“API Geoeconomic Briefing” is a weekly analysis of significant geopolitical and geoeconomic developments in the post-pandemic world. The briefing is written by experts at Asia Pacific Initiative (API) and includes an assessment of burgeoning trends in international politics and economics and the possible impact on Japan’s national interests and strategic response. (Editor-in-chief: Dr. HOSOYA Yuichi, Research Director, API & Professor, Faculty of Law, Keio University)
This article was posted to the Japan Times on February 2, 2021:
API Geoeconomic Briefing
February 2, 2021
Public investment in vaccine development is crucial for Japan’s future
Advisor to the Health Minister;
Former Vice-Health Minister and Chief Medical and Global Health Officer at the Health Ministry
The COVID-19 pandemic that has wreaked havoc over the past year worldwide should be a wake-up call for Japan and other countries, telling them that their social, economic and health care systems need to be constructed on the premise that pandemics will occur periodically.
To protect its people, Japan needs to invest in vaccine research, development and production at home to secure necessary supplies without being influenced by international politics. And, in this current pandemic era, vaccines have proved to be an effective diplomacy tool.
After the first case of COVID-19 was reported in Japan in January 2020, the country went through its so-called first wave in spring, its second wave in summer and its third and biggest wave since November.
Although in late November politicians called the following weeks the “critical three weeks” for working against a resurgence of the virus, the daily number of cases nationwide continued to rise, reaching nearly 8,000 in early January, forcing the government to declare a fresh state of emergency.
Amid such a situation, it is vital for the nation, which is scheduled to host the Olympic Games this year, to achieve herd immunity against the virus through vaccination.
However, Japan has been slow to start vaccinating its people compared with the likes of the United Kingdom and the United States, and is also is far behind other countries in domestic vaccine development, leading many to question its policy regarding the research, development and manufacture of vaccines.
It has highlighted the fact that Japan lacks the ability to research, develop and produce vaccines in a timely manner.
Luckily enough, the nation is expected to be able to import COVID-19 vaccines as a result of negotiations with Western countries which have the capability to produce enough vaccines to export.
If this hadn’t happened, the fear would be that any country would prioritize vaccinating its own people first and those countries could have denied shipping doses to Japan.
The current pandemic should shake Japan into rethinking its policy on the nation’s vaccine industry and making a major shift for the future.
To many people’s surprise, Japan had been a leading country in the R&D and manufacture of vaccines until the mid-1970s.
But since then, the vaccine market has shrunk along with a sharp drop in the number of infants — the main target group for vaccinations. The number of infectious diseases to be prevented by vaccines has also declined thanks to the success of the immunization program itself, as well as improved diet and nutrition.
However, the issue of side effects then stood out, leading to numerous lawsuits being filed, making the government and manufacturers become overly sensitive to the social trend of avoiding risks as much as possible.
Moreover, because vaccines were developed and produced solely for the domestic market, the industry had been supported by the health ministry with approval authority adopting restricted competition under a system of pulling all institutions along at the pace of the weakest. Such an industrial policy may have weakened the sector.
About a decade ago, Japan added to the mandatory childhood immunization schedule new vaccines such as pneumococcal vaccine, Haemophilus influenzae type B (Hib) vaccine and human papillomavirus (HPV) vaccine — all imported products — making the nation’s immunization program almost equal to those of Western countries.
But skepticism around vaccines rose again after a number of claims were made on possible adverse effects of the HPV vaccine and the government halted active recommendation of the shots in 2013.
Against this backdrop, Japan’s vaccine R&D ability has diminished significantly and the domestic basis for vaccine R&D is in danger of disappearing almost completely if the country misses this last chance of supporting and empowering it. Many retiring vaccine engineers are said to be recruited abroad.
Since around 2000, the world has been hit by a pandemic once in roughly four or five years, starting with the outbreak of avian influenza A (H5N1) virus in 1997, followed by the severe acute respiratory syndrome (SARS) coronavirus outbreak in 2003, the novel influenza A (H1N1) pandemic in 2009, the Middle East respiratory syndrome (MERS) coronavirus outbreak in 2012 and the COVID-19 pandemic in 2020.
Therefore, we have entered an era in which social, economic and health care systems should be constructed on the premise that pandemics will occur frequently.
Development and manufacturing bases
In order to prepare vaccines in the short term for such frequently occurring pandemics, Japan should have vaccine R&D and production bases within the country. Otherwise, it will have to import a large amount of vaccines every year, posing serious financial and security risks.
