On Dec 22, 2020, Science, Technology and Innovation Minister Khairy Jamaluddin announced that the Malaysian government will spend RM2.05bil to purchase vaccines for 26.5 million Malaysians. If every person receives two doses, that works out to approximately RM39 a dose on average, which is a very reasonable price and appears globally competitive.
These vaccines are an important tool in our ability to fight the pandemic. Malaysia has done well to sign procurement agreements with several companies to deliver enough vaccines to cover 83% of our population. However, this important milestone is being overshadowed by questions regarding the transparency of prices from each individual company.
These demands for price transparency are reasonable for public trust, vaccine confidence and anti-corruption reasons. As a health policies and global health expert, I am supportive of transparency and fair contract terms between low-and-middle-income countries and large and powerful multinational pharmaceuticals. That will improve health outcomes, reduce corruption and strengthen public trust.
However, price transparency for the vaccines is a highly complex situation and we must consider all sides to understand why the Malaysian government can’t disclose vaccine prices.
For full disclosure, I am currently an independent consultant for health systems and policies. I do not own stocks in any company anywhere in the world, and I spent eight years working for a large pharmaceutical company (two years in medical affairs in Singapore and six years as an ethics and compliance director based in Dubai, Shanghai and Paris covering Eastern Europe, the Middle East and Africa, and China).
Firstly, we must consider the forces outside government control. Pharma companies have three major customers categories: governments (health ministries, hospitals or government insurers), private entities (private hospitals, distributors or agents) and global organisations (Unicef, the United Nations Children's Fund, buys two billion vaccine doses a year, for instance).
Pharmas often ask their customers to sign nondisclosure agreements (NDAs), even if it's a large customer. The NDAs can cover areas like intellectual property, prices or commercial terms. It’s probable that these NDAs cover ex-factory prices (ie, wholesale, but not retail prices) and other commercial terms such as custom/insurance/freight terms or mark-ups along the distribution chain.
Pharmas use the NDAs to preserve or enhance their commercial advantage. For one, keeping intellectual property and patents secret gives them an advantage over their competitors. Secondly, keeping ex-factory prices secret enhances their negotiating strength with other buyers. This is especially true because multinational pharmas sell to countries with different levels of wealth. Thirdly, keeping commercial terms (such as freight prices, insurance terms and mark-ups) secret provides another advantage over their competitors.
Why would a customer sign the NDA? Firstly, there’s no clear disadvantage for doing so. There’s only a clear advantage if all other customers stop signing all NDAs with every company. So far, there is no single actor in the world willing and able to convene this collective action. Secondly, the customer needs the products made by company and is willing to sign an NDA.
NDAs can help pharmas make more money. At this point, maybe you're angry at pharmas. But we can't blame them entirely because they are merely responding to global capitalism. Wall Street, pension funds and asset managers want higher profits to benefit shareholders, pensioners and investors. Ordinary Malaysians can benefit too if institutions like EPF, Khazanah, PNB and private asset managers invest in pharmas.
Now you might say “pharmas shouldn’t profit from disease” and that is a very reasonable statement. But the solution is not to simply blame the pharmas but to change the structural forces that compel pharmas to act in certain ways. In other words, we must change the way global capitalism functions and how global health goods (like vaccines, medicines and oxygen) are managed, priced and governed. Then we can have equitable outcomes for the poorest and most vulnerable people in the world.
But that’s a very big and complex conversation, and it should be done separately. In this letter, I want to discuss Covid-19 vaccine prices and NDAs.
At this point, we understand that NDAs are outside the Malaysian government’s control. Malaysia must comply with them because we – like all the other countries also buying vaccines – have no choice. Revealing vaccine prices means breaking the NDA and potentially losing the vaccines. And it’s not just Malaysia held to an NDA, as even the European Commission (comprising 27 countries and 450 million people) signed an NDA with Pfizer. (The commission’s online FAQ states: “At this stage the specific pricing per dose is covered by confidentiality obligations.”)
Despite the NDAs, however, the government must realise that transparency will increase vaccine confidence and public trust, which strengthens public health. There are several ways we can build trust and fight corruption despite the NDAs.
Firstly, publicly announcing the overall vaccine cost is an excellent move. Kudos to Khairy for this amount of transparency. Secondly, Khairy had the right instinct to offer to disclose more to relevant Parliamentary Select Committees and the Public Accounts Committee. In theory, individual MPs can sign NDAs to preserve confidentiality but they will be responsible if leaks happen and we lose the vaccines.
Thirdly, the government can commit to release the details of each contract at a pre-agreed date, for example two years after signing the contract. This is an easy clause to insert into a contract with any pharma. Fourthly, the government can release more non-price details today, for example, the terms for logistics, indemnity, insurance and freight. These value-added services are not price-related and can be public information.
Malaysia needs long-term work to strengthen our own external reference pricing system (to benchmark prices against peer countries) and build our own domestic manufacturing capacity to reduce overreliance on foreign entities. Finally, Malaysia must actively lead reforms of global health. Two specific examples are governance and the pricing of global public goods such as vaccines and medicines.
I personally do not support NDAs. However, I understand and accept the current realities of the global health and capitalist systems. Malaysia is a middle power with limited leverage in the global health landscape that is tilted against low-and-middle-income countries.
Hopefully, this understanding will give us a firm foundation to mitigate the disadvantages of NDAs while working hard to increase our own self-reliance and change the deep infrastructure of global health.
DR KHOR SWEE KHENG