The Health Department has dismissed allegations that it unfairly awarded a tender to an international pharmaceutical company ahead of the local government-backed Biovac, which has provided pneumococcal vaccines to the state for years.

This after reports that Biovac had been “dumped” in favour of a cheaper supplier, who will begin providing the vaccines to the state in 2024. 

India-backed Cipla will now be offering a 10-valent pneumococcal vaccine at R97.06 per dose — almost three times cheaper than Biovac’s 13-valent vaccine, sold to the public health system at R288.32 a dose.

Biovac has been in a partnership with pharmaceutical giant Pfizer since 2015 to help produce the 13-valent pneumococcal vaccine, expecting to supply the state. Last week, in a shock move, the department announced it had awarded the new three-year contract for the vaccines to Cipla, which imports the shots from the Serum Institute of India — now the world’s largest vaccine manufacturer by number of doses produced and sold. 

The Serum Institute produces vaccines for polio, diphtheria, tetanus, pertussis, BCG, r-Hepatitis B, measles, pneumococcal and Covid-19. According to its website, an estimated 65% of children around the world receive at least one vaccine manufactured by the Serum Institute. The institute’s serums are used in about 170 countries in their national immunisation programmes.

The SA government owns almost 50% of Biovac. The state and multinational drug manufacturers have invested heavily in the facility over the past 20 years in an effort to revive SA’s human vaccine manufacturing capacity, reported Business Day. 

Biovac CEO Morena Makhoana told the newspaper that there had been a lack of opportunity to institute talks. In previous tenders, Biovac could negotiate on price, but this time around there was “no discussion at all”, he said.

His number one headache now was how he would strike any further deals. “If you snub a company like Pfizer, which other investor will see this a worthwhile [enterprise] to invest in?”

Pfizer Sub-Saharan Africa CEO Kevin Francis also told Business Day that the department’s decision came as a “huge surprise”, given that it had asked Biovac to invest in the production of Prevenar-13 and that the government was promoting SA as an investment destination for biopharmaceuticals.

“There is no alignment between government departments,” he said. “It puts us in a precarious position. How do we consider future investments going forward in SA?”

The new deal is a blow to South Africa’s ambitions to develop vaccine manufacturing capacity, claimed Makhoana, who also told SAfm that it was “extremely disappointing news” and “extremely shocking”, especially on the back of last week’s Investment Conference in Sandton. 

He questioned why the government would award the tender to an international company, instead of fostering local vaccine production capacity — particularly in light of the experience of Covid, during which South Africa was one of the last countries to receive vaccines. 

“We are still in a pandemic, even if Covid isn’t so topical right now. One of the main issues that had been raised over the past year or so was about how manufacturing in Africa and South Africa can be promoted so that we can look after ourselves when the next pandemic comes.”

Read more in Daily Maverick: South Africa is halfway to fully fledged vaccine manufacturing, says Biovac CEO Morena Makhoana

Makhoana also questioned why the department would choose Cipla’s 10-valent pneumococcal vaccine over Biovac’s 13-valent vaccine, which he said was more effective, even if it was more expensive. 

“We know the fiscus is under pressure. We can’t ignore the fact that the budget is under pressure… but you might be wanting to save a few hundred million rands in the short term, then possibly have health outcomes that are not great. You may be penny wise and pound foolish.”

On top of that, he said, there was a real risk that the state would be jeopardising an industry that could be contributing to the fiscus and hurt foreign direct investment.

On Thursday, the Department of Health issued a statement saying it noted with concern Biovac’s allegations contained in an article published by Business Day titled, “State’s cheap shots at Biovac.”

The department said it has had a relationship with Biovac since 2003 to prioritise the local manufacture of vaccines, which resulted in a supply agreement with Biovac as the sole supplier of all vaccines used in the state immunisation programme from 2003 to June 2020.

In 2009, the pneumococcal vaccine was introduced in the vaccine programme and sourced from Biovac, the statement said, adding that Biovac had entered into a technology transfer agreement with Pfizer for the local manufacturing of PCV13 (the 13-valent pneumococcal vaccine).

“At present, there are three pneumococcal vaccines registered with Sahpra containing the most prevalent serotypes that would be effective for use in South Africa, thus any suggestion that PCV 10, as procured by the department, is not effective, is unfounded,” said the statement. 

“It is important to indicate that the Department of Health as a government procurer of goods and services has an obligation to ensure that all procurement is aligned to the five pillars of procurement, which include value for money, open and effective competition, ethics and fair dealing, accountability and reporting, and equity.”

The department said it is standard practice to negotiate prices with all local manufacturers who submit responsive bids, but in this instance, Biovac did not comply with some of the requirements and conditions of the contract, so it was not able to enter into negotiations for price. 

“What complicated matters further was that Biovac’s bid price was at least double the price of the competing company.

“In terms of local manufacturing issues, contrary to what the article says, Cipla has been in the country for many years contributing to local investment and job creation like any other company, in compliance with local labour laws. While it’s true that Cipla has its parent company in India, the company has shown commitment to continuing investing in South Africa.”

The department said even after Cipla’s plant was destroyed during the July uprisings in 2021 in Durban, it has invested in rebuilding the plant, which is now fully operational. 

“The department could not ignore the benefits of savings from a company which was offering quality vaccine products at half price, which make it possible to increase services in the Expanded Programme on Immunisation, and which also allow the ability to tackle more of the vaccine-preventable diseases.” DM