This article is part of a series in which OECD experts and thought leaders — from around the world and all parts of society — address the COVID-19 crisis, discussing and developing solutions now and for the future. Aiming to foster the fruitful exchange of expertise and perspectives across fields to help us rise to this critical challenge, opinions expressed do not necessarily represent the views of the OECD.
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In the last few months, the European Union, United Kingdom, United States and India have utilised direct or indirect measures to restrict the export of COVID-19 vaccines or vaccine supplies. Companies that want to export them from the EU now have to seek permission from the country where production takes place, as well as the relevant departments the European Commission. The Italian government recently blocked a shipment of AstraZeneca’s COVID-19 vaccine destined for Australia. The EU is reportedly considering a proposal to stop vaccine shipments to countries which do not show “reciprocity” by allowing supplies to reach the bloc. Other countries such as the United States have used more subtle ways to prevent exports of vaccines, vaccine ingredients and equipment. There has been a lot of finger-pointing between the United States, United Kingdom, EU member countries and developing countries about disruptions to the natural flows in the vaccine supply chain.
The tension between actions to meet the vaccine needs of internal population versus preserving global trade, and the resulting decision dilemmas faced by political leaders, is understandable. However, from a supply chain perspective, the measures display a poor understanding of how global supply chains for vaccines and medical products tick. In fact, the goals of meeting internal vaccine needs faster and preserving the global flows in the supply chain are not necessarily in conflict.
Just after the start of the COVID-19 pandemic last year, export restrictions by China, India, the United States, EU and a host of countries and regions were the mainstay of policy interventions in the market for PPE, medical equipment such as ventilators and diagnostic tests. The only thing they contributed to was worsening the supply situation and further reinforcing the shortages of equipment, intermediate inputs and raw materials.
Supply chains to manufacture COVID-19 vaccines, key vaccine ingredients and auxiliary supplies such as syringes and vials are intricately global, and depend on a complex web of flows across countries. Input material, equipment for manufacturing, bulk vaccines and finished products flow back and forth between the United States, countries in the European Union, United Kingdom, Japan, China and India several times. For some vaccine developers, the production of drug substance and final product formulation, and “fill & finish” occur in different continents. For instance, the drug substance for Johnson & Johnson’s COVID-19 vaccine is manufactured in Europe, whereas most of its contracted fill & finish capacity is in the United States. Complex lipids required in the production of mRNA vaccines are manufactured by a small number of suppliers located in Austria, Germany, Canada, and the United States.
EU export restrictions on vaccines and vaccine ingredients, or measures that create additional supply chain frictions, will hurt the medium-term availability of vaccines to populations not only in the EU but also in all countries. Similarly, if the United States bans exports of vaccine manufacturing equipment, such as single-use reactor bags and filtration equipment, it not only hurts the current production of COVID-19 vaccines but also delays the start of additional manufacturing capacity around the world. Or if India—a large manufacturer of vaccines through manufacturing partnerships with vaccine developers—directs more of its supplies to meet domestic demand, it will hamper global efforts to COVID-19 vaccination, especially in low- and middle-income countries.
Furthermore, as pharmaceutical companies and contract manufacturers are working to ramp up their manufacturing and supply networks globally, they face a complex series of interacting choices about where to locate their suppliers and production plants. Countries with export restrictions become less attractive locations, not only for vaccine manufacturing but also for large multi-product biologics manufacturing facilities. Manufacturing facilities, which are most likely to come under the threat of export blockage, cannot operate as part of a global supply network that needs unlimited flexibility. The risks of government intervention and trade controls will become an important factor when companies locate their future manufacturing sites.
Instead of export controls, the focus should be on increasing vaccine production in all locations where it is technically feasible and economical. Much of the production of vaccine ingredients and vaccines is concentrated in OECD countries, and their governments should play the role of capacity expansion enablers for the vaccine producers. They can help them expand their critical raw material and consumable supplies, fostering co-production deals between competing manufacturers, and provide support if other bottlenecks arise.
If all OECD countries agree not to impose supply chain barriers that will hamper a co-ordinated global response, the vaccine supply chain will produce and deliver more vaccines to all. Vastly expanded vaccine supply is a global public good that will help all OECD countries and the rest of the world.
Prashant Yadav is a Senior Fellow at the Center for Global Development, Affiliate Professor at INSEAD and Lecturer at Harvard Medical School. He is a recognised scholar and policy advisor in medical supply chains.
Jan C. Fransoo is Professor of Operations and Logistics Management at Tilburg University’s School of Economics and Management in Tilburg, the Netherlands. He is the author of several books on supply chain management and serves as a supply chain advisor to private companies and national governments.
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