Exit in sight, Gates Foundation hopes India will foot the vaccine bill

On 25 September, Indian Prime Minister Narendra Modi was felicitated with the Global Goalkeeper Award by the Bill and Melinda Gates Foundation (BMGF). On the surface, it was recognition for the PM’s Swacch Bharat Abhiyan scheme—a programme that sought to eliminate the practice of open defecation. But there was a lot more riding on this award. It was the culmination of a years-long effort to make an ally of a man seen as critical to BMGF’s continued success in the region.

Instituted by BMGF in 2017, the Global Goals Awards are meant to recognise champions of United Nation General Assembly’s sustainable development goals (SDGs). Enshrined in 2015, these serve as a blueprint for a sustainable future without poverty, hunger and preventable child deaths. For Seattle-based BMGF, which has worked towards preventing child mortality since its inception in 2000, the SDGs are something of a north star.

This sort of focus made India a key proving ground for the Foundation. In fact, with the country accounting for just under 1 million child deaths a year—a fifth of the global child mortality burden—BMGF set up an office in India in 2003, just a few years after the charity’s conception. 

Since entering India, BMGF has also learned of three situations unique to the country. First, unlike countries in, say, Africa, where the Foundation is particularly active, the Indian government can afford to provide a decent standard of public health but doesn’t. For a developing country with a growing GDP, India is one of the lowest per capita spenders on health—with only around 1% of GDP spent on healthcare compared to the global average of 6%.

Big spender

With $47.9 billion in assets, BMGF spends about $5 billion annually across the developed and developing world. It is also the single largest donor to the World Health Organisation

Second, India’s massive population blunts the impact of direct grants. Although BMGF spent more on India—$282.5 million—in 2017 as compared to any other country, the per person spending came to 21 cents (Rs 15). In Uganda, where it spent only $34.9 million, the per person spending was closer to 85 cents (Rs 59).

Lastly, it has understood that it can’t just foster innovation, affordability and access. It needs the Indian government to adopt whatever it sets in motion and take things forward.

All of this made it clear to the Foundation that there was only so far it could go without having the Indian government decidedly onside. So, for the first iteration of the Global Goals Awards, the leadership of BMGF was sold on the idea of Narendra Modi being one of its inaugural awardees. The idea, however, was scrapped after internal protests at the highest level, said a former senior BMGF executive on condition of anonymity. BMGF neither confirmed nor denied this.

This didn’t stop the Foundation from expressing its appreciation for Modi. Bill Gates publicly lauded Modi and his government for everything from the Swachh Bharat campaign to financial inclusion and the Ayushman Bharat healthcare scheme. In lieu of the 2017 award, these statements from the left-leaning Bill Gates himself were part of a conscious decision to gain the Indian government’s support, says another former BMGF executive.

But after the Modi-led BJP won the mandate of the people for a second time running in mid 2019, BMGF realised that it needed to go the extra mile. Modi was here to stay and BMGF had to be close to him. Thus, despite various groups protesting against Modi’s chequered history on human rights, as well as one BMGF employee resigning in protest, the Foundation bit the bullet. Narendra Modi was made part of its latest cohort of awardees. BMGF has also stopped funding one of its long-term partners—Rajiv Gandhi Mahila Vikas Pariyojana (RGMVP), which has ties to the BJP’s arch-rival, the Indian National Congress.

Modi, BMGF is hoping, will help it execute the second part of its philanthropic strategy—the exit.

Exit, stage left

BMGF espouses what The Economist calls philanthrocapitalism—using philanthropy to fix market failures like the lack of purchasing capacity of buyers or small margins for producers. And for the Foundation, time is of the essence. It wants to create the maximum impact in the shortest possible time. With this in mind, BMGF places a great emphasis on vaccines since research funded by the charity shows that vaccines offer the greatest return on investment in terms of health.

Consequently, of the $1.8 billion BMGF spent in 2018 on global development, more than 50% was spent on eradicating polio using vaccines and vaccine delivery overall.

In India, too, the Foundation has worked extensively to fix the vaccine market. In an emailed reply to The Ken, BMGF’s spokesperson wrote that one of the reasons India is important for the foundation is that it is a leading source of solutions to the challenges facing not only its poorest citizens but poor people everywhere. And that vaccines developed by Indian companies constitute 70% of vaccines used in low- and middle-income countries. 

Indeed,  it has ‘fixed’ the supply side of the market by doling out grants to every major vaccine producer. This has even helped make India the leading vaccine supplier to the world. Some of its grantees call BMGF the SoftBank of Indian healthcare, after the Japanese VC giant. However, unlike SoftBank, BMGF isn’t in it for the long haul. Once it establishes a system, it demands an exit so it can move on to new innovations. Bill Gates, after all, calls himself an “impatient optimist”.

