CIAO DATE: 04/05

Demand Policy Instruments for R&D: Procurement, Technical Standards and The Case of Indian Vaccines

Abstract

Vaccines represent a nearly $8 billion global industry today, which is projected to grow to $10 billion in 2010 (PhRMA, 2001). In 2001, worldwide spending on R&D for “biologicals,” of which vaccines are the largest segment, was $1.1 billion (about 4% of total private pharmaceutical R&D) (PhRMA, 2001). Although vaccines comprise only 2% of the global pharmaceutical market, it is indispensable for public health immunization the world over. Yet, at the same time, the number of private vaccine suppliers in advanced industrialised countries is shrinking (in the US alone, there were over twenty vaccine suppliers until the 1970s and now approximately five exist); firms in developing countries must pick up some of this slack, especially for vaccines that are especially important for diseases prevalent in developing countries.

A slew of regulations surround the domestic production as well as subsequent export of the products and processes of this sector. Technical regulations and standards are important for the production and use of biological substances, such that not only do such products and processes have to be compatible with domestic standards, but a country that chooses to administer nationwide vaccine programs often has to comply with international standards, even if the vaccines are not being exported. In addition, as if there were not enough challenges facing developing countries, the World Trade Organisation’s various Agreements, preclude entirely open-ended support by developing country governments for domestic firms. Public health has some limited flexibility in the current multilateral regime as an issue of national interest. It should thus be investigated further in terms of its technological and institutional implications for R&D and innovation.

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