This chapter focuses on additional actions needed to anticipate and mitigate the impact of severe crises on medical supply chains. These actions go above and beyond the foundational supply security policies already discussed in the previous chapter. First, this chapter explores how to be better prepared for faster and more agile responses to crises. It then describes mechanisms to mitigate the risk of shortages and ensure equitable access to existing and newly developed technologies that populations need. This chapter has a focus on co‑operation among governments and collaboration with the private sector.
Securing Medical Supply Chains in a Post-Pandemic World
OECD Health Policy Studies
3. Developing additional crisis capabilities
Abstract
Key findings
Anticipating and mitigating the impact of a severe crisis on medical supply chains requires additional efforts, building on the initiatives to anticipate, avert and mitigate the impact of shortages described in Chapter 2, to (1) prepare for more rapid responses and to (2) implement mechanisms to reduce the impact of the crisis on population health (see Figure 3.1 for an analytical framework). International co‑operation and close collaboration between the private sector and governments are important to ensure a cohesive, collective, and efficient response.
Preparedness plans should include specific measures to address supply chain issues. Stakeholders could work on the establishment of processes and criteria for defining lists of critical products specific to different emergency situations and to put in place mechanisms to monitor international and regional flows of the selected products. These lists could also be used for cross-county pooled procurement, for example at the European level. Policy makers could also agree in advance on rules and processes to deploy appropriate regulatory flexibilities or requirements in times of crisis to ensure needed products can be distributed without compromising quality.
Policy makers should also ensure that mechanisms are in place to facilitate worldwide access and fair allocation of existing technologies, and to support R&D efforts and encourage technology transfer of technologies developed during the crisis (such as new vaccines or treatments).
Countries should agree on mechanisms to co‑operate, share information on supply and demand, and refrain from exacerbating supply chain issues through panic buying and export restrictions. Multilateral or regional trade agreements or mutual recognition agreements (MRA), for example, could contain health-related provisions encouraging countries to co‑operate to ensure the continuity of supply of medical goods.
Policy makers may need to support the expansion of production capacity in cases of surging demand and mandate the prioritisation of the medical sector for the supply of raw materials and electronic components by subcontractors. Preparing and implementing appropriate legislation in advance would facilitate rapid responses by policy makers and other stakeholders.
Governments may need to support the development of new vaccines and treatments in response to specific crises. In doing so, they should reinforce existing mechanisms to facilitate equitable access, such as knowledge sharing, voluntary licensing, and technology transfer, using mechanisms that can be activated immediately in the event of a crisis.
Figure 3.1. Analytical framing of policies to improve medical supply chain security
Note: API active pharmaceutical ingredient. “Routine circumstances” refers to routine or “business as usual” situations in which minor or major supply disruptions occur absent a major crisis. Severe crises refer to major events (e.g. pandemic, other type(s) of major events or health threats).
Chapter 3 focuses on policies to address sudden surges of demand due to regional or global crises. While the policies outlined in Chapter 2 are at the foundation of building more resilient supply chains, anticipating and mitigating the impact of severe crises on supply chains requires additional effort. The objective is to be better prepared for faster and more agile responses (Section 3.1) and to ensure equitable access to the (existing and newly developed) technologies that populations need (Section 3.2) – Annex A supplements discussions in this Chapter, presenting examples of national and cross-country initiatives. For minor disruptions (e.g. a severe seasonal influenza season), firm inventories may be adequate and there may be no need for governments to intervene. More serious crises (e.g. epidemics, localised natural disasters) may require additional capacity, and governments will have a role in complementing the actions from the private sector. In an extreme crisis (e.g. a global pandemic), these strategies will be inadequate to avert disruptions, and standby capability will be required (Sodhi and Tang, 2021[1]). Governments have a central role in organising emergency supply chains and working with industry and relevant international organisations, if necessary, to develop these additional capabilities in advance.
3.1. Preparing for severe crises
To deal with major crises, governments need to develop plans for different types of future health crises in which they identify their role in securing access to essential products and clarify the organisation of emergency supply chains with the private sector. In doing so, the role of governments in securing access before crises take place may be seen as threefold.
First, governments need to incorporate supply chain issues in their general and health-specific risk prevention strategies. This is where reviews of vulnerabilities and assessments of potential additional capacity are relevant and can be undertaken jointly with the private sector. The sharing of information is key to ensuring that governments know in advance the nature and extent of disruptions and fluctuations in demand that can be absorbed by private sector risk management strategies, and those that will require government intervention. Some investment in monitoring information systems may also be needed to enable governments to assess the severity of a health crisis in terms of security of supply and identify when emergency plans have to be deployed.
