For companies prepared to cut the costs of their medicines for the developing world, there’s more in it than a warm glow of doing good

Public and private donors from around the world have pledged more than £2.6bn to help immunise more than a quarter of a billion children in developing countries by 2015.

Joining in the fun, UK prime minister David Cameron pledged £814m at the Global Alliance for Vaccines and Immunisation (Gavi) conference in London in June, while Bill Gates pledged £600m on behalf of the Bill & Melinda Gates Foundation.

A number of drug manufacturers have also committed to lowering prices on vaccines against some of the major killer diseases in the developing world. India-based firms Serum Institute and Panacea Biotec have committed to price cuts on their pentavalent vaccines, which protect against diphtheria, tetanus, pertussis and hepatitis B, among other illnesses.

GlaxoSmithKline has offered to provide the rotavirus vaccine to Gavi at $2.50 per dose, or $5 to fully immunise a child – a 67% reduction in the current lowest available public price. Merck has also announced that it will offer its rotavirus vaccine to Unicef at discounted prices. 

Good for business 

Gavi’s Ariane Leroy says that, rather than being purely a charitable exercise, there are business benefits for manufacturers that wish to participate. Gavi strongly believes in the principle of lowest sustainable pricing, so that multiple manufacturers have an incentive to develop and supply products for Gavi countries, Leroy says. “As companies that produce these vaccines become more efficient over time, they are able to reduce the unit cost of production.”

In addition, the high volumes purchased through Gavi funding enables manufacturers to benefit from economies of scale, which can further decrease their price offers.

Allan Pamba, director of public engagement and access initiatives at GSK, agrees. He says: “GSK is committed to increasing access to our medicines and vaccines for people, no matter where they live. We believe this is the right thing to do and that it will contribute to our business success in the long term.”

For GSK, it is not an act of philanthropy, Pamba says. The company is changing its business model “to enable us to make our medicines and vaccines as affordable as possible to as many people as possible in developing countries, in a sustainable manner”.

For companies such as GSK, it is essential to achieve a balance between profit-making and sustainability. “It is important to ensure we make enough profit to be able to deliver a return to our shareholders and to continue to invest in R&D to discover the vaccines of tomorrow and provide jobs for our employees, while increasing access to our medicines and vaccines in the developing world,” says Pamba. This means implementing a tiered pricing structure, with prices aligned to a country’s ability to pay.

A tiered pricing model means that companies can make larger profits in developed countries. They can then re-invest in research and development for new products. In other words, R&D is funded by tiered pricing from developed countries.

But safeguards are required to ensure that low-cost vaccines don’t find their way to the black market. GSK’s precautionary measures include monitoring for unusual sales activity, and using only trusted distributors. “This can, of course, only go so far but we believe that the potential benefit of low-cost vaccines for people in developing countries outweighs the risk,” Pamba says.