Lessons from the Pandemic: Investing in More Reliable and Equitable Health Supply Chains in a Post-Pandemic World
Jia Qin, Dr. Andrea Feigl
Introduction
While international trade has catalyzed an era of unparalleled economic advancement around the world, globalization also poses major challenges. A study by the Mckinsey Global Initiative found that every region of the world depends on trade for more than 25% of at least one key industry, highlighting the crucial interconnection between local and international spheres. However, what happens to these interdependencies during times of crisis? Pressing issues such as geopolitical disputes, climate change, and emerging infectious diseases are reshaping the globalization process, aggravating existing inequalities and driving regional fragmentation.
Nowhere are these challenges more salient than in the field of health. Medical supply chains are foundational to global health security since flourishing health systems depend on access to medical products. However, as Covid-19 demonstrated, global supply chains for medical products are fragile and inequitable. Export restrictions following the outbreak of Covid-19 highlighted the risk of depending on trade for medical essentials, shifting country priorities away from global trade and towards regional autonomy. The inequitable distribution of Covid-19 vaccines also emphasized the dependency of low-income countries (LICs) on high-income countries (HICs) when it comes to securing essential health products. While inequitable vaccine production and distribution exacerbated the toll of Covid-19, the rise of nationalist policies also diminished global trust in the reliability of trade.
Given this situation, greater investment is essential for strengthening global health supply chains. Specifically, stakeholders should focus on more equitable and reliable access to medical products by investing in local manufacturing capacities that supplement imports. For LICs, this means decreasing dependence on donor countries. For HICs, this means diversifying internationally sourced products with domestic ones in case of future trade disruptions. Equitable and reliable access to medical products reduces the toll of future disease outbreaks and is crucial for health security and long-term economic stability.
Trade Restrictions in Times of Crisis
Trust in international trade waned following the pandemic as supply chain disruptions revealed the risks of depending on global trade for medical products. At the start of 2020, as the world scrambled for protective equipment (PPE) such as face masks, hospital gowns, and gloves, China imposed export restrictions to prevent domestic manufacturers from shipping PPE abroad. This decision caused severe shortages for the US and EU who both relied on China for PPE. Grim newsreels from the beginning of the pandemic showcased US doctors reusing disposable gloves and masks while wearing garbage bags as medical gowns. In response, the president of the United States, Joe Biden, issued Executive Order 14017 directing all government departments to assess supply chain risks under the sentiment that America “shouldn’t have to rely on a foreign country — especially one that doesn’t share our interests or our values — in order to protect and provide our people during a national emergency.” However, developed countries were not the only ones affected by supply chain shutdowns. African nations also found themselves unable to buy testing reagents or pharmaceutical ingredients during the start of the pandemic as the EU implemented export restrictions. Despite readily available funds, the EU’s nationalist measures triggered a continent-wide shortage of essential medicines in Africa. The ease with which national priorities overrode existing trade agreements during the Covid-19 outbreaks reduced trust in international trade, prompting HICs to diversify their sourcing for supplies such as PPE, while forcing LICs to navigate the pandemic without essential medicines.
Vaccine Inequality
The global distribution of Covid vaccines highlights the inherent inequality in the global health supply chain. Despite the record-breaking speed with which scientists developed a vaccine for Covid-19, the allocative inefficiency of global vaccine distribution exacerbated the health and economic impacts of the pandemic. Even as the first Covid-19 vaccines entered stage-3 clinical trials in 2020, wealthy nations had already staked claims for their own citizens. Through advanced market commitment contracts with vaccine manufacturers, almost half of all planned vaccine supplies in 2021 were secured pre-production by a few wealthy countries — the US, UK, EU, Australia, Canada, and Japan — a group comprising only 14% of the global population. The EU, UK, and Canada also entered 7 bilateral deals securing themselves enough vaccines to vaccinate their population 2, 4, and 6 times over respectively. Meanwhile, remaining countries were left with significantly reduced capacities to access vaccines, relying on donor organizations like GAVI/Covax or making diplomatic arrangements/concessions to vaccine manufacturing countries. LMICs were at a particular disadvantage in combating the pandemic since they were essentially last in line for vaccinations.
The Cost of Vaccine Nationalism
The profound health and economic losses from vaccine nationalism further underscore the need to invest in more equitable, sustainable health supply chains. Vaccines save money; achieving herd immunity not only reduces the transmission and risk of severe illness from Covid-19, but also lowers healthcare costs, mitigates costly lockdowns, and increases individual health and productivity. Until the majority of the planet receives vaccinations, we will continue to see new viral mutations emerge. As we saw with the delta and omicron variants of Covid-19, even vaccinated people were not immune to the genetically mutated strains of the virus, leading to mass reinfections and lockdowns. As such, vaccine hoarding among wealthy countries actively prolongs and increases the disease burden of pandemics. A 2022 RAND Study estimates that not vaccinating low-income countries would cost the global economy up to $1.2 trillion a year (source). On the other hand, the cost of vaccinating the world’s poorest populations is only estimated at around $25 billion, showing that global vaccination is not only feasible but would lead to massive economic and health gains. As such, future investment in health equity is not only essential for protecting human life but also yields long-run macroeconomic returns.
Is Globalization Over?
Following the inequitable global response to Covid-19, which highlighted the risk of depending on trade for medical supplies, many countries turned towards national or regional solutions which were seen as more reliable than producers from the other side of the planet. However, national and regional supply chains for medical goods increase costs of production and threaten trade partnerships in other key industries, highlighting that while domestic manufacturers must invest in emergency production capacities, international trade is still the most efficient option during periods of normalcy.
In HICs, the pandemic led to an expansion of domestic manufacturing and a restriction on imports. For example, the Trump Administration began withdrawing the US from its WTO commitments on PPE. In April 2020, the US also deployed $1.2 billion in subsidies to domestic PPE manufacturers. However, onshoring increased the cost of production for PPE, financially burdening service providers down the supply chain. Withdrawal from WTO commitments also sparked worry about retaliatory action by trade partners threatening the sales of US exports. By April 2021, the Biden Administration had reversed many of the previous administration’s policies and returned PPE imports to pre-pandemic levels.
The pandemic also inspired LICs to ramp up domestic production of medical supplies, shaking off its dependence on imports and donations by creating regional supply chains. Unlike in the US and EU, where the predominant worry was Chinese PPE exports, African countries faced a severe lack of essential medicines and vaccines. The continent imports an estimated 90% of drugs and 99% of vaccines. During the pandemic, 72% of Africa’s imported medical supplies were subjected to trade restrictions, leading to widespread shortages in lifesaving medicines. This dire situation led the African Union and Africa CDC to develop pharmaceutical hubs in select countries with the goal of providing greater supply access for the continent. The launch of the African Continental Free Trade Agreement (AfCFTA) in 2021 further reinforces the region’s willingness to increase intra-continental trade and reduce dependence on imports.
Conclusion
The severity of supply chain shortages worldwide due to Covid-19 shifted global perspectives on international trade, ushering in a new era of globalization. For both HICs and LICs, shortages of essential medical products led to an increased focus on domestic production capacities. However, while HICs learn to balance the low prices of imported PPE with increasing investments in emergency domestic manufacturing, LICs fight to shake off their extreme dependence on unreliable imports for lifesaving medicines and vaccines. As we have seen, fragmentation and inequality in medical supply chains crippled the global response to Covid-19, leading to massive loss of life and over $9 trillion in economic losses. Equal access to medical products is crucial for pandemic preparedness and requires greater investments in domestic capacities as well as more reliable approaches to international trade. The high economic and humanitarian costs of future outbreaks makes global health supply chains a high priority investment area.
