The Characteristics of the Process of Technology Acquisition in BVI

The processes of technology acquisition by the BVI firms can be approached from other perspectives. At the beginning the mechanisms were mostly of cooperation with no economic interest involved, and the technologies transferred were mature and of general use in the market.^232,233 Some of the agreements benefited from broader cooperation agreements between the nations involved (interviews 2, 11 and 19).²³⁴ Strong quality control capabilities were developed within the successful agreements but Good

231 In both Figures 7.1 and 7.2 the TA process of the measles vaccine carried out by Instituto Butantan in 1979 was omitted since the process was interrupted before the vaccine was introduced to the market, as revealed in interview 6.

232 The first technology acquisition approached in Table 7.1 is an exception to this rule and is described in detail by Barbosa (2009:106-115): following an epidemic of meningitis in the country, the Brazilian government decided to immunize the entire population and 80 million doses of the vaccine were bought from the Mérieux Institute in France. As the technology had been recently developed the manufacturer did not have installed capacity to produce all the doses required and decided to build a pilot plant in Brazil. At the end of the business the pilot plant was donated to Oswaldo Cruz Foundation along with the technology, personnel training and technical assistance.

233 See Figure 6.5 in the previous chapter for a typology of the vaccine life cycle in the markets.

234 The agreements for the technology transfer of the measles and polio vaccines to Bio-Manguinhos/Fiocruz took place under a broader cooperation agreement between Brazil and Japan. This was coordinated by the Japan International Cooperation Agency (JICA) and involved the donation of equipment and personnel training (Barbosa, 2009 and interview 11).

Manufacturing Practices (GMP) were not required by the transferors and were not implemented by the BVI at that time (interviews 6 and 11).²³⁵

The second phase of the technology acquisition was inaugurated in 1998 with the agreement for the technology transfer of the Hib vaccine, and it remains up to the present time.²³⁶ From that time on, a new mechanism was used for the agreements – licensing – since the vaccines were mostly proprietary products (interview 15).²³⁷ The technologies transferred became increasingly more complex, and the elapsed time between the launch of the vaccine on to the international market by the transferor, and the starting of the technology transfer to the firms of the BVI became surprisingly short.²³⁸ As shown in the first column of Table 7.1, from 1999 most of the technologies transferred were in their early product phase and, more recently, the elapsed time of the last two technology transfer agreements was around 1 year; this is the exact opposite of the pattern described in literature about technology transfer to catch-up countries and industries.²³⁹ According to several interviewees the huge Brazilian public market created by the PNI, along with government purchasing power and preference for vaccines produced by the local manufacturers, have been determinant in persuading some “Big Pharma” firms to adopt this different strategy (interviews 3, 7, 9, 10, 13, 15 and 19).

The technologies transferred during this second phase resulted in another important impact on the two main BVI firms. As new technologies were introduced, the price profile of the vaccines marketed has risen from cents to dollars and therefore the income of the firms has grown dramatically, bringing the firms to a new economic reality.²⁴⁰

235 Later on Bio-Manguinhos/Fiocruz became the representative of the JICA and hosted annual training programmes on quality control techniques for measles and poliomyelitis vaccines for third world countries (Barbosa, 2009).

236 The agreement was signed in 1998 and production started in 1999 (interview 11).

237 As there were patents involved, the agreement had to be approved by the Brazilian intellectual property authority – the National Institute of Industrial Property – INPI (interview 15).

238 It is worth clarifying that the adoption of the launch date of the vaccines to the market by the transferor in Table 7.1 instead of the date of the first introduction of the vaccine to the world market in some cases (as presented in Table 5.4 of Chapter 5 on pg. 104), is because the former constitutes newly and improved technologies partially or totally protected by patents.

239 The issues about technology transfer of mature products to catch-up countries and about the specificities of the vaccine life cycle are approached in Sub-section 3.4.2 of Chapter 3 (pg. 54 and footnote 82) and Figure 6.5 of Chapter 6 (pg. 146) respectively.

240 Figures about the BVI are presented in Sub-section 6.2.4 (pg. 135-143) and Section 6.3 (pg. 147-151) of the previous chapter.

The high complexity of the manufacturing process of vaccine, already described and illustrated in Section 5.4 of Chapter 5 (pg. 115-118), was a critical issue in the processes of technology transfer listed in Table 7.1. This was central to the specific and “reverse”

way the technologies have been transferred (interview 11). In the first stage the firm acquires the “bulk” of the vaccine from the transferor and carries out the final processing steps, including quality controls. In addition to being less technologically complex, the capabilities for final processing are normally already developed and used for other vaccines manufactured by the firms.²⁴¹ The same is often true for the facilities that can normally be used for the final processing of different types of vaccines. This stage can last several years whilst the firm learns the upstream stage – the production of the concentrate(s) – and adapts or builds the proper facilities for this second stage of the manufacturing process.²⁴² The implementation of the second stage can also last several years, depending on the level of complexity of the technology and on the technical conditions of the transferee to receive and even to adapt the technology to the local conditions.^243,244

Amongst the interviewees approached about the subject of operating capabilities, it was unanimous that previous knowledge was key for the accomplishment of the processes (interviews 2, 6, 8 and 11). Furthermore, several capabilities developed during the first TA processes have made the more recent processes easier and quicker (interviews 2 and

241 It does not mean that knowledge acquisition is not intense in this stage. On the contrary, there are many things to learn about the new technology, especially about the steps of formulation, freeze-drying and about the quality control tests required. Furthermore, the second stage is planned and the facilities begin to be adapted and/or built during this stage (interview 11).

