A Preferred Supplier model to redirect public and private interactions

pharmaceutical innovations would appear to be a reasonable step forward. In fact, the latest communication from the European Commission on the Pharmaceutical Strategy for Europe, states that

“Actions in the area of public procurement can foster competition and improve access. Public buyers should design smart and innovative procurement procedures, e.g. by assessing the role of ‘winner-takes it all’ procedures and improving related aspects (such as price conditionality, timely delivery, ‘green production’ and security and continuity of supply) including via the Big Buyers initiative launched under the SME Strategy”.

The COVID-19 pandemic is testing the resilience of the system and its capacity to respond to a planetary crisis, and although the investments made to develop and produce a vaccine are unprecedented, issues remain around transparency and directionality, raising concerns about equitable distribution and access to the vaccines, treatments and diagnostic tests produced. Strengthening the system to improve its outcomes, accountability and transparency will not be achieved solely by increasing inputs (funding, resources, etc.), but by redefining how the different actors (both public and private) interrelate. Companies and public sector actors interact in many different ways, for example the following: ● As shown in this paper, companies receive billions in public investments to fund the research and development of new pharmaceutical products. ● Clinical trials of pharmaceutical companies’ products often use public sector infrastructures and resources. ● Regulatory agencies assess and approve the safety and efficacy of pharmaceutical products to facilitate access to national markets. ● Pharmaceutical companies’ product representatives engage with healthcare professionals in different sectors to provide information and promote their products. ● Pharmaceutical companies participate in tenders and other procurement mechanisms established by health systems. Procurement and supply practices have been identified as ways in which commercial partners can apply sustainability and ethical principles focused on the environment and human rights issues (such as child labour and equal opportunity and nondiscriminatory employment practices29). Corporations, including pharmaceutical companies, implement responsible procurement practices (for example, those evaluated in B Corps certification) designed to impose environmental, social and ethical standards on their suppliers and to work only with those suppliers (preferred suppliers) who fulfil the predefined criteria.29,36,37 This practice is fully aligned with the Sustainable Agenda and the Sustainable Development Goals, as well as the Ten Principles of the UN Global Compact.36,37

A Preferred Supplier Model Aimed at Redirecting Public and Private Interactions.

“Strengthening the system to improve its outcomes, accountability and transparency will not be achieved solely by increasing inputs but by redefining how the different actors interrelate.”

The aim of ISGlobal’s 4S proposal is to mirror these practices by establishing standards and indicators related to certain factors designed to reorient the R&D system towards a more public-health-oriented model. To achieve this, we propose four principles upon which the relationships between public and private partners should be founded and shaped. The objective of these four principles is to address some of the weaknesses identified in this paper. Our purpose is to mirror practices that have been implemented by the private sector and to introduce ethical standards in procurement and supply chains, setting public health and ethical standards to redirect the research agenda and supply chain practices. The aim of this proposal is not to develop new governance bodies, but rather to establish a set of principles focussed on helping to direct the existing mechanisms by way of appropriate metrics and indicators, which companies would be obliged to fulfil if they wish to engage with public sector actors. These principles would be applicable at national, regional and international levels. In ISGlobal’s view, every interaction between public and private partners could be subject to these preferred supplier principles, allowing only those companies that fulfil the criteria to interact preferentially with the public sector. If a preferred supplier system was established, companies wishing to interact with the public sector would have to compete by performing best at a number of metrics, based on public health needs and expectations of how companies should redefine their business practices. Interactions between public and private sector organisations should be based on the following four principles, the core pillars of ISGlobal’s proposal: ● Sharing needs. To ensure that the biomedical research agenda prioritises the public health needs of society, the preferred supplier will have to invest a tangible share of its R&D efforts in meeting public health needs. The model must also take into consideration the regulatory and market access commitments of new drugs. ● Sharing risks & rewards. To ensure a more balanced and transparent distribution of the R&D risks and rewards at every level of the development pipeline, the preferred supplier would acknowledge receipt of public resources of all kinds received at any point during the R&D cycle. The amount of public funding received will have repercussions on the IP protection and/or the participation in the commercial benefits associated with the end product as well as on the final price, and the donor will have a say in those decisions. Moreover, the recipient of the public R&D funding will be required to provide information on all the production costs associated with the new asset, so that these can be taken into account in the pricing and market strategy. In return, a preferred supplier would have access to a larger pooled demand from the public institution implementing this strategy. ● Sharing results. The pharmaceutical R&D system should strengthen its accountability and transparency mechanisms. If public funds are to be invested in R&D, conditions should be imposed to ensure that the benefits derived from the R&D process, (the knowledge generated and not just the end product/s) are accessible. A preferred supplier would provide access to the results of clinical trials and to all the information on drug candidates that have not been successful. This data could be used to create a public pool with relevant data to inform future R&D efforts. The aim is to treat knowledge and information as what it is: a public good.