The second role of governments is to produce clear guidelines that define risk management structures, processes, and responsibilities, so that when a crisis occurs, procedures can be immediately triggered without the need to define roles and responsibilities. These guidelines can also help the private sector in organising its own risk management strategies and knowing what to expect in a crisis. Guidelines pertaining to access to essential medical products can include emergency procurement procedures (such as centralising the purchase of emergency supplies, undertaking centralised price tracking and quality verification, etc.); template agreements that can be used with domestic and foreign suppliers; descriptions of communication channels; and methods by which firms can access regulations and decisions adopted as part of emergency procedures.
The third and most complex role of governments is to create an “industry commons”1 (Sodhi and Tang, 2021[1]) and to enter into upstream agreements and advanced planning with firms on emergency supply chains and the repurposing of existing manufacturing capacity. Large‑scale crises involve spikes in demand that cannot be addressed by stockpiling strategies and regular risk management strategies. Production has to be ramped up to levels well beyond normal market demand and this requires the deployment of manufacturing capacity. Planning for repurposing in advance, and having agreements in place with firms to do so, is the most efficient way of preparing for large‑scale crises. However, this requires close co‑operation with the private sector and firm-specific partnerships and contracts that are challenging for governments to put in place, especially when there is no crisis, and investing resources in such efforts may not appear as a priority.
The sections below highlight the need to consider supply chain security explicitly in preparedness plans (Section 3.1.1), to define governance and processes to establish lists of critical products tailored to specific health emergencies (Section 3.1.2), and to enact additional regulatory flexibilities or requirements to respond to large scale events (Section 3.1.3).
The importance of enhancing medical supply chain security and preparing for future crises is recognised in international co‑operation fora (G7, G20, International Health Regulations) (see Box 3.1).
Box 3.1. Securing medical supply chains is a priority in international co‑operation fora
G20 and G7
The G20 meetings hosted by Indonesia (2022) and India (2023) were instrumental in fostering global co‑operation among the world’s largest economies in order to address supply chain issues in the aftermath of the COVID‑19 pandemic. According to the chair’s summary of the 2023 Health Ministers meeting, one of the three focus areas of work was “Strengthening Co‑operation in the Pharmaceutical sector with focus on availability & access to safe, effective, quality and affordable Medical Countermeasures – VTDs (Vaccines, Therapeutics, and Diagnostics)” (G20, 2023[2]). With respect to medical supply chains, ministers prioritised discussions that recognised the need for a broader manufacturing base for essential products, particularly in developing countries. The strengthening of local and regional health product manufacturing capacity and co‑operation was highlighted as a relevant concern. The summary also encouraged the development of multi-stakeholder collaboration to promote R&D, diversify manufacturing networks, and strengthen the resilience and transparency of global supply chains. It recognised the relevance of inter-agency work and partnerships in global health, such as GAVI, CEPI, and the Global Fund, and their collaborations with WHO, UNICEF and member states.
Unlike those of the G20, recent G7 meetings have not focused specifically on the topic of medical supply chains. During the 2023 G7 Health Ministerial meeting held in Nagasaki, Japan, participants emphasised the importance of multi-stakeholder engagement to promote equitable and rapid access to safe and effective medical countermeasures (Ministry of Health, Labour and Welfare, 2023[3]). The WHO Access to COVID‑19 Tools Accelerator (ACT-A) was underscored as a strong example from which countries could draw insights. Although medicines were not mentioned explicitly, G7 leaders focused their discussions on measures to improve the security of supply chains to avoid dependency on one or only a few countries for essential products. The 2021 G7 Health Ministers meeting was an important forum for discussing the relevance of strengthening global supply chains to increase and diversify the production of COVID‑19 vaccines, and to recognise the threat posed by shortages and the lack of diversified supplies of antimicrobials.
Reforms of the International Health Regulations (IHR) and the development of a new Pandemic Treaty
With the onset of the COVID‑19 pandemic and the recognition of shortcomings in international co‑operation to address global health threats, WHO and its member states initiated a process to draft and negotiate a new agreement on pandemic preparedness and response. The process is being led by an intergovernmental negotiating body (INB), representing all regions of the world. In February 2023, the INB released its “conceptual zero draft” of the text, capturing the key topics to be discussed further by negotiators (WHO, 2023[4]). Article 6 of the document proposed the establishment of a WHO Global Pandemic Supply Chain and Logistics Network, within which parties would co‑operate on assessments of supply vulnerabilities and implement agreed policies in the event of a future pandemic. Proposed measures include examining the types and volumes of products to be included in collective stockpiling schemes; mapping manufacturers and suppliers of strategic medicines and estimating demand; identifying the most efficient multilateral purchasing mechanisms (including pooled procurement schemes); and developing a system to ensure the fair allocation of products. The text also includes provisions committing the parties to refrain from imposing regulations that affect the trade of pharmaceutical raw materials and ingredients. The INB is expected to submit its final document to the World Health Assembly in May 2024 (WHO, 2023[5]).
