Facing the coronavirus crisis: Opportunities and challenges in developing countries, the Argentina case

GRACIELA E GUTMAN; PABLO LAVARELLO

Oslo

Congreso; 2021 Eu-SPRI Conference, Science and innovation ? an uneasy relationship? Rethinking the roles and relations of STI policies; 2021

Eu-SPRI

The research questionConfronting the global pharmaceutical industry limitations, highlighted today by the coronavirus crisis, what are the options for semi-peripheral countries?Relevance The COVID 19 outbreak has magnified health sector failures that were already at work before the pandemic, including:1.- The failure of public health systems’ privatization to improve health delivery and results has imposed enormous human costs.2.- Amidst an institutional model based on the financialisation of capital accumulation, scientific knowledge and the discovery of new products or techniques once patented become intangible assets of small companies listed on the stock market (Orsi and Coriat, 2003).3.- The pharmaceutical industry has changed from one characterized by vertically integrated companies, (from in-house R&D to clinical trials), to one that includes fewer firms that are (temporality) horizontally integrated and expanding through mergers and acquisitions (Gealde, et al 2014; Busfield, 2020).4.- Most of the research and development (R&D) has been directed towards more profitable, costly treatments of diseases (drugs for cancer, diabetes and Alzheimer's) disregarding developments aimed at vaccines (IMI; 2020).5. Concentration has not inhibited new forms of competition. New big and medium companies from emerging countries (China, India, South Korea), are now important players in this segment (Lavarello, et al, 2018).6.- Governments of developed countries seek to recover lost time in the face of Pandemic crisis (Kaplan et al., 2013). In this context, funds are oriented not only to the applied research for specific projects, but also to the scientific system in general, and to basic science institutes and scientists. (ISPA Network, 2020).7- This evolving framework opens opportunities for developing countries willing to combine scientific, technological, industrial policies and health sovereignty strategies as drivers of their health sector development strategy.Theoretical and historical frameworkThe literature that analyzed national experiences of late industrialization in the second half of XIX century underlined the importance of economic concentration and centralization (Gerschenkron, 1968). In this perspective, the so-called " advantages of backwardness" were associated with the achievement of accelerated accumulation and high thresholds of productive capacities. The literature on economics of innovation posits that, given the emergence of new technological paradigms since 1970, a distinction is necessary between thresholds of productive capacities and those of "innovative capacities". (Lall, 1992, Bell and Pavitt, 1995; Freeman, 2002). Additionally, some studies specify that these thresholds differ according to the different stages of the technological trajectories, generating "windows of opportunity" and maybe greater challenges in institutional matters (Perez and Soete, 1988; Perez, 2001). Taking this literature into account, this paper considers the different forms of interaction between economic factors and institutional variables, according to the long-term movements of world capitalism, namely, the consolidation of world market, an ever-increasing concentration of capital and the contemporary financialisation process (Chesnais, 2013). These three modalities of capital accumulation at the end of the 20th century as well as the new forms of profit appropriation by Multinational Companies (MNC) - which certain authors refer as techno-financial (Michalet, 1985, Chesnais, 1994)- results in new challenges for catching up processes.Therefore, it is possible to understand the limits faced by the current processes of articulation between science and technology in the (bio) pharmaceutical industry, which gained visibility with the outbreak of the pandemic in 2020. Process expressed in the role played by the "monetization of intellectual property" (Pisano, 2006), the profound institutional changes which enabled these processes (Coriat and Orsi, 2002), and the resulting weak coherence of the centralization process of (bio) pharmaceutical MNCs organizations, with its implications in the declining trend in productivity of the R&D (Lavarello, 2016). Within these theoretical contexts, we will analyze the major challenges associated to new biotechnology “windows of opportunity” that Argentina faces to the actual pandemic crisis. Data and methodological approachThis paper is based on a set of previous research projects, based on case studies of the biopharmaceutical industry in Argentina in the period 2003-2017, that analyze the opportunities and the thresholds for a catching up strategy within the framework of the new biotechnological paradigm. These studies were based on: 1) a survey of Argentine biotech companies looking for their innovative capabilities and strategies); 2) public statistics on foreign trade and drug patenting; 3) in-depth interviews with R&D institutions and a selected group of biotechnology companies that adopted early imitation strategies in the face of different waves of biopharmaceuticals drugs (Lavarello, Gutman and Sztulwark, 2018; Lavarello, 2016; Gutman y Lavarello, 2014)Results A brief summary of the central features of the biopharmaceutical industry in Argentina highlights its potentialities and limits to face the challenges of the coronavirus crisis 1.