Names of medicines, vaccines and pharmaceutical companies have seeped into daily conversations. In the past, people cared so little about exact names of vaccines, injections or pills that they were given, not to mention details of manufacturer or even their locations. That has all changed thanks to the Covid-19 pandemic, which has triggered a shift in medication-taking behaviours. Names of the world's largest pharmaceutical companies, most of which are concentrated in the United States, followed by China, Japan, and European countries, have become more widely known, with the most familiar being Roche, Novartis, Merck, and Bristol Myers Squibb.
Therefore, it is better to know more about the trade and supply chain of the pharmaceutical industry. Operations of a pharmaceutical company can be divided into five key processes: 1) research and development, 2) experimentation and testing, 3) manufacturing, 4) distribution, and 5) marketing and sales. Besides mergers and acquisitions (as evident in the increasingly longer names of these companies), two prominent trends in the past 10-20 years are outsourcing and offshoring.
Outsourcing is the delegation of certain internal activities to an external organisation or agency, while offshoring refers to the relocation of operations from one country to another.
Rising R&D costs as well as the need to move their operations closer to the targeted markets have prompted many pharmaceutical companies to increasingly outsource and offshore their manufacturing (as well as R&D for some companies) to Asia, with some opting to hire OEMs (original equipment manufacturers) to produce their medicines.
A common practice in various industries (such as automotive and electronics), original equipment manufacturing generally involves a manufacturer with the required equipment and tools who manufactures products to be later branded by its clients. With drugs, pharmaceutical companies also transfer manufacturing technology to OEMs -- a process that takes at least one year in most cases -- as well as control the quality of the products to ensure they meet relevant standards. However, the distribution is completely overseen by the pharmaceutical companies.
Since the onset of the Covid-19 pandemic, vaccine manufacturers have increasingly outsourced and offshored their manufacturing to OMEs (especially in Asia), with Moderna entering into an OEM agreement with a producer in South Korea (Samsung Biologics), Johnson & Johnson with a manufacturer in India (Biological E), and AstraZeneca with manufacturers in several Asian countries (China, India, and Japan), including Thailand's Siam Bioscience.
Siam Bioscience offers an interesting case study, especially with regard to technology transfer. Merely half a year after it had been selected as an OEM for AstraZeneca's vaccine, the company successfully completed its technology transfer and began producing vaccines that met international standards despite the complete novelty of the vaccine. As the controlling of quality, consistency and safety was of paramount importance in this process, this should benefit Siam Bioscience's future technology transfer.
However, an OEM's role is to produce and deliver all products to the pharmaceutical company who owns the technology. As a technology recipient and manufacturer, Siam Bioscience is obliged to deliver all the vaccines it produces solely to AstraZeneca, which then sells them to the governments with which it has entered into agreements.
While Covid-19 has decentralised vaccine manufacturing to more parts of the world, the World Health Organization's executive board has pushed for more development of vaccine production capabilities among manufacturers across the world since 90% of all vaccines come from the United States, Europe, China, and India. However, given the difficulty and complexity involved in technology transfer, ultimately only a handful of manufacturers can equip themselves for vaccine production, which has caused manufacturing to concentrate in only a few regions, potentially leading to healthcare problems when another pandemic hits in the future.
With Covid-19 cases on the rise and limited vaccine supplies, having a domestic manufacturing base will offer Thailand some security against vaccine procurement issues faced by many countries without ones. While this benefit does not compare with the advantages enjoyed by countries with proprietary technology as well as research and development, Thailand's first-ever technology transfer is a testament to how far the country has progressed.
Given the long and complex value chain of the pharmaceutical and vaccine industry, it should be clear now that Thailand cannot simply wait to receive donations or wait to purchase vaccines from other countries. If we aspire to become a medical hub with drug and vaccine security, having an OEM who has been a technology recipient will serve as a crucial step that will enable us to develop and produce medicines and vaccines like many other countries, such as South Korea, whose current success comes from this very same starting point.
Assoc Prof Pasu Decharin, PhD, is lecturer at Faculty of Commerce and Accountancy, Chulalongkorn University.