In accordance with the World Health Assembly Decision WHA75(9) on Strengthening WHO preparedness for and response to health emergencies, and in parallel with the development of a new pandemic treaty, a WHO working group with representatives from all member states has been studying potential amendments to the International Health Regulations (IHR) (2005) since October 2022. The IHR is a legally binding international law instrument which defines countries’ rights and obligations during public health emergencies of international concern and determines specific rules in regard to health measures for international travellers and goods. The latest amendment proposals were submitted by a wide range of WHO member countries and considerably increase the scope of the IHR, including the addition of measures to ensure the supply for essential products (WHO, 2022[6]). For example, WHO would be responsible for carrying out assessments of the affordability and availability of health products required to respond to the international health threat, and to develop allocation plans to ensure equitable access for all parties to the IHR. More complex topics, such as the recommendations for exemptions in national intellectual property regulations to facilitate the manufacture and export of health products, are also present in the draft text. The proposed amendments are currently undergoing technical review by the WHO secretariat and should be considered by member states during the 77th World Health Assembly in May 2024.
3.1.1. Including supply chain security in preparedness plans
Prior to the COVID‑19 pandemic, several OECD countries had undertaken some degree of pandemic preparedness planning. Of 23 countries who responded to the OECD Resilience of Health Systems Questionnaire 2022, 91% stated that they had a national plan motivated by WHO recommendations (70%), strong national/political will (61%), and their experience of the 2009 H1N1 pandemic (61%). Many of these included provisions with respect to testing and laboratories (~70%), stockpiles of vaccines and medicines (about two‑thirds); personal protective equipment (PPE) procurement and logistics (~50%), vaccines and other medicines’ logistics during the pandemic (~40%) and respirators supply strategies (~40%). A smaller proportion had planned for emergency approval processes for vaccines and medicines (~30%), vaccine and other medication R&D (~30%), and PPE production and/or trade (~30%). About half of these plans included a strategy for international co‑operation (OECD, 2023[7]).
In Europe, the Health Emergency Preparedness and Response Authority (DG-HERA), part of the European Commission, was established in 2021 to ensure the availability of medical countermeasures (MCMs) in the event of future public health emergencies. In terms of preparedness, HERA works on the identification and assessment of different types of potential threats (i.e. pathogens with pandemic potential; chemical, biological, radiological and nuclear threats; and antimicrobial resistance) and on the organisation of epidemiological surveillance. It supports R&D for the development of medical countermeasures, and works with industry to identify potential vulnerabilities in supply chains and to prepare for capacity expansion for manufacturing of MCMs in case of need. HERA also works on the preparation of critical lists of medicines and medical devices needed to respond to crises (see Section 3.1.2 below) and for inclusion in EU-wide stockpiles. HERA publishes annual reports on the State of Health Preparedness (European Commission, 2022[8]).
At the 2021 North American Leaders’ Summit (NALS), leaders from Canada, Mexico and the United States agreed to convene a Public Health Supply Chain Dialogue under the North American Plan for Pandemic and Animal Influenza (NAPAPI) Health Security Working Group. This Dialogue took place on 10 November 2022. Representatives from the three countries convened to discuss challenges, lessons learned, and opportunities for further trilateral discussion and collaboration, including providing support for a revision of NAPAPI in 2023. The revised NAPAPI will strengthen North America’s ability to respond to health security threats, including influenza and other serious communicable disease outbreaks (Gobierno de Mexico, 2021[9]).
3.1.2. Establishing processes to define lists of critical products to respond to emergencies
The development of lists of critical medical products to respond to severe emergencies and major crises can be used to address two objectives. One is to guide stockpiling, the other is to support efforts to ensure supply chain security. For example, WHO recently defined a list of products for radiological and nuclear emergencies that it recommends stockpiling nationally (WHO, 2023[10]). In 2012, PAHO developed an Emergencies and Disasters Essential Medicines List (EDEML) for Caribbean countries to facilitate rapid procurement to support the provision of urgent medical care in the acute phase of a crisis and to maintain care for people with chronic diseases under treatment (PAHO, 2012[11]).
Some OECD countries have been working on establishing similar lists. As discussed in Chapter 2, the United States has established a list of medical products that should be available at all times in the country, including all of the inputs that are critical for their production (active pharmaceutical ingredient, raw material). This list preferences products used in the acute treatment of severe conditions, as well as those required for protection against certain infectious diseases, and chemical, biological, radiological, and nuclear threats. Supply chains for some of these products are being analysed (FDA, 2022[12]).
