Vaccine challenges another chapter in the same story
Australia’s struggle to secure COVID-19 vaccine is no surprise given we import 90 per cent of our medicines. Experts want a new approach for the next crisis.
Prime Minister Scott Morrison inspects a vial of the Oxford-AstraZeneca vaccine. A global scramble for vaccines is hampering Australia’s rollout. Getty
James ThomsonColumnist
Updated Mar 19, 2021 – 2.57pm, first published at 11.30am
It’s rapidly becoming clear that one of the biggest hurdles facing Australia’s vaccine rollout is simply getting our hands on enough of the stuff.
But while confirmation we’ll miss our original target of vaccinating all adult Australians by the end of October has brought disappointment and criticism of the government, it shouldn’t come as a surprise.
Australia’s scramble for vaccines is a symptom of our near-total reliance on imported medicine.
With only
CSL manufacturing the AstraZeneca vaccine locally, Australia has no choice but to enter a global arm-wrestle to fill the gap. And as Italy’s decision to
block a shipment of AstraZeneca vaccine to Australia two weeks ago makes clear, sitting at the end of a long and complex global supply chain isn’t a great place to be.
Finding quick fixes will be difficult, although perhaps not impossible; one ASX-listed minnow has already put its hand up to help fill the manufacturing capacity shortage.
But there is a broader question about whether COVID-19 generally, and the vaccine shortage specifically, has exposed a weakness in some of Australia’s most critical supply chains, which leaves the nation vulnerable to future shocks and crises.
Does Australia really want to import 90 per cent of its medicines? Or should COVID-19 supply shortages force us to follow other nations and conduct a post-pandemic examination of our capacity in critical industries, with pharmaceuticals near the top of the list?
You’re always at the end of an opaque line and all of a sudden we ran out of things that we shouldn’t run out of.
— Dr David Sparling, IDT Australia chief executive
For Dr David Sparling, Australia’s struggle to secure vaccine supply is part of a bigger problem that has been brewing for three decades.
Sparling is the chief executive of IDT Australia, a listed pharmaceuticals manufacturer with a market capitalisation of $42 million.
Formed in 1975, ITD is the last manufacturer in Australia of what are called small molecule active pharmaceutical ingredients (APIs). These are the building blocks on which about 80 per cent of the medicines we use in Australia are based.
Once upon a time, IDT made APIs and finished doses – tablets, capsules and injectables – for a thriving local pharmaceutical industry. But slowly and steadily, much of that work was sent offshore to low-cost nations; first India and more recently China.
When the pandemic hit 12 months ago, Sparling watched as three decades of shifting drug making overseas came home to roost.
Shortages of critical medicines quickly emerged as freight interruptions (particularly to the international passenger flights that carry about 70 per cent Australian freight) collided with consumer hoarding and a level of protectionism from exporters keen to ensure their home markets were looked after.
The challenge in securing COVID-19 vaccines is another chapter in the same story.
“It came as no surprise because we saw that in the initial COVID crisis on the pharmaceutical side,” Sparling says.
“You’re always at the end of an opaque line and all of a sudden we ran out of things that we shouldn’t run out of.”
When the government put out a request for information about Australia’s potential manufacturing and supply chain capability for COVID-19 vaccines and treatments, IDT quickly put its hand up.
Not only can it make APIs, tablets and capsules and conduct and provide testing and analytical services, but it also has a sterile manufacturing line that, with some modifications, could be converted to fill and finish vials of vaccine.
And while IDT’s move into making cannabis medicines is gaining some traction, Sparling is more than willing to look at expanding the excess capacity he has to help Australia’s COVID-19 fight.
On Friday, Sparling got good news, with the federal Health Department asking IDT to “conduct a feasibility assessment to assess the possibility of utilising the company’s sterile manufacturing facility to supplement the production capacity for a COVID-19 vaccine.”
The stock soared a staggering 44.6 per cent to 26.7¢.
But even beyond the issue of vaccines, Sparling insists there is a bigger lesson for Australia from the pandemic about whether we should be so reliant on international supply chains for essential medicines. He uses the analogy of products you would need if you were stuck on a desert island – antibiotics, anti-inflammatories and anaesthetics.