This is where India poses a unique problem—BMGF’s 21-cents-per-capita approach isn’t enough to fix demand, i.e, buy vaccines as well. Now, it needs a buyer for a country with the world’s largest birth cohort—some 25.7 million babies each year. Something only the Indian government is capable of. But while India has expanded its immunisation programme to partially include some of the vaccines that were developed through BMGFs grants over the last four years, it still isn’t sold on the Foundation. 

BMGF understands the importance and difficulty of an exit in India only too well. It entered the country at the turn of the century to assist the Indian government curb the spread of HIV.  “It was unprecedented with large prevalence, the government was unprepared and it was expensive to treat. So the Gates foundation jumped on it. The foundation came to India as an HIV funding agency,” said development economist Amir Ullah Khan. Khan was deputy director and policy advisor to the BMGF from 2011 to 2015.

While The Foundation pumped $338 million into the National Aids Control Programme, the effort was only partly successful. The government wasn’t convinced with the programme’s effectiveness and it took over only a part of BMGF’s programme. “We told them you can’t create a huge number of assets and then just leave and expect the government to take over everything,” Sujatha Rao, the head of the National Aids Control Organisation (NACO) at the time, claimed in a 2009 Forbes story

In the same piece, Ashok Alexander, who led BMGFs operations in India, laid out its philosophy: “We are not perpetual funders. We try to be catalytic…In five years we would hope the HIV/AIDS epidemic is contained enough that we will no longer have to be involved.” This is true of the Foundation even today.

Khan believes that this experience taught BMGF to invest in projects with measurable impact and a clear exit strategy. Its efforts to fight polio—which began in 2007 with BMGF earmarking $3 billion to eradicate the virus globally—has seen success in India. The last case in India was detected in 2011.

Changing sides

By this time, says Khan, BMGF had established two sets of strong relationships in India. On one hand, it was the darling of vaccine makers, who benefited from its grants. In 2001, for instance, BMGF gave a large part of the $6.25 million to the largest vaccine manufacturer—Pune’s Serum Institute—to develop an affordable meningitis vaccine for Africa. BMGF even partly funded clinical trials that cost about $37 million. The result was a vaccine sold at $0.50 per dose (Rs 35). By 2015, it saw a market of 50 million doses annually.

BMGF had also developed a strong rapport with the Congress-led Indian government. The foundation even gave a grant to Rajiv Gandhi Charitable Trust (RGCT), which functions primarily in Amethi—until recently a bastion for the Congress’ Gandhi family. 

When the BJP-led government came to power in 2014, however, BMGF no longer commanded the same support, according to the former executive with BMGF quoted above. Initially, the government recognised its importance. In 2015, the Modi-helmed government awarded Bill and Melinda Gates India’s third-highest civilian honour—the Padma Bhushan. 

The government even included the Rubella, Japanese Encephalitis, Rotavirus and Injectable Polio vaccine—all of which had either direct or indirect funding from BMGF—in the government’s immunisation programme in 2015.

But in the following years, this budding relationship has soured.

Shortly after the Modi government announced demonetisation—where it declared 86% of the nation’s currency invalid—Gates addressed the government’s policy think tank, Niti Aayog. While he avoided the topic of demonetisation, a press release claimed he’d endorsed the policy. Gates cleared the air by stating he had no opinion on demonetisation the following day, a move that antagonised the government. 

Shortly after, in March 2017, the government took control of funding for Immunization Technical Support Unit (ITSU) from BMGF-supported Public Health Foundation of India (PHFI). ITSU provides strategy and monitoring advice for the government’s immunisation programme. Just two months later, though, the government prohibited PHFI from receiving foreign funding altogether.

Side effects and ethics

BMGF has been criticised for ignoring the side effects of its vaccine against diarrhoea. The vaccine introduced in India has a high risk of intussusception—a potentially fatal side-effect of rotavirus vaccines, in which the intestine folds into itself, causing abdominal cramps, bloody stools, nausea and vomiting. In addition, a 2009 BMGF-funded clinical trial led to the deaths of seven Indian girls. A panel appointed by the Indian health ministry in 2010 noted a number of shortcomings and alleged ethical lapses in the trial.

According to reports, some of this was motivated by the Swadeshi Jagran Manch (SJM), an affiliate of the Rashtriya Swayamsevak Sangh (RSS), the BJP’s ideological mentor. 

“The news of friction from the government started coming from various programmes over the last three years. People were taken aback and an internal debate began on how do we work with the government? The earlier model of being in the background was not not working. In states like Uttar Pradesh and Bihar, people did not see BMGF, they saw PHFI or Care (both funded by BMGF). Our work model used to be in the background. Now, the question was how do we have a voice?” said the former executive with BMGF.

