Only, IVC has not produced a single vaccine. In seven years.
Before we get to why, let’s go back over a decade. To January 2008.
Three Indian public sector undertakings (PSUs) were closed after the World Health Organisation questioned the quality of the vaccines produced at these centres. Following a hue and cry over the absence of a national vaccine maker, the government in 2012 announced a plan to set up a state-of-the-art unit in three years. The IVC was to be the nodal centre for supply, research and manufacture, and the supplier of 585 million doses, or three-fourths of the national immunisation programme’s vaccine requirement.
India, in 2017, under its Rs 9,451 crore ($1.44 billion) national immunisation programme, allocated approximately $25 per child for vaccines and operational costs. Children born in India are vaccinated for 12 diseases—tuberculosis, diphtheria, pertussis, tetanus, polio, measles, hepatitis B, diarrhoea, Japanese encephalitis, rubella, pneumonia, and meningitis. Of these, the vaccines the government requires the most are Oral Poliovirus vaccine (130 million doses) and Tetanus vaccine (110 million doses). The private vaccine industry estimates that, on an average, the government has a requirement of 120 million doses of each vaccine based on a birth cohort of 28 million and number of doses. A birth cohort is a group of people born during a particular period or year.
The plan for an IVC made sense then.
Except the government’s choice to carry out this ambitious plan was…a condom-maker with no experience in making vaccines. State-owned HLL Lifecare’s vaccine unit, HLL Biotech Ltd (HBL), was entrusted with constructing the IVC in three years. This despite protests from political and public parties.
An epidemiologist with Shimla’s State Institute of Health and Family Welfare, Dr Omesh Kumar Bharti, who has worked on anti-rabies vaccines, said, “The IVC was opposed by many people. The government shouldn’t have undermined indigenous manufacturing in PSUs, and yet, it went ahead with it,” he said.
The vaccine PSUs had research, manufacturing capabilities, skill and manpower. HBL has none of these, remarks a scientist with the National Institute of Science, Technology and Development Studies, Council of Scientific and Industrial Research (CSIR-NISTADS). “The IVC that was set up with so much money has been reduced to a packaging firm. If the IVC were to come into a public private partnership, vaccine PSUs will die,” the scientist added.
The IVC was to make five vaccines to guard against nine diseases—diphtheria (a nose-and-throat infection), pertussis (whooping cough), tetanus, hepatitis B, Hib (a bacterial illness), tuberculosis, measles, rabies, and Japanese encephalitis.
But, seven years later, it’s still incomplete. Meanwhile, HBL’s losses have risen year-over-year, surging nearly ninefold to Rs 42 crore ($5.9 million) in the year ended March 2018 as expenses piled up. Revenue rose 58% to just under Rs 32 lakh ($45,000). To top that, HBL’s auditor said the losses were understated.
HBL’s only activity of any note, which came last year—and this may sound anticlimactic—has been to act as a consultant to restart the three vaccine PSUs. It also partnered with a private firm—that too only as a tester and seller for two vaccines. All this in a failed bid to win a government tender.
There has been little development and only sporadic news since. The latest was a few weeks back when the Prime Minister’s Office asked the health ministry to speed up the separation of HBL from HLL Lifecare. This had less to do with making HBL functional and more with the government hastening a two-year-old plan to shed its stake in HLL Lifecare as part of a wider plan to disinvest in some PSUs.
For over a decade now, the government’s immunisation programme has been reliant on private players such as Serum Institute of India (the world’s largest vaccine maker), Bharat Biotech, Shantha Biotechnics, Panacea and Biological E—the firm with which HBL partnered. The relationship between the cost-conscious, public health-oriented government and the profit-minded firms has been tenuous to say the least.
The three PSUs producing essential vaccines such as DPT, BCG (TB vaccine) and TT have resumed operation, but they are hardly making any contribution to the Government’s Universal Immunisation Programme (UIP), with private sector accounting for over 90% of the requirement.
The three restarted PSUs have had little impact, as The Ken has reported. The IVC was to be the white knight, with a government agreement to buy 75% of the vaccines it produced.
With that in mind, the government took the fate of the IVC in its own hands roughly two years back, when it decided to sell its stake in HLL Lifecare and take full control of HBL. “HBL is going to be demerged from HLL and be a central public service unit. Previously, it was a wholly-owned subsidiary of HLL. Running the IVC is the only purpose of HBL,” additional health secretary Arun Singhal said over the phone. He declined to comment further. A questionnaire sent to Singhal, health secretary Preeti Sudan, and joint secretary Dr Mandeep Kumar Bhandari received no response.
Meanwhile, the delays, including a year’s worth due to what HBL calls “local agitation at the site”, had a cascading effect on other activities and has resulted in cost overruns. HBL’s revised project cost of Rs 710 crore ($100 million) was rejected in 2017. In July 2018, it sent a revised estimate of over Rs 904 crore ($127 million), with a plan to start commercial operations in March 2020, according to HBL’s 2018 financial statement.
HBL was expecting the funds when the government’s second term started in June this year, CEO V Vijayan told The Ken, but it is yet to see even one rupee. “We qualified, validated and kept the facility ready. But the funds didn’t come through. We expect the funds to be released in two more months and the pre-qualification and certification to take four more months,” Vijayan said.
Even if the funds do come through, it will be years before production starts in full swing. And that after the government has poured in about Rs 600 crore over seven years into a project whose fate first lies in a disinvestment plan. A project that has only enriched the coffers of private vaccine makers.
These private firms attribute the delay and cost escalations to the government’s misjudgement of time and costs, and a flawed project concept. Its choice for an implementing agency had taken many in the industry by surprise.
