When Gavi first launched, Big Pharma was dropping out of the vaccine business.
“It had become unprofitable because it was only the wealthy Western markets that were…willing to pay what they were worth,” said Dominic Hein, Gavi’s head of market shaping.
Today, the partnership helps poorer countries pay for immunizations that meet the World Health Organization’s quality standards. The Serum Institute is a stalwart supplier, pumping out four in 10 of the vaccines funded by Gavi. It was “the pioneer of low-cost, high quality vaccine-making,” Hein said.
The partnership with Gates has boosted the company’s position in the health care world – and helped it reach new levels of profitability — even if people still sometimes scratch their heads when they hear the name Serum Institute of India.
“We’ll have to change the name to describe exactly what we’re doing,” mused Adar Poonawalla, who took over in 2011 as CEO of the company, which is still privately listed. “Maybe in a year or two we’ll look at that.”
Living a globe-trotting lifestyle
For all their work on behalf of the masses, the Poonawallas are indisputably rich and like to show it off.
Cyrus Poonawalla, who remains chairman of the company at age 79, is No. 165 on Forbes’ billionaires ranking, with an estimated net worth of $11.5 billion. (A different ranking estimated the pandemic boosted his net worth by a quarter, pegging him as the world’s 86tht-richest man.) His personal website features pictures of him hobnobbing with Gates and posing with his sports cars and limousines.
Adar, who along with his glamorous, Bollywood-linked wife Natasha has become popular fodder for the sub-Continent’s tabloids, told GQ India that under normal circumstances he’d be in Cannes, on a yacht this summer. Instead, he’s near the company’s headquarters in Pune, where one of his offices is a refurbished A320 jet. Pune is the eighth-most populous city in India, and it happens to be in the midst of a serious coronavirus outbreak.
“In terms of public perception, we’ve been known more for our lifestyle; now people understand the work we do,” he acknowledged to the men’s glossy, which featured him on the cover of its June issue as the “Vaccine Vanguard.”
Indeed, the company estimates that 65 percent of the world’s children receive at least one vaccine made by the Serum Institute.
Some of its products were designed specifically for the needs of poor countries. For example, its oral rotavirus vaccine is heat-stable, so it doesn’t have to be kept cold as it’s distributed in countries without consistent electricity.
But others of its products are variants of breakthroughs that were achieved by the global drug giants collectively known as Big Pharma. These, Poonawalla said, could be sold for much less than what Americans and Europeans pay for them.
Cheaper production costs in India are part of what Poonawalla says is the Serum Institute’s advantage over big Western players like Sanofi and GlaxoSmithKline. Yet the Serum Institute has never created a first-of-a-kind vaccine — meaning its entire business model is based on having its scientists piggyback on the basic research of other companies to understand a disease and the body’s immune response.
Once the Serum Institute has produced a quality version of the same vaccine created by Big Pharma, it is able to manufacture huge numbers of doses quickly and inexpensively. The benefit to people around the world is a matter of “basic mathematics,” said Poonawalla. “Once you produce more than 100, 200 million doses of any product, you know the costs come down substantially.”
Yet regulations have made it hard for the Serum Institute to enter wealthy markets. This is not because the company can’t meet quality standards, he said, but because Western regulatory systems preserve patent protections for vaccines in complicated ways.
“As a result, the European [and American] people have been paying hundreds of dollars for a vaccine as opposed to $20 or $10 for a vaccine,” he said. “This is one of the things that President Trump actually has identified as a semi-fraud by Big Pharma, where they’ve gone overboard and exploited the public.”
Challenging the global patent system
Poonawalla’s claims strike at the crux of drug pricing debates in both the U.S. and EU, which center on whether patents and other incentives to fulfill unmet needs are being abused in pursuit of profits. The aim of medical patents is to reward companies for the risks and costs of research and development. The Coalition for Epidemic Preparedness Innovations estimated that — factoring for some failed efforts— getting a vaccine just to the later stages of clinical trials costs up to $1.1 billion.
So European and American laws give the original developers of a new medicine a period of monopoly, when no one else can sell their drug. While there are lots of mechanisms to extend this, usually within 15 years or so, cheaper generic versions are able to start competing.
For vaccines, which are part of a class of drugs derived from living cells called biologicals, there can be multiple layers of patents: for the active aspect of the formula, for the adjuvant that makes it work better, for the cell cultures used to grow the live parts, for the process for making the vaccine. This can indefinitely delay the introduction of lower-priced generic biologicals, known as biosimilars. The complicated — sometimes impossible — task of working around patented components makes it harder for would-be competitors to drive prices down.
Generic medicines can usually skip the clinical trials that the original drug had to go through, as long as they can prove they’re chemically identical and have the same biology. Biologics are much more complex drugs, and so for biosimilars, “you can’t guarantee that sameness to the same degree,” said Paul Fehlner, a former IP lawyer for Novartis. The Serum Institute’s versions of vaccines can’t be assumed to work in exactly the same way as the original manufacturers’, in part because they may have tweaked something to dodge a patented part of the process. That means they must face a costly slate of clinical trials.
In the U.S. and Europe, “the regulations build on and reinforce the patenting strategies,” Fehlner said. And if a product infringes on a patent in any way — even if it seems incidental — the product can’t be sold. Even Big Pharma firms are constantly suing each other in the U.S. over alleged patent infringements for biologicals, aiming to keep competition off the market as long as possible.
A straightforward way to overcome these obstacles is to buy commercial rights. Poonawalla said he’s tried — and it’s established practice for companies to sell these rights for vaccines to be sold in the developing world. But for wealthy markets, Big Pharma won’t sell for an affordable price — or they outright refuse, he said.