In Europe, two steering groups are responsible for developing lists of critical medicines and medical devices to respond to major events or public health emergencies. The objective is not to stockpile all these medical products, but to ensure continuous access during a crisis:
The Executive Steering Group on Shortages and Safety of Medicinal Products (MSSG), comprising members of all EU Member States, the Commission, and the European Medicines Agency (EMA), is responsible for ensuring a robust response to medicine supply issues caused by “major events” or public health emergencies. While the latter are declared based on specific criteria,2 “major events” can encompass a broad range of situations, such as environmental or biological events, or incidents affecting the supply of essential medicines in more than one Member State. The MSSG is responsible for establishing lists of critical medicines that must be monitored on declaration or recognition of a public health emergency or major event (EMA, 2023[13]). To help the creation of these future lists, the MSSG published in July 2022 a list of “main therapeutic groups” in crisis preparedness. This list includes the relevant subgroups (at anatomic therapeutic classification (ATC) Level 3) considered necessary for emergency care, intensive care, and surgery, and is based on a well-defined process and published methodology (EMA, 2022[14]; EMA, 2022[15]). Lists of critical medicines for mPox and COVID‑19 were published in August 2022, but are already obsolete.
The Executive Steering Group on Shortages of Medical Devices (MDSSG), established in March 2023, supports the EMA’s mandate to ensure a robust response to medical device supply issues caused by public health emergencies (EMA, 2023[16]). The group is responsible for establishing a list of critical medical devices for monitoring on declaration of a public health emergency; ensuring supply and demand tracking to facilitate rapid identification and mitigation of shortages; reporting and offering recommendations on mitigation measures; and proposing EU-level actions to address shortages of these vital medical devices. The methodology for establishing the list of critical medical devices was published in June 2023 (EMA, 2023[17]). Public health emergency critical devices lists will be tailored to respond to specific emergencies.
In addition, European legislation3 foresees the development of an IT platform to facilitate collection of information on shortages of, and supply and demand for, medicinal products, including information on marketing status (including withdrawals and cessations of supply), from both industry and Member States The platform is expected to become operational in February 2025. The objective is to monitor, prevent, and manage (1) shortages of products on the critical medicines lists during a public health emergency or major event, and (2) actual and threatened medicine shortages in one or more EU Member States that could give rise to a major event or public health emergency.
3.1.3. Enacting appropriate regulatory flexibilities or requirements
Responses to emergency situations may require some additional regulatory flexibilities or requirements, while ensuring that patient safety is not compromised. Policy makers could agree in advance on rules and processes to be able to use these appropriately in times of crisis. For example, this may include authorising the use of alternative products already approved by a regulatory agency (or having WHO pre‑qualification) where shortages occur due to failures in supply. For example, during the COVID‑19 crisis, Canada authorised quantities of propofol from alternative suppliers on the basis of having marketing authorisation in the EU. This may also take the form of accelerated or exceptional processes to approve the use of newly developed products during emergency situations. The EMA’s implementation of rolling reviews and the US Food and Drug Administration’s (FDA) use of Emergency Use Authorizations (EUA) for COVID‑19 technologies are examples.
All these decisions, however, represent trade‑offs demanded by emergency situations. In the United States, the Department of Health and Human Services (HHS) authorised emergency use of in-vitro diagnostics (IVDs), PPE and other medical devices, as well as medicines for use during the COVID‑19 outbreak (HHS, 2020[18]). EUAs may be issued for medical products which “may be effective”, – representing a lower level of evidence compared to the “effectiveness” standard normally required for product approvals (FDA, 2017[19]). In the EU, Member States were allowed to approve medical devices that had not yet undergone conformity assessment in case they were urgently needed and no alternative was available. Some COVID‑19 IVDs are reported to have been approved early in March 2020 according to standards lower than those prevailing for diagnostic tests (Blakely et al., 2022[20]). Some goods approved hastily were later recalled (e.g. masks in the Netherlands and in the United States). In Australia, the Therapeutic Goods Administration (TGA) introduced an expedited recall pathway to respond to complaints of poor safety or performance within 24 hours (Blakely et al., 2022[20]).
While additional flexibilities may be necessary, they can pose additional risks and should be removed when the crisis is over. While many of the products needed during pandemics are consumables and will not remain in the health system, others such as ventilators, infusion pumps, haemodialysis devices, and left ventricular support systems, are likely to remain in use in hospitals, even though their safety-performance profile may be inferior to that of other available products (Blakely et al., 2022[20]). Hospitals, which often faced higher than usual acquisition prices and operate under tight budgetary pressure in many countries, are not likely to replace them prior to obsolescence.
Blakely et al. (2022[20]) suggest a number of policy options to limit the drawbacks of additional flexibilities during severe crises. The first option is to annually review the scope of medical devices eligible to use these expedited pathways during a crisis to ensure they target the appropriate ones. The second is to require additional evidence retrospectively for items intended for long term use, and the third is to support hospitals in ensuring the removal and replacement of devices where necessary (ibid.)