Japan needs a vaccine R&D and manufacturing ecosystem which can be completed within the country with ample capacity to assist and collaborate with other potential customer countries.
But first, Japan needs a strategy for future policy on the vaccine industry.
The country must focus on Asia, which on the whole is becoming richer and has an increasing population.
A large market is necessary to help maintain and improve the R&D and production foundation, so the focus should not be limited to Japan, whose birth rate is declining.
Asia has potential not only as a market and a sales channel, but also as an R&D partner which can bear some of the costs. Japan is strong in basic science but weak in clinical development, but other Asian countries can help Japan speed up vaccine development by jointly conducting clinical trials.
Such a strategy will become more feasible if Japan offers various support, including helping the Association of Southeast Asian Nations establish its version of the Centers for Disease Control and Prevention (CDC), offering technical support to vaccine approval authorities in other Asian countries and assisting Japanese vaccine manufacturers expanding business in Asia.
Japan should also recognize the value of vaccines as a diplomacy tool.
Not only Western states, but nations like China and Russia are also working aggressively to develop COVID-19 vaccines so that they can strengthen diplomatic relations with developing countries by offering vaccines at reasonable prices to countries which cannot develop them by themselves.
Japan has been showing its presence to a certain extent by leading efforts to support the COVAX Facility, an international framework led by the World Health Organization and funded mainly by developed nations to ensure that developing countries have fair access to vaccines. But the presence is not as significant as that of countries which can directly provide vaccines.
For a civilian power like Japan with restrictions on offering military support, such a diplomatic tool which would face little opposition at home and abroad would become a precious asset.
The business model for developing medical supplies and drugs, including vaccines, has been shifting recently from producing low-molecular compounds to launching biopharmaceuticals in the market.
Traditionally, products were developed by large-scale pharmaceutical companies possessing a large library of compounds and spending a lot of time on trial and error internally.
But the trend is changing to clinical researchers and venture firms producing seeds and launching them in the market with the help of investment advisory companies.
COVID-19 vaccines produced by Pfizer Inc. and Moderna Inc., which won approval in the U.K. and the U.S., are both developed by venture firms.
Japan’s pharmaceutical companies are generally small in size and do not have sufficient funds for R&D. But one way for them to be competitive would be to strategically specialize in infectious diseases like Shionogi & Co. for instance.
It is also necessary for academic researchers to work on interdisciplinary research in a wide range of fields including not only medicine and pharmaceutics but also molecular biology, statistics, genetic engineering and mechanical engineering, and that could have a ripple effect on other sectors as well.
In addition to companies shifting their business and academic researchers cooperating on interdisciplinary work, the government has its role to play.
The research and development of medical supplies and drugs including vaccines is inseparable to risks and costs. But for COVID-19 vaccines, the government provided huge financial assistance to construct and renovate production facilities for vaccines — usually done after vaccines are developed — at the same time as development started, on the premise that it will purchase all of the vaccines to be produced.
Regarding side effects, unless there are clear defects on the part of the manufacturers, the government will compensate for any health damages from vaccination.
Such higher-than-normal public intervention would be necessary for the R&D and manufacturing of vaccines of high public interest and urgency, since the nation can’t just rely on the “invisible hand” of the commercial market.
Furthermore, it is crucial to create a legal system which authorizes the emergency use of medical supplies and drugs such as vaccines, so that a part of the approval process can be omitted or simplified in cases of pandemics by balancing effects against risks to make them available to the public sooner, rather than so much later than in Western countries.
It is difficult to develop COVID-19 vaccines through traditional methods of virus inactivation, and the mainstream method adopted is to use genetic engineering.
Vaccines manufactured by Pfizer and Moderna, called messenger RNA vaccines, create antigen protein inside the body that induces the production of antibodies against it.
This theory can be applied not only to COVID-19 pneumonia but also to any infectious disease including COVID-19 variants, enabling production of vaccines in a relatively short period of time.
It is also said that the theory is applicable to creating vaccines not only for infectious diseases but also for cancer or dementia, which are already under development.
In that sense, investing in vaccine R&D can result in measures not only to combat infectious diseases but also other illnesses which have affected society.
The government’s most important task is to protect people’s health and safety.
To protect the public from frequent pandemics, making investments for vaccine R&D and production at home is essential to avoid having to submit to international politics.
Considering its ripple effect on other industries and its usefulness as a diplomatic tool, it can be regarded as public investment with a big return guaranteed.
The views expressed in this API Geoeconomic Briefing do not necessarily reflect those of the API, the API Institute of Geoeconomic Studies or any other organizations to which the author belongs.