A senior executive of Bharat Biotech requesting anonymity said that HBL was chosen because it was the poster boy of Indian PSUs. “In late 90s, when the country was in the clutches of Japanese Encephalitis, HBL was used to procure Chinese vaccines, bypassing all trade channels. That is how it came into the picture,” the executive said.
Now, years later, the HBL’s vaccine complex is not producing anything despite housing four units—bulk vaccine production, formulation, quality control, and utility and engineering services—needed in the manufacturing process. What it lacks is an R&D unit, which is a basic requirement to start production. After R&D come clinical trials that can take five to six years. Then the vaccine needs a nod from the WHO, a pre-qualification, before it enters the global supply chain. All said, a fully-functional producing plant is years away.
HBL wanted to start production, Vijayan said, with the pentavalent vaccine. This vaccine costs a little under a $1, but is the costliest in the national immunisation programme. It targets five diseases, namely diphtheria, pertussis, tetanus, hepatitis B and Hib.
But the lack of an R&D unit has put those plans on indefinite hold. In that case, how did HBL sell two vaccines—pentavalent and one for Hepatitis B?
It did this via a loan-licensing arrangement with Hyderabad-based Biological E. The private company produced the two vaccines, while all HBL did was test, label and sell them in the retail market in Tamil Nadu and Kerala. A far cry from what the vaccine complex was intended for—to produce from scratch, mainly for the government.
The two companies tied up in July-August last year, when the government called a tender for the pentavalent vaccine. But they lost. Hyderabad-based Indian Immunologicals Ltd won a contract to supply 60% of the requirement, while the rest was shared by four others, including Biological E who had also participated in an individual capacity.
HBL getting the vaccines manufactured at Biological E has irked the private vaccine makers. After all, the government had committed to buying 75% of HBL’s production. It was nothing but a shortcut, a former executive of Serum said on condition of anonymity, as HBL didn’t have the infrastructure and manpower. “So who’s doing the basic activity? Biological E. So what is IVC doing? Testing at their plant and selling it to the Indian government. Is that what the government had desired?” the executive asks. Serum took up the issue officially on behalf of the private players.
However, HBL CEO Vijayan says the tie-up was merely for “market sensitisation.” He did not explain the need for sensitisation of a vaccine made by Biological E and tested and labeled by HBL. Biologicals E said it does not speak to the media, while Indian Immunologicals did not respond to questions.
Eventually though, that tie-up didn’t last either. The partnership was discontinued for want of funds.
Too big to fail?
It’s not as if HBL was standing still. HBL has entered into long-term supply and technology license agreements with vaccine makers, like the one with Institute of Immunology, Zagreb, Croatia, in 2013 for the manufacture of measles vaccine in India. Under the deal, for the first two years, IMZ would supply the bulk of the vaccine to HBL who would formulate and fill them.
It has also been loading up on property, plant and equipment, which totalled Rs 291.2 crore ($41 million) in the year ended March 2018, skyrocketing from Rs 2 crore ($281,000) the previous year. That led to depreciation and related costs jumping to Rs 14 crore ($1.9 million) from Rs 41 lakh ($58,000), propelling a ninefold-rise in HBL’s losses. While long-term borrowing nearly doubled to Rs 244 crore ($34 million), some of the loss came from the financing costs clocked in at Rs 7 crore ($986,000) versus zero in the year ended March 2017.
Moreover, the auditor’s report for the previous year notes that HBL has not accounted for the leasehold land of 100 acres, on which the IVC is built, at its fair value of Rs 10.1 crore ($1.4 million) nor for the sub-leasehold land of 3.38 acres. This, the auditor notes, understated liability by an equivalent amount, capital work-in-progress by nearly Rs 56 lakh ($79,000), and loss by nearly Rs 42 lakh ($59,000), beyond the Rs 42 crore that it reported. Their financial results for the year ended March 2019 are not yet available.
Now, why HBL was buying plant, machinery and other equipment at that rate when it did not have a production license yet is anybody’s guess. The rise in long-term borrowings can perhaps be explained by the lack of government funds, plus it has to keep paying its bills. HBL has 120 employees.
“IVC has been a flawed project from day 1. Making India self-sufficient in vaccine procurement is easier said than done. It will take five years to six years to do that. They will need 1,500-2,000 employees including scientists,” said the former Serum executive. The person does not consider HBL competition for private companies yet.
As an SPV (special purpose vehicle), HBL will be isolated from the financial risks of its parent company HLL Lifecare which is loss-making. Its legal status as a separate company wholly-owned by the Indian government will make its obligations secure, even if HLL Lifecare was to go belly up.
However, public health activists like Chinu Sreenivasan, co-convener of the All India Drug Action Forum, is batting for the IVC. “Having come this far, the government should not lose interest in the IVC. It should not shut it down like the vaccine PSUs 10 years back. The IVC should be given additional funds,” Sreenivasan said.
The government seems to have no choice but to continue procuring from private vaccine manufacturers as plans for long term self-reliance is stuck in limbo due to the government’s own doing. Public health activists have stopped tracking the status of the project due to inordinate project delays and lack of accountability of government officials in the public domain, especially the media.
Sunil K Bahl, who retired as the director of Business and Regulatory Affairs at Serum, says that just like Indian hospitals have achieved an important position in the global market, the IVC can also do the same in the global supply chain. After the rigour of trials and research and development. Vijayan, meanwhile, is hesitant to put a timeline on the completion of the project. He’s cautiously optimistic that once funds come through, IVC can launch commercial operations.