242 In some cases this reverse process can start more downstream, that is, the first stage starts with the acquisition of the vaccine already in the vials and the transferee carries out only the labelling and packaging steps of the final processing. Amongst the possible reasons are the very special characteristics of the technology transferred, the need to speed up the introduction of the vaccine in the market and the need to adapt or expand the final processing facilities (interview 11). Delays in adapting or building the new facilities have often postponed the conclusion of the processes (Barbosa, 2009 and interview 6).

243 This reverse way of transferring the technologies is convenient for all the actors involved. For the transferee it allows enough time to absorb the technology, develop the capabilities needed and implement the production process safely at the same time it starts selling the product to the government. For the government it allows a quicker introduction of the product to the immunization programme and enables the supply of the product on a regular basis. For the transferor the quick introduction of the vaccine to the market and bulk selling for several years normally provides high financial returns and a guaranteed market (interview 7).

244 The most recent technology transfer agreement is a revealing example. Although the production start-up of the 10-valent pneumococcal conjugate vaccine is planned for 2010, less than one year after the contract signature, the entire process of technology transfer is predicted to last at least eight years (interview 10). The reasons presented by the interviewee are the high complexity of the technology, which consists in ten vaccines in one, and the need for new and dedicated facilities for the concentrate production.

11). Indeed, the benefits to the development of technological capabilities within the two main firms have been countless. Not only the specific capabilities directly involved in the manufacture of the vaccines but also others that could be exploited in the business in general.

One good example is the quality assurance capability – including metrology and validation – that was highly improved by Bio-Manguinhos/Fiocruz during the technology transfer of the Hib vaccine. The process was extended not only to all vaccine manufacturing lines but also to the management of the production processes. It allowed the firm to apply and obtain pre-qualification from WHO to supply the international market with some of its vaccines (Benedetti, 2008 and interviews 2 and 11). Instituto Butantan also had its quality assurance capabilities strengthened along with the technology transfer of the influenza vaccine even though these capabilities are to be further improved by the Institute (interview 6).

Other important capabilities developed by both firms were in the area of engineering.

As mentioned before, to receive the transferred technologies the firms often need to adapt or even build new facilities that require a type of capability seldom found in the country due to the specificities of the vaccine sector. Therefore the transfer agreements always involved some technical assistance to support the local engineers with the design of the facilities, and with equipment and materials specifications (interviews 6 and 21).²⁴⁵ In summary, what is evident is that the technology transfer agreements have helped the two main firms of the BVI to develop world class operating capabilities and to grow in the international scenario (interviews 7, 10, 11 and 20).²⁴⁶

Notwithstanding, one point of great interest for the BVI and for this research remains highly controversial, as has been raised during the interviews. It relates to the supposedly intended benefits of the technology transfer processes to the development of

245 According to one interviewee the agreement for the technology transfer of the influenza vaccine also included equipment specifications that were passed to the local equipment industry making possible the acquisition of several equipments locally (interview 6).

246 The processes of technology acquisition have benefited other firms of the BVI directly or indirectly.

One example is the outsourcing of part of the production process of the Hib vaccine to Tecpar. Within this strategic alliance, Tecpar is producing the monomeric tetanic protein for Bio-Manguinhos/Fiocruz to be used in the conjugation of the Hib vaccine. Besides the specifications for the production of this component, Bio-Manguinhos/Fiocruz also helped Tecpar with the development of its quality assurance system to ensure that the production complies with GMP requirements (Barbosa, 2009).

innovative capabilities. For most of the interviewees approached about the subjects of policies, corporate strategies and operating capabilities, the TA processes have been important and directly or indirectly helped the development of internal innovative capabilities or somewhat accelerated it (interviews 2, 3, 10, 11, 13, 15 and 19). As technologies transferred invariably need to be adapted to local needs, the R&D areas are constantly developing to support the ideal establishment of the processes (interview 11).

For most of those interviewees who work with technological development, however, the knowledge spillover from these agreements to R&D areas is limited, sometimes localized but not that useful in terms of development of the capabilities needed to innovate (interviews 1, 4, 6, 12 and 14). In this sense the TA processes are seen as a means of postponing the pressures and needs for quick answers from the R&D areas rather than to help to develop them. Moreover, within these agreements the transferors are keen to control the capabilities they do not wish to transfer (interview 1). For some interviewees the TA processes can eventually hinder the development of innovative capabilities since projects are cancelled due to the lack of practical necessity of their results (interviews 1 and 12).

However, other interviewees point out the importance of the proximity between production and R&D areas, stating that these interactions have been increasingly important to the development of some innovative capabilities (interviews 5 and 18). As an example, several improvements to the old yellow fever vaccine and to its production process were made possible from the knowledge acquired in the TA process of the measles vaccine (interview 18). The same interviewee points out that some capabilities developed within the TA process of the MMR vaccine might help the in-house development of a Hepatitis A vaccine. The domain of new technological platforms has also been possible with some of the agreements and is of interest to the firms for the development of innovative capabilities (interviews 5 and 18). The issue is, therefore, far from an agreement.

One last point about the TA agreements relates to the contracts themselves and their implications to the firms. There are some restrictions imposed by the transferors and the most important relates to the markets where the firms can sell the technologies

transferred.²⁴⁷ Normally, by contract, they are allowed to supply the Brazilian public market only, which restricts important international markets such as UNICEF and PAHO (interview 7).²⁴⁸