● Sharing outputs and outcomes. To ensure that the industry is sustainable and focuses not only on economic results but also on the health outputs of its activity, interactions between public and private companies should be subject to different standards than those imposed on preferred suppliers. Preferential access to public funds could be granted to companies demonstrating compliance with best environmental practices in manufacturing and distribution or criteria related to corporate practices, such as stringent policies to reduce buybacks and favour reinvestment of capital in the R&D process. Similarly, equitable access practices could be measured and used to achieve status as a preferred supplier. Implementing a preferred supplier model would entail the development of metrics and indicators that would allow the public sector to select and prioritise companies with better performance in these indicators, for example, when two companies are offering similar or equivalent products or services not shown to be different by the appropriate clinical and cost-effectiveness research. An obvious limitation for this selection would be when we are talking about an innovative product which is only provided by one company. In this case, other approaches should be taken in order to guarantee the public interest. These pillars are just indications of what companies would need to do to engage with public institutions. Each of the four pillars would require different areas of analysis and indicators in order to fairly assess the companies’ performance. Different sets of indicators would be required to evaluate different types of companies, for example those focused on generic products, small biotech companies and larger pharmaceutical multinationals, because different behaviours are expected from companies with very different business models. In addition, many of the areas within these principles need further definition, such as the therapeutic areas towards which R&D investments from companies would need to be directed and the definition of R&D investments.

Furthermore, the scope of application needs to be defined. If a preferred supplier model is to be established, the market size of the public partner needs to be sufficiently large to make companies adopt the measures assessed in the pillars discussed above. For this purpose, a joint global effort will be needed to get these standards accepted by all, low-, middle- and high-income countries.

BOX 2. 4S proposal: A SWOT analysis

Strengths

● The model aims to redirect the system’s performance to achieve outcomes more oriented towards public health interests and medical and patients’ needs. ● Flexible: the system’s outcomes would depend on the indicators set by the model for choosing a preferred supplier. ● Capacity to incorporate civil society, academia and public institutions in the development of the indicators and metrics required to implement the model. ● Once developed, it may be easily applied to different settings (other organisations, regions, countries, etc.).

Weaknesses

● The public partner/countries/organisation for the implementation of the project needs to be defined. Which countries/organisations should implement this model in order to create a critical mass (i.e. sufficient market size) to ensure that the companies will comply and not withdraw from certain markets or countries? ● The metrics and indicators needed to establish and implement the preferred supplier model need to be developed as well as a methodology for comparing different company types, standards and practices. For example, the differing business models of small biotechnological companies and larger pharmaceutical companies will have to be considered in order to not favour one type of company over another. ● What would be the role of public R&D institutions and how will they fit into this model to allow competition across public and private R&D institutions? ● Some of the pillars (e.g., transparency) need to be enforced by legislation: for example, companies should be obliged to disclose their investments and pricing strategies.

Legislation to this effect has recently been passed in Italy. Consequently, establishing transparency criteria for becoming a preferred supplier may be difficult.

Opportunities

● The momentum created by the COVID-19 global health crisis can be used to promote a shift towards a needs-driven direction in pharmaceutical R&D as an opportunity to open up new markets. ● A preferred supplier model is fully aligned with the Sustainable Development Agenda, promoting access to quality essential medicines, targeting global health priority diseases, such as AIDS, tuberculosis, malaria, NTDs and other priorities, including AMR and epidemic preparedness; and supporting R&D in medicines, vaccines and diagnostics. ● This model can be aligned with other priorities of the Sustainable Development Agenda, implementing environmental criteria and labour conditions to become a preferred supplier and fostering innovation and sustainable industrialisation.

Threats

● Implementation of the model will require international cooperation and governance, a requirement that has been identified as a weakness of the current model. This may be of especial relevance in areas related to transparency, in which non-disclosure agreements between companies and purchasers are common. ● As happened with the UN Global Compact and other initiatives that have been embraced by both public and private industry partners and have contributed to increased global welfare and more ethical standards, the 4S model cannot succeed without the support of influential governments, supranational organisations and visionary industry leaders.