Other flexibilities may be less problematic. This could include the simplification or acceleration of regulatory processes, for example, to enable the sale of medicines with foreign packaging and labelling or to permit the exceptional importation of products. It is important for regulatory agencies to have the imprimatur to apply regulatory flexibilities in the event of critical supply chain disruptions.
Responses to emergency situations may also require the gathering of additional information. In the United States, for example, requirements to notify potential medical device shortages emergency situations was implemented to facilitate prevention measures.
3.2. Ensuring mechanisms are in place to mitigate risks of shortages
The sections below discuss mechanisms for mitigating the risks of severe crises, including the importance of enhancing co‑operation among governments to prepare for crises (Section 3.2.1), to encourage co‑ordinated and efficient allocation of existing technologies (Section 3.2.2), to support expansion and prioritisation of manufacturing capacity (Section 3.2.3), and to support the development and production of new technologies and encourage technology transfer (Section 3.2.4).
3.2.1. Enhancing co‑operation among governments to prepare for crises
Many of the issues affecting the security and resilience of supply chains (and by extension, the policies needed to address them) lie outside health systems. Co‑operation among governments in areas such as trade policy, trade facilitation, transport and infrastructure (both physical and digital) can also increase preparedness by keeping markets open, addressing disruptions, and facilitating the movement of essential medical products during crises.
The first objective of such co‑operation is to improve transparency, which is critical in helping governments manage fast-evolving crises. This includes sharing lessons learned, building confidence in supply and trust in global markets, and helping to avoid harmful policy choices such as panic buying or hoarding by governments. International initiatives or forums can offer a framework for co‑operation, similar to that of the Agricultural Market Information System (AMIS) initiative in the case of agricultural and food markets (Box 3.2).
International co‑operation can also lower barriers to trade and investment in essential products, as well as their main inputs, in order to optimise sourcing opportunities and access for all countries, consistent with the objective of many trade and investment agreements. However, strengthening the resilience of key global value chains may require new commitments from countries to prevent disruptions to markets, such as the use of export restrictions. In the World Trade Organization (WTO), the Ottawa Group (a group of 13 WTO members) launched a global Trade and Health Initiative in 2020 that aimed at developing a list of actions and potentially new commitments to facilitate trade in essential medical products (Ottawa Group, 2020[21]).
The COVID‑19 pandemic offers a striking example of how trade barriers can affect the supply of medicines. As previously noted, the early stages of the pandemic saw countries imposing lockdowns and travel bans, with consequent disruptions to transport, freight, logistics and customs activities which adversely affected the movement of goods across borders (including raw materials, components, and finished products). These were followed by export restrictions that reduced access to essential medical products and exacerbated shortages (Hoekman, Fiorini and Yildirim, 2020[22]). Outside COVID‑19, many essential medicines not only remain subject to substantial tariffs, but also to a range of non-tariff measures (NTMs) that go beyond the imposition of quality standards (OECD, 2023[7]). Restrictive measures such as these can not only contribute to scarcity in international markets, but can also raise prices and reduce availability in non-producing countries. No country is self-sufficient in the production of all necessary medicines or their constituents, and trade is therefore essential to ensure the continuity of supply chains.
Trade agreements, whether multilateral, regional or bilateral, include general exceptions and specific exceptions related to health that allow countries to take measures, such as export restrictions, during crises. Some trade agreements, such as the Japan-Australia Economic Partnership Agreement (JAEPA), have specific provisions to ensure stable supply of energy and mineral resources and to prevent the introduction of export restrictions when there are disruptions. Co‑operation mechanisms and commitments to resort to reasonable measures that take into account the availability of products for partners during a crisis could also be envisaged for medical supply chains in regional trade agreements or at the multilateral level.
At the regional level, the Free Trade Commission of the Canada-US-Mexico Agreement (CUSMA) issued a decision in February 2023 to encourage Coordination and Consultation on North American Trade Flows in Emergency Situations (Government of Canada, 2023[23]) Under this decision, the partners have agreed to create new mechanisms to consult with sub-national governments and key stakeholders in the event of supply chain disruptions, and to create a new Trilateral Co‑ordination Sub-Committee on Emergency Response to share information and co‑ordinate activities related to matters affecting trade in emergency situations. The Canada-US Working Group on Supply Chains (established in 2021) supports both bilateral efforts to facilitate trade but also broader regulatory co‑operation looking at stockpiling and regulatory flexibility (The White House, 2022[24]).
Finally, governments also play a pivotal role through trade facilitation measures, as these ensure the swift movement of goods across borders. Measures designed specifically for crises, such as fast clearance procedures or accelerating certification processes, can help mitigate disruptions that affect international trade flows and are complementary to the regulatory flexibility described in Chapter 2. Trade facilitation measures have generally proven to be more efficient when they are co‑ordinated across countries, and even more so when they are included in a series of initiatives taken to promote co‑operation, regulatory convergence, and the harmonisation of rules.
