Healthcare is a basic human right. The constitutional mandate of the Department of Health is to provide healthcare services in response to the needs of the people of South Africa within available resources. Given the strain on currently available resources, the department has established an efficient and effective contracting mechanism for vaccines and medicines. Furthermore, the contracting mechanism is aligned with all National Treasury regulations and prescripts.
To enhance and uphold cordial relationships with manufacturers, the Department of Health has consistently adopted a proactive approach to addressing relevant issues directly with manufacturers and key stakeholders, prioritising direct engagement over public debate through the media.
Recently, there have been a number of news reports criticising the National Department of Health for awarding a contract for the pneumococcal vaccine (PCV) used in the Expanded Programme on Immunisation (EPI) to an Indian manufacturer (providing PCV10) in preference to a local manufacturer, Biovac (providing PCV13).
While this matter was discussed in detail with Biovac and other arms of government, the negative media reports persist.
Read more in Daily Maverick: Foreign vaccine procurement threatens local production
Unfortunately, one headline suggested that the vaccine awarded to the Indian manufacturer is inferior to the vaccine offered by Biovac. This implies that government provides inferior vaccines and medicines to the people of South Africa.
All vaccines and medicines used in South Africa, whether in the public or private sector, must be registered with the South African Health Products Regulatory Authority (Sahpra).
Sahpra evaluates and approves every product for safety, efficacy and quality. This includes the product which was contracted for by the department.
The specific requirements for the PCV vaccine in the advertised tender document called for a multivalent vaccine containing a minimum of eight pneumococcal serotypes. The vaccine that was awarded contains 10 serotypes and the bid offer from Biovac contained 13. While the PCV13 from Biovac contains three additional serotypes, the strains not included in the PCV10 constitute a low percentage of pneumococcal disease in South Africa.
The department will continue to monitor the incidence of pneumococcal disease through existing surveillance systems. This data will be considered in preparation for the next EPI tender to ensure that the department continues to make evidence-based decisions and continue to ensure access to safe, effective and quality vaccines.
Local manufacturing
The terms “local manufacturing” and “local production” conjures images of the entire manufacturing process being local – from the production of the ingredients (drug substance in the case of vaccines and active pharmaceutical ingredients in the case of medicines) to the packaging material.
In reality, the local manufacture of the vaccine is currently limited to what is known as “fill and finish” — the filling of vials with drug substances imported from international manufacturers, and packaging of the product for sale. Currently, there is no local production of drug substances used in vaccine manufacture for the vaccines used in the EPI.
In the same way, locally manufactured medicines are formulated using active pharmaceutical ingredients, which are also imported.
There is also the perception that local production of vaccines and medicines would make the country less reliant on foreign manufacturers. This would be true if the drug substance and active pharmaceutical ingredients are domestically manufactured. However, this is not the case, and South Africa still depends on foreign manufacturers and suppliers to produce vaccines and medicines that are considered to be locally manufactured.
The drug substance or active pharmaceutical ingredients account for up to 75% of the cost of the vaccine or medicine. For example, if a unit of vaccine or medicine costs R100, and 65% of the cost of the medicine is attributable to the drug substance or active pharmaceutical ingredient, then R65 of every unit procured by the Department of Health goes out of the country.
If elements of the packaging material are also imported, the overall value of the imported component increases further. It is reported that Biovac (the local manufacturer) has partnered with Pfizer Laboratories since 2015 to produce the PVC13. Presently, Pfizer Laboratories holds the certificate of registration for the vaccine.
In the General Regulations to the Medicines and Related Substances Act, 1965 (Act 101 of 1965), the “holder of a certificate of registration” means a person in whose name a registration certificate has been granted and who is responsible for all aspects of the medicine, including quality and safety and compliance with conditions of registration. Thus Biovac, the local manufacturer, does not hold the registration certificate for this vaccine.
Despite investments that have been made in Biovac over two decades by the government of South Africa, various multinational organisations such as Pfizer Laboratories, and the Bill and Melinda Gates Foundation, the expected industrialisation and technology advancement has not translated to South Africa being able to produce a wholly locally manufactured vaccine where the holder of a certificate of registration is the local manufacturer, e.g. Biovac.
The Department of Health’s policy is to support local manufacturers as far as possible, provided this support offers value for money (and is affordable) and does not negatively impact the security of supply.
Furthermore, there is an expectation that the department should pay a price premium for locally produced vaccines and medicines. The intention is that the value add of paying a premium should offset the additional cost.