The award in September was one answer. BMGF also went out of its way to stop funding long-term partner in UP—Rajiv Gandhi Mahila Vikas Pariyojana (RGMVP). The organisation, which is associated with the Congress’ Gandhi family, stopped receiving funds earlier this year, said the former executive. The Ken did not get to question BMGF on this as the organisation backed out of a pre-arranged meeting the day before publishing.

The urgency comes as BMGF realises it is racing against the clock.

Private Party

While BMGF helped vaccine makers fix the supply side of things, on the demand side, it relied on Gavi (Global Alliance for Vaccines and Immunisation). It donated to Gavi, which, in turn, helped create demand in regions where governments cannot or do not want to pay the initial price of vaccines. Up until now, India has relied on Gavi to introduce the new vaccines to the immunisation programme. 

2017, in fact, saw Gavi’s spending in India reach an all-time high even as the government’s finance was just 79%, the lowest in the last five years. Moving forward, the government expects the expenditure on vaccines to increase from Rs 8,764.36 crore ($1.2 billion) in 2018 to Rs 12,364.31 crore ($1.8 billion) in 2022 as it seeks to scale up both rotavirus vaccine and pneumococcal conjugate vaccine from 2018 onward. In the same period, the government’s share of the vaccine burden would have to go from 79% to 97% (see chart) as Gavi’s $500 million support to India is expected to run out by 2021.

Gavi funding has thus far been crucial to India’s vaccine makers, most of whom are BMGF-funded. The assured demand at a particular price, even if it is lower than market price, gives better clarity, explains a senior executive with Serum Institute. 

With India’s Gavi tank running dry, BMGF-funded suppliers of vaccines like Serum Institute and Bharat Biotech need the Indian government to foot the bill for the entire birth cohort. The way BMGF chooses its grantees, however, has left the Indian government less than convinced about buying from BMGF’s chosen few.

There is no specific rule that decides who gets funding from BMGF. Or even what sort of support they receive—equity or a grant or volume guarantee or all of it— said the former BMGF executive quoted earlier. The Foundation’s intent is to lower mortality, but is it always completely fair and entirely right? I’m not sure, says the former executive. 

Rationale for investments

BMGF’s portfolio of grantees in India includes most vaccine makers, think tanks like Public Health Foundation of India, industry bodies like FICCI, large NGOs including Care India and PATH, among several others. It also has another strategic investment fund that offers equity investment, debt and volume guarantees. All told, it has over 60 companies and not-for-profits combined in its portfolio

The lack of a clear, rule-based approach for who gets BMGF funding has led to some distrusting the organisation’s motives. One member of the National Technical Advisory Group for Immunisation, which advises the government on new vaccines, accuses BMGF of a bias towards private sector over their public counterparts. 

The former senior executive who was with BMGF in 2013 says that Gavi did try to negotiate a memorandum of understanding which preferred private sector vaccine manufacturers. However, the Indian government resisted and the clause does not exist in the final partnership document signed between India and Gavi. 

Despite this, the arrangement with Gavi has hurt public vaccine makers. The Ken has reported that three vaccine-producing PSUs were unable to compete in government vaccine tenders since they produce DPT while Gavi endorses the Pentavalent vaccine. Hyderabad-based Biological E—funded by BMGF through Gavi—which produces the pentavalent vaccine, has been selling the vaccine to the government since 2015. An executive with Biological E agreed that a grant from BMGF helped the company compete in government tenders for pentavalent vaccines.

Harish Iyer, senior advisor of scientific programs at BMGF India, insists that the foundation does not discriminate between public and private companies. It simply cares whether they meet the World Health Organisation’s benchmarks for quality and can therefore export vaccines, too. None of the Indian public sector companies have met these benchmarks.

Capitalism over charity

The second and more thorny criticism of BMGF’s funding choices comes from Medecins Sans Frontieres (MSF), one of the largest health charities in the world. MSF is one of the few not-for-profits in global healthcare who have not accepted money from BMGF. MSF is opposed to Bill Gates’ support of patenting vaccines, which results in reduced access for the poor. The Ken has reported on how Indians are unable to access TB medicines—Bedaquiline and Delamanid—since they are patented.

Most recently, MSF challenged the patent granted to Prevnar 13, a Pneumococcal Conjugate vaccine (PCV) developed by pharma major Pfizer to prevent pneumonia in infants and the elderly. Pfizer had received a subsidy from BMGF via Gavi through a unique investment mechanism called advanced market guarantee. This assures Prevnar a market. The Ken has reported how the vaccine became the first patented vaccine to enter the national immunisation programme.

Pneumonia accounts for 25% of deaths of infants. Not only does Prevnar prevent mortality, it also cuts down the use of antibiotics prescribed for subsequent ENT infections. When stacked against the Foundation’s aim of preventing child mortality, the patenting of Prevnar seems counter-productive. BMGF subsidised Big Pharma in the name of fixing the market, says Leena Menghaney, South Asia head of MSF’s access campaign.