Box 3.2. Enhancing transparency and policy co‑ordination: The experience of the Agricultural Market Information System (AMIS)
The Agricultural Market Information System (AMIS) initiative was created by the G20 in 2011 in response to the food price crisis of 2007/08 and 2010. AMIS assesses global supplies for major staple crops (wheat, maise, rice and soybeans) and provides a platform to co‑ordinate policy action in times of market uncertainty. By enhancing transparency and policy co‑ordination, AMIS prevented disruptions and price hikes for food during COVID‑19.
How does AMIS work?
To gather information on food supplies, AMIS relies on the Global Food Market Information Group which is composed of technical representatives from the 28 AMIS members. The Information Group provides comparable and timely information on markets (supply, demand, stocks and prices) and on policies put in place by countries that affect markets (e.g. duties, export restrictions, price caps, etc.). The Rapid Response Forum is composed of senior officials from AMIS participants. It promotes early discussion about disruptions and critical market conditions, as well as ways to address them. Finally, AMIS has a Secretariat that involves 10 international organisations (including the OECD).
Feasibility for medical products
Given the positive experience with AMIS, it has been suggested that a similar initiative be established for essential medical products. However, the agricultural and medical sectors are different in a number of ways. AMIS focuses on a limited number of products that are inputs for the food industry and for which production and market information were already being collected by participating countries or international organisations. Medical supply chains are more complex and collecting similar information for a variety of essential medical products would be challenging. It would involve working closely with the private sector and setting up a fit-for-purpose mechanism for collecting information. It would also involve countries’ obtaining legal authorities to collect the necessary information, as well as the funding to set up and maintain the infrastructure. Nevertheless, having a forum where major producers of medical products could co‑ordinate their policies and address crises could be regarded as a valuable avenue for improving medical supply chain security.
Source: Agricultural Market Information System – AMIS (2023[25]), Homepage, www.amis-outlook.org/
3.2.2. Encouraging co‑ordinated and efficient allocation of existing technologies
Regional stockpiling and pooled procurement can be considered useful means of ensuring access to technologies in cases of large surges in demand. However, stockpiling critical products at country level can have a negative impact on available supply. Regional stockpiling may be considered a more pragmatic option, provided that the rules for the allocation of products in times of crises are well-defined.
Launched in 2019, rescEU is one example of a multi-country stockpiling mechanism that aims to provide essential material and human resources to respond to a diverse range of emergencies. The initiative is part of the EU Civil Protection Mechanism, a co‑ordination strategy to ensure rapid emergency responses. The European Commission funds the collective stockpile and 9 Member States hold the physical stockpiles, assuming both logistics and procurement responsibilities. Countries propose which products should be stockpiled and provide appropriate logistics and interoperability with EU systems. rescEU acts as an option of last resort for member and associated countries that lack sufficient capacity to respond to emergencies (European Commission, 2022[26]). EU countries made extensive use of the system during COVID‑19. Notably, rescEU focused on providing PPE, ventilators, and protective masks, although it also stockpiled and delivered medicines. The scheme also supports some non-EU countries (Glencross, 2022[27]). As part of the package of measures introduced by the European Commission’s communication on medicine shortages (2023[28]), a common strategic approach to medicine stockpiling is planned for the first half of 2024.
In the European Union, a process for joint procurement agreements to secure access to MCMs in the event of a crisis was established just after the 2009 H1N1 outbreak. This mechanism was activated during the COVID‑19 pandemic, allowing the Commission to procure COVID‑19 vaccines on behalf of Member States. The EU strategy aimed to secure timely access to affordable vaccines through advance purchase agreements (APA). A steering board with representatives from each member state and the Commission provided oversight of the procurement process and validated contracts prior to signature. To facilitate timely access, the Commission Decision that approved the agreement with Member States for vaccine procurement included (1) speed of delivery and (2) capacity to supply through the development of production capacity within the EU, as two criteria to be applied in financing contracts with manufacturers. A report by the European Court of Auditors highlighted that in the first half of 2021 the EU faced vaccine delivery issues with Janssen and AstraZeneca vaccines, having only received a third of contractually agreed volumes by the end of June 2021. The auditors recognised that the Commission had limited leverage to overcome supply challenges, as no supply chain risk analyses had been carried out prior to signing contracts with manufacturers (European Court of Auditors, 2022[29]). The report called for a more complete evaluation of the joint procurement scheme, including benchmarking with other procurement processes. Nevertheless, EU Member States can engage in the collective procurement of MCMs on a voluntary basis, and some did so to procure mPox antivirals, for example.
