Managing Public-Private Partnerships

Session-2 Why PPP? Motivation and Drivers of PPP

Swapnil Garg
 Managing Public-Private Partnerships

INTRODUCTION
Objective
Examine the public and private sectors motivations and drivers
for entering into PPP, for mutual and public value creation.

Reading
Daemmrich, A. A. & Cornell, M.I (2012). GlaxoSmithKline in Brazil: Public-Private
Vaccine Partnerships. HBS Case 9-712-049. (15 pages)

Prof.Swapnil Garg/ Professor (Strategic Management) 2

 Managing Public-Private Partnerships

Key Takeaways

1. Developed and emerging markets / Pharma and vaccine

markets have some fundamental differences
2. Vaccines are a large volume and low margin business
3. Vaccines require government support for penetration
4. A private firm is fundamentally disadvantaged in vaccine
market, but there is a huge opportunity, which is difficult to
miss.
5. Careful balance of private and public interests, long and short
term focus have to be considered.

Prof.Swapnil Garg/Professor (Strategic Management) 3

GSK A Pharma company

How do vaccines fit into the pharma business model?

GSK
Largest Pharma company in the world
◦ 130 Billion pound market capitalization
◦ 27.4 Billion pound sales
◦ 8.4 Billion pound operating profits
◦ 3.9 Billion pound R&D expenses
Different product lines (Exhibit 1,2)
World wide sales (Exhibit 1,2)
◦ 5.5 Billion pound emerging market
◦ GSK’s sales % declining in its largest and most profitable
markets (US and Europe)
Pharmaceuticals and Vaccinations (Exhibit 2, 3)
◦ Highest growth in sales of vaccines (CAGR +16.5%)
What are the key aspects of vaccination?

Vaccine Research

Vaccine Manufacture, Distribution

 Vaccination Context

• Unique contextual challenges

• Quality control
• Social Acceptance
• Distribution
• Could the government deliver to the
challenge?
• Competencies in all stages of vaccine
design and development?
What are the key aspects of vaccination?
• Growing segment
• Key to emerging markets
• Long tradition but controversial at times
• Long development and proving cycle
• Strict quality control in production
• GSK’s focus (Exhibit 2,3)
• A few vaccines deliver all the growth (Exhibit 4)
• Brazilian government’s focus on preventive
health
• Amazing success of Brazilian health care (Future
Scope ?) (Exhibit 5)
How do countries manage vaccination programs?
How do countries manage vaccination programs?

Government budget, Insurance programs

Government mandate is important
Small value, distribution is key
Brazil
◦ Good achievements in health indicators (Ex 5)
◦ 9% GDP spend on health
◦ Government’s long focus -- SUS and FIOCRUZ
◦ Insurance does not cover medicines
◦ High instances of dengue etc (which can be vaccinated
against)
FioCruz a government body

What is its mandate about vaccination?

What is FIOCRUZ?

Century old
“promote health and social development, to forge
and disseminate scientific and technological
knowledge, to be an agent of citizenship”

Provides guidance to govt and SUS on policy and

scientific issues
What was the PPP about? Key aspects

Did the history matter?

(1985 know how), (1995 technology), (2008
Active agents)
How does the PPP align interests of GSK and Fiocruz?

How did they start and what was envisaged?

How did the partnership evolve?

Government purchase of vaccines→ self-

sufficiency aspirations

1985 -- Technical collaboration

Progression from supply of active ingredients to
sharing of manufacturing know-how
2008 - Technology transfer deal
Synflorix

Vaccine for preventing pneumococcal infections

• PPP for technology transfer
• Synflorix….. Exclusive rights/ ten years/ declining price/
technology transfer
• Quantity: 13 million doses and decreasing with time
• Price: Euro 11.5 to drop to Euro 5
– (Europe price Euro 35-40)
• Future: Complete transfer of technology to Brazilian
Government
How does the PPP align the interests of GSK and FIOCRUZ

Why should GSK get into PPP with FioCruz?

Why should FioCruz get into PPP with GSK?

Second part of PPP: Dengue research and product development?

Endemic in over 100 countries

$51 million investment by each in a joint
research program
High uncertainty
 RISKS

• Risks for this PPP

◦ GSK (country risks)
◦ GSK (product risks)
◦ Fiocruz (technology risks)
◦ Brazil (National)
How is the PPP creating value and appropriating the same?

GSK
• Crown Jewel
• Drive market down
• Play with the pharma logic
FIOCRUZ
• Why GSK?
• Short/ Long term perspective
• What happens when things look down?
 Deepak Sapra

CEO API and Services, Dr Reddy’s Laboratories

IIM, Bangalore, Chevening and FullBright Scholar

https://www.forbesindia.com/article/big-
bet/from-russia-with-love/63337/1

PPP and Pharma

PPP and Regulatory Mechanisms
PPP and COVID19 Vaccine
https://forms.gle/vwussBwFoNytiAZ66

Thanks
 Afterthought

• How would like to see such a PPP in India?

 Deepak Sapra
Is there a public-private partnership involved in
your firm’s attempts to get the vaccine from
Russia?
Is there a PPP involved in your attempts to
distribute the vaccine in India?
How would the commercial interests of Dr.
Reddy’s be take of in this case?

https://www.forbesindia.com/article/big-
bet/from-russia-with-love/63337/1
 Deepak Sapra

I will share your forbes article with students as pre read

(Mr. GV Prasad’s statements says it all).
Just one question:
Please throw light on the alignment of interest of the
Russian Government and Dr. Reddy’s in making this
unique PPP work? I say unique as Public here is a
foreign government, and Dr. Reddy is private, while
the objective is to provide a vaccine for the Indian
population?
 Analysis points

• Drugs and Vaccines

• Vaccination market and emerging economies
• GSK’s competitive context
• PPP option
 How is a Vaccine made?

• http://www.telegraph.co.uk/finance/newsbys
ector/pharmaceuticalsandchemicals/1113858
6/how-a-flu-vaccine-is-made-from-chicken-
egg-to-syringe.html
 GSK and Strategy

• What are the product wise performance of

GSK, keeping stagnation of pharmaceutical
sale in mind, and issues in emerging markets?
Gauge the extent of private sector
commitment to this endeavor.
 Competitive Strategies

• How are PPP being viewed as a competitive

strategies adopted by firms ?
 GSK and PPP

• What are the positives and concerns for the

GSK as they enter into PPP with Brazil or other
middle-income country?
• What would be the mutual benefits?
 Private risks

• Risks for Vaccine industry/ GSK(overall)/ GSK

(Vaccine line)
History of relationship between GSK and Fiocruz?

• What is Fiocruz?
• …. GSK?

• Relationship overtime…..

• Latest deal between them….

 Brazil (Emerging economy)

• What are unique Health requirements of

Brazil?
• How can these be fulfilled by PPP with GSK?
Case Questions

1. What are the positives and concerns for the GSK as they enter into PPP with
Brazil or other middle-income country? Can we do a risk analysis of GSK's
decision?

1. What are the product wise performance of GSK, keeping stagnation of

pharmaceutical sale in mind, and issues in emerging markets? Gauge the
extent of private sector commitment to this endeavor.

1. How are PPP being viewed as a competitive strategies adopted by firms?

1. What are the unique contextual challenges here, like quality control
challenges in Vaccine program? Does government facilities have
competencies in all stages of vaccine design and development?

1. Identify the mutual benefits here?

1. Keeping case statistics in mind, would you like this kind of PPP and
recommended it for a country like India?