Impact Blog
Covid-19 fight: Biotech seizes opportunities, while big pharma hesitates

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      By Laura AhmadiESG Research Analyst, Calvert Research and Management

      Washington - While the spread of Covid-19 continues to roil global markets, health care remains one of the few sectors with positive momentum, as pressure to diagnose, treat and prevent the disease mounts.

      In the biotech industry, several players quickly joined the fight against the disease as it emerged, both on the vaccine and antiviral treatment fronts.

      However, unlike the biotech industry, which is characterized by smaller firms at earlier stages of development, the pharmaceutical industry has been slow to enter the Covid-19 space, with only a handful of firms committing to some level of support by early March.

      The initial absence of large pharmaceutical firms from the mix has been notable, and unfortunate. Unlike firms of larger size and scale, biotechs may not have the manufacturing capacity to meet growing demand or the resources to conduct large enough clinical trials with expediency. These problems could have significant implications for how quickly new therapies are developed and delivered to all patients, especially those most in need.

      Vaccine industry incentives

      Overall, vaccines have historically presented as attractive business opportunities for firms with the right expertise. Vaccine assets offer long exclusivity periods and stable growth. In addition to intellectual property protections, manufacturing complexity often serves as a high barrier to entry, and vaccines cannot be genericized the way many drugs can.

      Despite favorable economics, pharmaceutical companies may be hesitant to be seen as profiting from a public health crisis like Covid-19. The drug industry has been in the crosshairs of the US government over its pricing practices for the past few years, and leveraging exclusivity to price a Covid-19 therapy - especially one developed in part using public finding - could add fuel to the fire. In the past, many vaccine companies have faced scrutiny over their pricing practices. For example, in 2016, both Pfizer and GSK responded to international pressure and cut prices charged to humanitarian organizations for their pneumonia vaccines.1

      The industry's reputation in the eyes of the American public has also been tarnished in recent years. Gallup reported in 2019 that the pharmaceutical industry is the most poorly regarded industry in Americans' eyes.2

      On the other hand, firms may be wary of investing in an asset with uncertain earnings potential. Should the global spread of the virus slow, public funding and revenue opportunities may dwindle. Such was the case with SARS, a virus that closely resembles Covid-19. While developing a SARS vaccine initially interested the pharmaceutical industry, projects were shelved as infection rates fell and panic subsided.3 Unfortunately, the abandonment of similar vaccine projects in the past due to lack of financial incentive may have negatively impacted the industry's response time to the Covid-19 outbreak, and tarnished big pharma's reputation further.

      Responsible path forward

      In spite of these concerns, there are still opportunities for pharmaceutical companies to help solve global health challenges while acting in the best interests of shareholders and maintaining positive brand value. Best practices for responsible participation include:

      • Embracing partnerships with other companies and research institutions that allow drug makers to focus on core competencies without shifting focus from other priorities while contributing expertise that could expedite the development of therapies.
      • Entering into and upholding clear commitments in terms of funding, R&D, manufacturing and distribution to avoid shortages or quality issues until the public health emergency has abated. Failure to uphold these commitments can cause irreparable reputational damage and draw scrutiny from human rights organizations or regulators.
      • Engaging in health systems' strengthening and educational programs, including training of local health workers, educating local populations on vaccines, and assisting in efforts to improve sanitation.
      • Committing to responsible pricing practices, including GDP-adjusted prices or caps on price increases, to ensure access in all geographies of need.

      Bottom line: If approached responsibly, pharmaceutical companies can take advantage of financial incentives in the vaccine industry while maintaining favorable reputations and delivering valuable health solutions.