3.2.3. Supporting expansion and prioritisation of manufacturing capacity
COVID‑19 vaccines were developed and manufactured in record time. There was no vaccine for SARS‑CoV‑2 at the beginning of the outbreak in December 2019, but by May 2022, 15.2 billion doses had been produced.4 This feat was achieved through close collaboration with the private sector. In the United States, the US Department of Defense and the Department of Health and Human Services worked together and used the Defense Production Act (DPA) to assist companies in expediting the process of developing and manufacturing COVID‑19 vaccines (Bown, 2022[30]). During “Operation Warp Speed”, the government provided subsidies to seven companies for R&D and completion of clinical trials, and, for biotech companies without manufacturing capacity, for outsourcing of production. Further funding was provided through priority-rated contracts to speed up manufacturing for the most promising candidates at the end of Phase 3 trials. This funding allowed the shifting of financial risks from the firms to the government, and accelerated the development and production of vaccines.
In the EU, a Task Force for Industrial Scale‑up of COVID‑19 vaccines was set up in February 2021 by the Directorate‑General for Internal Market, Industry, Entrepreneurship and SMEs (European Commission, 2021[31]). The Task Force worked closely with the industry to ramp up production. In particular, it helped to address about 150 bottlenecks identified in production capacity and supply chains, such as the sourcing of bioreactor bags, vials, low dead space syringes, and lipids for mRNA vaccines. In co‑operation with national authorities, the Task Force also helped to launch new production facilities and supported manufacturers in the signature of APA with EU countries. The EU became the biggest producer and exporter of COVID‑19 vaccines (based on data from WTO-IMF COVID‑19 Vaccine Trade Tracker, as of May 2022). As documented by Bown and Bollyky (2021[32]), the scaling up of manufacturing was achieved through efforts of firms who established efficient supply chains through outsourcing, partnerships, and international production networks. However, the support of governments was key in assisting firms and speeding up the process.
During crises, market dynamics can become obstacles to rapidly increasing the production of essential medical products that experience strong surges in demand. In severe cases, governments must have effective policy tools to ensure that such products are prioritised in access to raw materials and other components that might otherwise be provided to speed up manufacturing to other industry sectors. In the United States, the DPA allows federal agencies to require companies to prioritise government contracts deemed essential to address national emergencies. For example, from April to May 2020, seven new public contracts priority-rated under the DPA to provide a total of 137 431 new ventilators by the end of 2020 were signed with manufacturers, both to support healthcare providers and to replenish the Strategic National Stockpile (FEMA, 2021[33]). Priority-rated contracts also allow orders to take preference over other contracts with respect to delivery. This could, for example, facilitate access to semiconductors for the medical device industry, which faces challenges in the supply of these products, as they are in high demand from other sectors (car and aviation industry). In interviews with manufacturers, it was noted that the prioritisation provided by the DPA was effective in supporting security of supply for ventilators. A 2021 report by the US Government Accountability Office (2021[34]) also confirmed with manufacturers that priority ratings had helped ensure the continuous supply of ventilators in the United States. However, despite the potential benefits of priority setting for the production of essential products during crises, the use of such instruments should be evaluated carefully and follow strict pre‑determined rules. Public intervention in industrial production has the potential to disrupt the supply of other products that may be essential to respond to the crisis and can result in unanticipated consequences for other manufacturing sectors.
Emergency situations have also led some countries to resort to involving other industry sectors in contributing to national efforts to secure the provision of much needed health products. In the United Kingdom, for example, the National Health Service launched the “Ventilator Challenge”, a call for manufacturers outside the health sector to begin producing ventilators to treat severely ill COVID‑19 patients. The initiative was led by the UK Cabinet Office and, together with a similar initiative by the Department of Health and Social Care, had an initial target of 30 000 ventilators. Mainly as a result of quality issues, the ventilator challenge fell well short of reaching its goal (European Parliament, 2021[35]). However, manufacturers’ interest in the project and relatively strong preparedness to respond to the government request have led experts to predict that re‑shoring efforts in the United Kingdom could increase in the near future (European Parliament, 2021[35]). A UK Government audit of the programme noted that the cost of the programme was GBP 277 million. It also mentioned that the government accepted higher levels of risk by signing contracts without a previous evaluation of which products would actually work. However, it concluded that the Cabinet Office took reasonable approaches to control the programme’s costs and that it adapted its initial urgent demand after realising it would not be necessary to purchase that quantity of new ventilators (National Audit Office, 2020[36]).
While the above examples illustrate measures that were taken during the COVID‑19 crisis, the expansion and prioritisation of manufacturing capacity can be planned in advance for other types of crises, and co‑ordinated across countries. In addition to the regulatory co‑operation described in Chapter 2, strategies aimed at diversifying supply (including through additional domestic capacity) and creating an “industry commons”1 could also benefit from more international co‑ordination and global initiatives.
