2% on average on some medical products. At the same time, the average MFN tariff rate for the same medical goods is around 15% for these Sub-Saharan African countries.

EOS Perspective

Since the demand for COVID-19 test kits was significantly higher compared to their supply, producers and suppliers had a higher bargaining power, because of which they set an extortionate price. However, that being said, African competition authorities did their best to curb the prices, although there was still room for more.

Secondly, policy changes need to be brought about at the state level to allow increased competition in the African markets, which in turn would lower the price of the tests. African governments need to consider a more patient-centric and consumer-protective approach wherein competition is likely to facilitate the launch and consequent market uptake of better-quality products available at lower prices.

Additionally, prices and costs of COVID-19 tests should be monitored on a regular basis. The underlying problem of inflated COVID-19 test prices is likely to cease only when competition in the PCR testing sector is encouraged, and government policies of pricing the tests are more patient-oriented.

Moreover, robust intra-regional trade coupled with strong local manufacturing and lower trade barriers is expected to help build Africa’s more sustainable health system.

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