According to a consultant with the government, BMGF tried and failed to convince Pfizer to avoid going the patent route in India. Pfizer has received BMGF investment for an injectable contraceptive as well as the market guarantee from Gavi for Prevnar.

BMGF’s Iyer says the Foundation supports tiered pricing. This means that Pfizer is offering it to the government for a lower price than what is available in the market. However, even with that being the case, Prevnar is far and away the most expensive vaccine in the national immunisation programme. It was priced at Rs 198 ($2.8) per dose, while a vaccine like BCG cost just Rs 3.68 (5 cents). Even though Pfizer’s vaccine covered just 3.4% of the birth cohort in 2017, it accounted for $82.8 million of the $149.5 million of Gavi funding used by the government for buying vaccines in 2017.

And while the Gavi funding is currently helping the government shoulder part of this burden, Menghaney wonders what happens when that funding runs out.

Further, as The Ken has reported, while the sales pitch for the PCV says that pneumonia accounts for 25% of infant mortality, most pneumonia cases are caused by a virus PCV does not protect against.

Iyer points out that BMGF is still trying to improve access by funding Serum Institute’s development of a PCV that does not use the patented process developed by Pfizer. In the past, says Iyer, BMGF has invested in the development of rotavirus vaccines by both Bharat Biotech and Serum. These vaccines, which prevent diarrhoea, are now available for about $1.

If Serum’s BMGF-funded search for a Prevnar alternative is successful, the government could have access to a PCV that it can afford even without Gavi’s aid. This has played out in the pentavalent space as well. The government initially used Gavi funding but gradually took the burden on itself as pentavalent vaccine prices dropped by 50% in three years due to competition.

The Ken got in touch with BMGF over a call on the evening of 9 October and emailed it a detailed questionnaire on 11 October. Despite initial assurances of calls and meetings, the Foundation reneged on the same and did not share details of funding in India, its strategy for investments and future plans in the country.

The chequered flag

Even as these questions linger over BMGF, the Foundation is scrambling to charm the Indian government. Convincing the Modi-led government will ultimately determine whether all its efforts over the last decade—which helped grow the Indian vaccine industry from $500 million in 2012 to $1.1 billion in 2018—sustain in the long-term.

Bill Gates, at the 2018 Global Goal Awards, said, “Those two (PCV and rotavirus vaccine] will be the greatest explanation for the drop in child deaths in India than anything that has been done in the last decade.” Will the government’s universal immunisation programme continue to vaccinate infants against pneumonia and diarrhoea even after Gavi funding dries up? If so, BMGF would have managed the impact it set out to achieve.

India lags behind in mortality

India has some of the worst health indicators. Take infant mortality, for instance. Some states in India have infant mortality rates comparable to sub-Saharan African countries. While Madhya Pradesh is at 47 deaths per 1,000 live births, Kenya sees 43, Uganda 48.7, and Ghana is at 50. At the other end of the spectrum, Kerala sees just 10 deaths per every 1,000 live births, similar to the European average of 9

But even as its immunisation mission nears an uncertain end, the Foundation has its sights set on a new challenge. Eliminating tuberculosis (TB) in the country. In an emailed reply to The Ken, BMGF recognised that after immunisation and nutrition, the third area of focus in Indian healthcare is fighting infectious diseases, especially TB. One of the top 10 causes of death worldwide, and India accounted for 27% of total TB deaths in 2017.

The Foundation has partnered with the Indian government to eliminate TB by 2025. In fact, BMGF was involved in writing the National Strategic Plan for Tuberculosis Control 2012–2017, the guiding document for TB control in India. In 2016, the government launched an initiative called “India TB Research and Development Corporation” to develop new tools—drug, diagnostics, and vaccines—for TB. BMGF is one of the initiative’s funders.

BMGF’s focus on fighting TB in India may still be nascent, but it has long championed the fight against the disease. As far back as 2006, BMGF gave a $104 million grant to TB Alliance, a New York-based not-for-profit dedicated to the discovery and development of new, affordable tuberculosis medicines. In 2014, it followed up with another grant to conduct trials for TB Alliance’s breakthrough drug, Pretomanid. It is only the third drug developed in the last 40 years to treat drug-resistant TB.

The Foundation also gave a grant to US-headquartered Cepheid to develop a product that can diagnose drug-resistant TB. Over the last five years, India has begun buying Cepheid’s diagnostic tool GeneXpert, which has 1,300 installations across India. A large number of these were purchased by India’s national TB programme and are used at the district hospital level, bringing TB diagnostics into previously underserved areas.

Pretomanid, meanwhile, is expected to reach India sometime after November 2020. Even as it tries to see its immunisation efforts across the finishing line, the wheels of BMGF’s next Indian campaign are already in motion.

Correction: An earlier version of the story called Padma Bhushan as the highest civilian award. The story has been updated. We regret the error.

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