3.2.4. Supporting the development and production of new technologies and encouraging technology transfer
International co‑operation already plays an important role in the financing of clinical R&D, notably in therapeutic areas that are neglected by the private sector, due to high risks and/or low market prospects. Describing all initiatives would be beyond the scope of this report but an evaluation of what took place during the COVID‑19 pandemic may be useful in preparing for future severe crises.
For example, the Coalition for Epidemic Preparedness Innovations (CEPI), a non-profit foundation with donors from the public, private and philanthropic sectors, was established after the 2014 Ebola outbreak to develop vaccines to prevent and respond to emerging infectious diseases, and to “secure access to such products for the populations who need them”. CEPI focuses on the generation of clinical trials, knowledge, and investigational vaccines, and its contracts include obligations for grantees to ensure equitable access to developed products, including commitments to provide affordable access to populations in need (see Chapter 13 in (OECD, 2023[7])).
During the COVID‑19 pandemic, CEPI contributed to the financing of COVAX, the international partnership to develop, manufacture, procure, and distribute COVID‑19 vaccines, and Moderna and AstraZeneca also benefited from modest contributions from CEPI. Despite this, high-income countries were able to secure higher number of doses of these vaccines than low- and middle‑income countries. CEPI recently developed a new Strategic plan, which includes establishing networks and partnerships to address several objectives including the promotion of equitable access and relies on decentralised manufacturing, building R&D capacity in low- and middle‑income countries, and supply reservations (OECD, 2023[7])
Voluntary licensing of new technologies is another avenue for expanding production capacity. Through a voluntary licence agreement, a company holding intellectual property rights on a product allows another company to manufacture this product and sell it in a set of countries, most often with small royalty payments. The Medicines Patent Pool (MPP), supported by Unitaid and several governments, has been working on framework agreements with pharmaceutical companies to allow generic manufacturers to produce medicines and sell them to low-income countries specified in the agreements. To date, the MPP has signed agreements with 20 patent holders for 13 HIV antiretrovirals, one HIV technology platform, three hepatitis C direct-acting antivirals, a tuberculosis treatment, a cancer treatment, four long-acting technologies, 3 oral antiviral treatments for COVID‑19 and 15 COVID‑19 technologies (Medicines patent pool, 2023[37]). The MPP awarded a record number of 72 sublicenses for COVID‑19 therapeutics. These cover 119 low-income countries, and more than 4.35 billion people, for at least one of the three COVID‑19 therapeutics, with royalty payments waived until WHO declares the end of COVID‑19 as a public health emergency of international concern (USITC, 2023[38]).
In addition, the WHO COVID‑19 Technology Access Pool (C-TAP) was established in 2020 to facilitate faster equitable and affordable access to COVID‑19 health products for all countries. C-TAP is currently endorsed by 45 WHO member states, and works with UNDP, the Medicines Patent Pool, the UN Technology Bank and Unitaid (WHO, 2023[39]). The idea was to establish a single global platform through which developers of COVID‑19 therapeutics, diagnostics, vaccines and other health products could share their intellectual property, knowledge, and data with quality-assured manufacturers through public health-driven, transparent, voluntary, and non-exclusive licences. C-TAP provides support for technology transfer agreements and voluntary licensing, as well as patent pooling.
Technology transfer hubs can facilitate the sharing of knowledge, data, intellectual property rights (IPRs) and know-how for the development and manufacture of health technology products. WHO has announced it intends to establish several hubs, and the first, Afrigen, has been established in South Africa, to expand the capacity of low- and middle‑income countries to develop COVID‑19 mRNA vaccines and to scale up manufacturing. This will include the transfer of a comprehensive technology package, appropriate training and any licenses required to facilitate production and export of mRNA vaccines to low- and middle‑income countries (WHO, 2021[40]).
Although these initiatives do not primarily target OECD countries as beneficiaries, expansion of manufacturing capacity may relieve some pressure on supply chains in the face of increasing global demand for medicines and other medical products, and in case of emergencies. In addition, knowledge sharing has the potential to contribute to a more global response to future pandemics or other emergencies. These initiatives also address the quest for more equitable access to medicines and medical countermeasures in an increasingly connected world.
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Notes
← 1. An “industry commons” consists for governments to establish and institutionalise emergency preparedness measures with the private sector. According to Sodhi and Tang (2021[41]), these measures should address stockpiling (e.g. what quantity of goods should be stockpiled), backup capacity (e.g. which firms are expected to produce more) and standby capabilities (e.g. what resources can be freed if the emergency demand exceeds the combined stockpile and capacity). A strategy needs to be discussed and agreed with the private sector before a crisis occurs.
← 2. The criteria are defined in Article 12(1) of Decision No 1 082/2013/EU.
← 3. Article 13 of Regulation 2020/0321.
← 4. According to WTO-IMF COVID‑19 Vaccine Trade Tracker.