However, the department does not have an unlimited budget for vaccines and medicines, so the question arises: Who should be funding the additional cost? It is recommended that financial mechanisms be sought to counterbalance the lack of price competitiveness of locally produced vaccines and medicines.
Biovac also reported that they were not given an opportunity to review their bid price. The department’s standard practice is to negotiate prices with all local manufacturers who submit responsive bids without any material deviation from the requirements and the terms and conditions of the proposed contract.
However, for PCV13, Biovac did not comply with the Special Requirements and Conditions of Contract, and therefore did not proceed to the bid evaluation phase where price negotiations would have been possible. The department will not deviate from government’s procurement rules.
Numerous international vaccine and medicine manufacturers are a part of South Africa’s local industrial landscape. Despite the fact that these businesses may not be perceived as local, their presence plays an important role in offering employment opportunities and fostering skills development. Their investments and operations in South Africa reflect a commitment to the growth and development of the local sector, with demonstrable advantages for the economy and labour force.
The participation of multinational manufacturers in the local manufacturing process should not be undervalued despite the fact that the term “local manufacturing” is often associated with domestic companies. Their participation contributes to the larger goal of fostering a vibrant, competitive and sustainable manufacturing ecosystem in South Africa.
Giving priority to locally produced products should be carefully considered in the context of budget constraints.
As an example, the substantial saving achieved by awarding a contract for PCV10 to Cipla allows the department to introduce two new vaccines into the EPI, including Measles-Rubella (MR) vaccine and Tetanus-Diphtheria and acellular Pertussis (TdaP) vaccine. By doing so, the department can bolster its services for vaccine-preventable diseases, thereby increasing the potential to save more lives without imposing any additional financial burden on the taxpayer.
This exemplifies the department’s commitment to enhancing health outcomes within its existing resources, particularly in safeguarding children and pregnant women against a wider range of diseases. It counters the insinuations made in certain articles that the department would settle for less advanced vaccines.
In the award of contracts for antiretroviral (ARV) agents used to manage HIV, 95% of products were awarded to companies deemed local manufacturers, accounting for more than 70% of the value of awards.
The award of contracts in terms of the ARV tender resulted in significant savings for the department, given the competitive environment in the market. As a result, the South African government can fund the largest ARV programme in the world and provide access to millions of people requiring treatment and care. However, despite the awards to local manufacturers to formulate medicines, they continue to rely on imported active pharmaceutical ingredients.
If a price premium in excess of what may be deemed acceptable was to be paid, less funds would be available to the department for other priority programmes, including HIV and TB, or for funding of posts which would need to be frozen until sufficient funding becomes available. This will have an impact on service delivery and is contrary to the mandate of the department.
The Department of Health as a government procurer of goods and services has an obligation to ensure that all procurement is aligned to the Five Pillars of Procurement:
- Value for Money
- Open and Effective Competition
- Ethics and Fair Dealing
- Accountability and Reporting
- Equity
Giving undue priority to locally manufactured products may create a market environment which contradicts the principles above.
The additional risk is creating a monopolistic environment in which government, as procurer, is forced to be a price-taker leading to further budgetary inefficiencies. Furthermore, the success realised with the award of the ARV tender would not have been possible.
South Africa’s dependence on imported components necessitates financial mechanisms to balance the lack of price competitiveness of some local manufacturers. The department’s procurement policy remains consistent, and savings achieved with strategic contracts have allowed for the introduction of additional vaccines, exemplifying its commitment to improved health outcomes.
However, prioritising local products must consider budget constraints and procurement principles. Therefore, the department emphasises accountability and equitable healthcare delivery while encouraging collaboration and effective partnerships to address healthcare challenges.
The Department of Health will continue to collaborate with other government departments and local manufacturers to enable the local manufacturing of vaccines and medicines that is sustainable, affordable and in line with the needs of the country.
In conclusion, the Department of Health reaffirms its commitment to providing accessible healthcare within available resources.
While supporting local manufacturers is important, it must be executed cost-effectively while ensuring the security of supply. The department will continue to prioritise direct engagement with manufacturers and stakeholders in these important matters. DM
Prof N Crisp is DDG: NHI in the National Department of Health; Ms K Jamaloodien is Chief Director: Sector Wide Procurement, National Health Insurance, National Department of Health; Mr R Botha, Technical Adviser to National Department of Health, Chief of Party: Global Health Supply Chain – Technical Assistance; Ms M Schonfeldt, Pharmaceutical Policy Specialist, Expanded Programme on Immunisation (EPI), National Department of Health.