- Argentine has achieved the minimal threshold of (bio) technological capabilities necessary to adopt a catching up strategy based on an imitative strategy of biotech drugs, which is expressed in the opportunity to manufacture DNA and RNA based vaccines and to develop therapeutic drugs for COVID-19. 2.-About some 60 small biotechnology companies and a few pharmaceutic business groups, mostly domestic capital, are part of the local biopharmaceutical industry. It is a heterogeneous group of firms, of different size, dissimilar involvement in the sector`s value chain, and different strategies and capacities to advance in import substitution of active pharmaceutical ingredients (API), diagnostic kits, R&D platforms and drugs.3.- Over the past 20 years, a small though relevant number of Argentinian companies have reached the capabilities required for the development of complex biotech API and for drug manufacturing (among them, monoclonal antibodies), in close articulation with national scientific institutions, and with varying degrees of integration into international R&D and production networks. 4.- MNC have a central role in the domestic biopharmaceutical market: as main suppliers of imported highly complex biopharmaceutical drugs, as significant suppliers of these drugs to the public health sector, and as strong lobbyists in the definition and implementation of the domestic regulatory context. 5.-As a result, only a small part of the domestic public and private demand for biotech drugs is covered by local production (about 25 per cent), including both first generation biopharmaceutical drugs and a few complex ones.6.- It is possible to identify two learning paths for these firms (or groups of firms). On the one hand, those based on a stage skipping strategy, focused on manufacturing capacities in more complex drugs. On the other hand, those based on a sequential entry from the less complex to the most complex drugs, seeking to undertake locally the entire R&D and production chain.7.- Each of these trajectories involves different forms of articulation between the public infrastructure of Science and Technology and the business sector, with implications on the speed of R&D. While the first trajectory involves insertion in international and national networks with a temporary advantage in the development of imitative drugs, the second is more focused on local networks with a greater impact on local capacities but a lower learning speed.8.- These heterogeneity opens new questions on how to coordinate science opportunities, local technological capabilities and public procurement in order to overcome the strong commercial deficit of the industry, about one billion dollars in the mid-2000s, 50 per cent of which were monoclonal antibodies Conclusions and policy issuesThe coronavirus crisis has exposed tensions in the global pharmaceutical industry and shortages of the global supply chains within the framework of an unprecedented concentration and centralization of capital, highlighting countries interest in having domestic capabilities to respond to pandemic demands. The breaking down of pharmaceutical production chains, and the collapse of the private led manufacture and distribution system, underlines the need for global scientific cooperation and health sovereignty, requiring scientific internationalization, national technological catching up and industrial policy actions on a national or regional basis. As the pandemic reveals a systemic failures of developed countries innovation systems, the weak coherence between scientific opportunities and manufacturing base in new biotechnology fields opens transitory and small windows of opportunity for developing countries. They can insert as early imitators at lower costs than big pharma, profiting from backwardness advantages. Given the knowledge thresholds achieved by local scientific base in molecular biology, the learning and R&D thresholds achieved by the actual public and private technological capabilities, and the productive experience in bioprocesses and in biosimilars, biotech companies in Argentina have a chance to continue an updated import substitution process and to face the challenges posed by the pandemic. This requires advances in three areas of intervention: i) The strengthening of scientific and technological opportunities in close cooperation with the international scientific community; ii) support for the accelerated generation of learning in manufacturing; and (iii) the strategic role of public procurement in enhancing local production of complex drugs, guiding scientific and technological developments to meet the needs of the public health system, and boosting public production of medicinesIn short, the COVID 19 challenge opens up the possibility (driven by the health crisis), of building strategic high-cost drug development and manufacturing capabilities for the public health system. This requires articulating a deliberate action of international North South and South-South scientific cooperation with existing actions and instruments into "big structuring projects" at a national scale.