“Basic stuff, but still really clinically relevant and still really important,” Sparling says. “We do as a country need to learn some of the lessons that COVID has taught us, both in turns of supply chains but also sovereign resilience.
“COVID-19 created that need and unfortunately we fell short – a long way short.”
The irony in supply shortages
It’s a view shared by John Blackburn, a retired Air Vice-Marshall who is now chairman of the Institute for Integrated Economic Research and a passionate advocate for what he calls national resilience.
Blackburn’s organisation, which has worked with IDT, has studied the pharmaceutical supply chain closely and estimates 90 per cent of Australia’s medicines are imported. Exactly what countries Australia is reliant on is much more difficult to ascertain, in part because the big pharmaceutical companies argue information about the country of origin for key ingredients is commercially sensitive.
The big irony, Blackburn argues, is that Australia actually has competitive advantages in the sector. For example, about 30 per cent of the poppies used globally for opioids are grown in Tasmania. But these ingredients are shipped offshore to be processed and manufactured, before then being imported back to Australia as finished medicines.
Ironically, Blackburn says some of the doctors that Blackburn is working with have reported recent shortages of morphine.
“How stupid is that?” Blackburn says. “A third of the world’s production and all we do is export it like iron ore or coal.”
While the government has set up a register of shortages and medicine shortages have occasionally hit the news – the best example being a shortage of contraceptive pills that emerged in the middle of 2020 – the broader issue of Australia’s growing reliance on imported medicines has developed over such a long period that it has slipped under the radar.
COVID-19 is a reminder, Blackburn argues, that crises will occur and Australia could be exposed unless it can build a greater degree of resilience. The world is not becoming simpler or friendlier, he argues.
“There are critical things that keep our societies functioning. Let’s work out what they are and work out how we manage that risk.”
The pandemic has given this topic fresh momentum in the United States, where concerns about America’s reliance on Chinese manufacturing were the subject of Senate inquiries two years ago.
President Joe Biden has ordered a probe into America’s supply chains. AP
On February 24, US President Joe Biden signed an executive order on supply chains, saying the US “needs resilient, diverse, and secure supply chains to ensure economic prosperity and national security”. Alongside requests about rare earths and electric vehicle battery supply chains, Biden tasked his Health and Human Services secretary to “submit a report identifying the risks in the supply chain for pharmaceuticals and active pharmaceutical ingredients and policy recommendations to address these risks”.
This rigorous and transparent identification of the risks the US is conducting is something Blackburn would like to see in Australia. But he argues that wrapping the issue in the blanket of national security ensures a level of whole-of-government approach that Australia has struggled to bring to supply chain problems.
The government announced a $1.5 billion Modern Manufacturing Strategy in last October’s federal budget, and this includes a $107.2 million supply chain resilience initiative that is designed to identify critical gaps. But Blackburn argues policy remains too tightly bound in ministerial silos – industry, energy, defence, finance – and the big picture is often missed.
“There’s no co-ordination across all of this. We have an industrial age model working in the information age.”
Political cycles stymie action
Blackburn, who has 160 professionals working across his various resilience projects, says three things are required to tackle the supply chain resilience issue.
The first is a shared awareness of what the problems and risks are.
The second is an integrated approach that brings in business, government, the public sector, unions and lobby groups. The national cabinet, he says, held promise at the start of the pandemic, but appears to have fizzled out.
The final element is action. The military’s approach of preparing for a range of scenarios provides a model for how we can build resilience for the next crisis, which Blackburn expects will emerge from economic problems – particularly high debt levels – that were building long before the pandemic.
He’s not confident his plan will be adopted, mainly because political cycles don’t encourage the patient and bipartisan approach required to properly tackle the issue.
But there are signs business is on board. In a speech to the Australian Institute of Company Directors annual conference on March 1, NAB chairman Phil Chronican
argued the pandemic has demonstrated the need for Australia to diversify its industrial base to reduce the concentration of the nation’s supply chain, invest in critical manufacturing capacity and consider creating strategic reserves in areas such as health.
“We saw the risks of overly concentrated international supply-chains when COVID-19 hit and the movement of people and goods across borders was interrupted,” Chronican said.
“We need to invest in the critical manufacturing, medical technologies, food and mining/energy production – and keep strategic reserves of critical supplies we can’t make onshore.”
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