A few weeks ago it was World Immunization Week. Soon after that, the WHO announced that the COVID-19 pandemic was no longer a public health emergency of international concern (PHEIC). WHO staff were keen to clarify that this does not mean that the pandemic is over, but it is a happy development nonetheless.
Now is a good time to look back and set out a few key points to consider for those that have any interest or involvement in big medicine supply or manufacturing agreements.
The European Commission publishes the 'Advanced Purchasing Agreements' it has agreed for the supply of COVID-19 vaccines. This article will consider a selection of interesting issues that the published APAs point towards.
Setting up the manufacturing and supply of complex medicines requires a major investment in time (time being one of the things in short supply). Even if the technical set-up were quick and easy, it could still take a significant amount of time before commercially saleable batches are ready for release to market. Then, just when you think the hard work has been done, the product must get from a manufacturing facility somewhere in the world to a patient, who may be located far away; and that product must be in good condition when it arrives. If you add the loud voices of governments, media, patient groups, regulators and competitors, then it is fair to say that the job is not for the faint of heart.
If a customer wants to secure medicine supplies when the markets and patients are ready to receive them, it will need to make significant commitments before the desired product and its manufacturing process have been proven. This means that there is a tricky balancing act in which customer and supplier must apportion some big risks (such as unsuccessful product development and unused manufacturing capacity) while looking forward to potential big rewards for both parties. Short term and long term positions and interests should be analysed carefully (for example, the risk of delay at the commercial stage may make the risk of paying for unused capacity seem trivial).
The Commission showed us a good rule to remember for each negotiation. With its approach to procuring vaccines on behalf of member states (subject to an opt out), it considered its practical and financial objectives and then sought to maximise its purchasing power and look for economies of scale. In your deal, think about who will be able to use the supply chain that is established. Bigger quantities equals better bargaining power - which is why you will sometimes hear the laments of customers needing small scale manufacturing support. From the supplier's perspective, big quantities may come up against capacity or throughput limitations, and meeting orders may depend heavily on predictability. Ensure that the contract clearly identifies the point when indicative demand forecasts turn into binding orders.
Each country has a stock of facilities that process medicines (and here "process" is used in the widest sense covering manufacturing, packaging, testing and releasing of API, excipients and final product) and distributors and logistics providers that move them around. They are a finite resource. And they do complex things with complex and expensive machines. The result is that the business that owns the required resource may be in a strong position and customers may need to accept adverse legal terms and sit in a long queue for very expensive ride. Therefore, it is important to secure available capacity as soon as possible, while avoiding paying for nothing if the capacity is not needed for the originally intended purpose. Easier said than done.