Vaccine pain is global companies' gain

Following the suspension of local suppliers, GSK and Johnson & Johnson may win contracts

Despite Chinese health authorities' claim that there is no link between hepatitis B vaccinations and several babies' deaths, parents' confidence in domestic vaccinations has been shaken - and that is improving the outlook for overseas drug companies.

The deaths of 17 children from across the country were reported late last year. Health authorities issued a statement this month confirming that the separate deaths were due to various other reasons.

However, many people "are willing to pay more for the higher quality and safety of imported vaccines", says Guo Wei, an analyst with Ipsos, the global market-research company.

Chinese parents have long opted for domestic vaccines, as the cost of immunizations is mostly covered by the government through the National Immunization Program. But many are now deciding to pay directly for expensive imported vaccines.

Chen Chen, a 27-year-old mother in Hunan province, says she will seek more information about overseas vaccine producers and then make a "prudent" decision for her 6-month-old son.

"Overseas vaccine makers are barred from the Class I market, which is supported by the government through the National Immunization Program," Guo says.

Some overseas firms, such as Switzerland-based pharmaceutical company Novartis AG, have moved into the market through mergers and acquisitions. But they are limited in terms of local manufacturing.

But in the non-NIP Class II market, overseas producers see a potential market. And they can cooperate with the government to serve more consumers who are willing to pay higher fees.

British pharmaceutical giant GlaxoSmithKline Plc and Berna Biotech, a division of Johnson & Johnson, are major players in China's hepatitis B vaccine market.

"But they only participate in the non-NIP Class II market, which costs more and is paid out-of-pocket. Their market shares are estimated to be in the single digits," says Bruce Liu, partner and co-head of the pharmaceutical and health care practice at Roland Berger Strategy Consultants.

The crisis of confidence in domestic vaccines is offering multinationals a rare chance to play an important role both in the Class II market and conceivably in the NIP, such as working with governments, non-governmental organizations and charitable foundations, Liu says.

Liu suggeststhat multinational companies can also consider licensing out new vaccine technology to reputable local partners in exchange for revenue sharing, market access and goodwill.

GSK, which reported a slide in its China pharmaceuticals and vaccines business after the company became embroiled in a series of bribery scandals, may see a rebound.

Ma Yuan, corporate communications manager at GSK China, says it is too early to predict any trend.

"But GSK has licensed more vaccines in China than any other global manufacturer," she says.

GSK will continue to invest in manufacturing, developing and commercializing of high-quality, innovative vaccines, the company says.

Hepatitis B vaccines sold in China are produced mainly by seven companies, including GSK. Only two have passed China's new good-manufacturing practice certification, and these two companies have less than 10 percent of the market.

However, given local majors' failure to pass the GMP certification process, there will be a big market share shift, analysts says.

China's hepatitis B vaccine market amounted to about 100 million doses last year, Liu says.

"We can foresee a shortage of hepatitis B vaccine in 2014, given the simultaneous absence of the three local majors in the coming months, combined with additional newborns under the newly relaxed one-child policy."

Since two domestic makers - North China Pharma Corp and Hualan Biological Engineering Inc - have obtained GMP certification, they are stepping up to close the supply-demand gap.

United States-based Merck & Co Inc initially provided hepatitis B vaccine to Chinese majors when the company sealed a deal with the Chinese government in 1989.

Merck said in an announcement on Dec 23 that it does not make or sell hepatitis B vaccine in China, and it also doesn't supervise production by Chinese vaccine companies.

Seventeen deaths were reported following vaccinations using BioKangtai products from Dec 13 to Dec 31.

The China Food and Drug Administration says no problems had been found with BioKangtai vaccines in terms of production practices or product quality earlier this month.

However, just two days before the clarification, China's three biggest hepatitis B vaccine manufacturers - BioKangtai, Beijing Tiantan Biological Products Co and Dalian Hissen BioPharm Co Ltd - were reported to have failed to obtain GMP certification for 2013.

In an effort to further regulate drugmakers, authorities say those who did not conform to the code must suspend production this year.

The suspended production of the three major suppliers of free hepatitis B vaccines, which account for more than 90 percent of the market, deepened the sense of crisis among consumers.

Chen, the mother of the 6-month-old, took her baby to the hospital for a third shot of hepatitis B vaccine.

"I asked for detailed information about the manufacturer of the vaccine. When the nurse told me it was produced by Beijing Tiantan, I felt assured."

However, a few days later, reports surfaced about infant deaths allegedly linked to hepatitis B vaccines produced by Beijing Tiantan.

"I'm concerned that the three shots may have a negative impact on my son. I wish I'd known that I could choose a specific vaccine producer," Chen says.

According to the Chinese Center for Disease Control and Prevention, all infants should receive hepatitis B vaccine, as this is the mainstay of hepatitis B prevention.

yaojing@chinadaily.com.cn

( China Daily Africa Weekly 01/24/2014 page21)