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Senter for teknologi, innovasjon og kultur
Universitetet i Oslo
U N I V E R S I T Y O F
O S L O
Centre for technology,
innovation and culture
P.O. BOX 1108 Blindern
N-0317 OSLO
Norway
Eilert Sundts House, 7th floor
Moltke Moesvei 31
Phone: +47 22 84 16 00
Fax: +47 22 84 16 01
http://www.tik.uio.no
info@tik.uio.no
TIK
TIK WORKING PAPERS
on
Innovation Studies
No. 20100108
http://ideas.repec.org/s/tik/inowpp.html
1
Strategic evaluations and techno-economic networks.
Vaccine innovation in the Cuban biotech sector:
for public health – or for profits?
Jens Plahte
jens.plahte@tik.uio.no
Centre for Technology, Innovation and Culture (TIK-Centre)
University of Oslo
Norway
Centre for Health and Welfare Studies (CESBH)
(Centro de Estudios de Salud y Bienestar Humano)
University of Havana
Cuba
Abstract
In this paper the Cuban biotech sector with its highly integrated vaccine industry is analyzed
in the perspective of the techno-economic network model of Michel Callon. The paper dis-
cusses the strategic evaluations that have been performed in the sector. Given the emphasis on
public health displayed by the Cuban government and the precarious condition of the Cuban
economy (at least during the last 20 years), the strategic evaluations could be seen as an arti-
culation of the (sometimes conflicting) interests of public health and commercialism. The
main issue to be discussed in the present paper is how interests related to public health and
economic considerations are articulated and balanced in the strategic evaluations that have
been made in the Cuban biotech sector. There is a focus on the vaccine related activities of the
sector, which will be loosely referred to as the Cuban vaccine industry. This is the first of two
papers about the Cuban bitoech sector and vaccine industry.
Keywords: Innovation systems, techno-economic networks, Cuba, vaccines, biotechnology.
Introduction
Cuba is famous for its state-operated, free, universal, comprehensive, and nation-wide public
health system, which appears as a strong and highly tangible expression of humanitarianism
and philanthropy. Since the early 1980s a biotechnology sector has also been developing,
which simultaneously exploits the public health system as a source for inventions and as a
testing ground for new drugs, and supplies the public health system with valuable – and
sometimes unique – biopharmaceuticals. Vaccines are such an important part of the Cuban
biotech sector that one may speak of a vaccine industry embedded and integrated into the
biotech sector.
Since the biotech sector is so closely linked to the public health system it could be tempting to
assume that the biotech sector is simply at the service of public health, by providing biophar-
maceuticals according to needs defined by the public health authorities. However, the Cuban
biotech sector not only supplies the domestic health services – it is also a major source of for-
eign currency revenues of the country. Consequently, the interests or considerations that con-
2
tributed in shaping the biotech sector may be more diverse than merely that of improving the
health status of the Cuban people.
This paper aims to answer a set of questions revolving around how different interests relating
to public health and commercialism are articulated and reflected in the Cuban vaccine indus-
try. Which were the stated objectives for creating the biotech sector in the first place? How
have interests related to public health, education, science, technology, and economic devel-
opment been used in legitimizing the Cuban revolutionary government? What considerations
prompted initiation of individual vaccine product development projects, and which interests
were eventually served by the actual configurations of characteristics of these products? How
do such product configurations evolve over time? Have conflicting interests given rise to cer-
tain dilemmas or paradoxes, and how have any such predicaments been resolved?
The present paper is the first of two papers about the Cuban vaccine industry, and its main
contribution is an analysis based mainly on Michel Callon et al.’s (1992) concepts ‘strategic
evaluations’ and ‘techno-economic evaluations’. The vaccine industry is an integral and sub-
stantial part of the biotech sector, and by studying it as a case embedded in the case of the
biotech sector it becomes possible to make a detailed analysis of the relations between expli-
citly stated intentions and purposes of the sector at large, the characteristics of the vaccine
products, the marketing strategies of the vaccine industry, and its economic impact and signi-
ficance. Such a broad analysis facilitates identification of and a discussion about the interests
that seem to have had the strongest bearing in shaping the Cuban biotech sector with its inte-
grated vaccine industry.
The second paper about the Cuban vaccine industry (Plahte 2010) is also based on Callon’s
techno-economic networks concept, and focuses on the development, organization, and man-
agement of that industry and the biotech sector into which it is integrated.
Vaccine and biotech innovation and interests
The Cuban biotech sector consists of several research and production centers working both in
biopharmaceuticals and agricultural biotechnology. In particular the biomedical activities,
which include an integrated vaccine industry, have gained international reputation and fame.
For instance, the Cuban hepatitis B vaccine is based on state of the art genetic engineering
technologies, and the therapeutic cancer vaccines that are under development – of which one
is already being marketed – is cutting edge technology of international standards. The sector
is a result of a direct government intervention that was initiated in the early 1980s, and could
be seen as an amalgamation of long time commitments on part of the Castro regime in educa-
tion, science and public health.
Coming to grips with abstract phenomena like interests requires a conceptual framework, and
this paper approaches the problem from the perspective of innovation systems. There are four
different, albeit partly overlapping and complementary, kinds of systems that are studied in
the innovation systems studies tradition: national innovation systems, regional innovation
systems, sectoral innovation systems, and technological (or techno-economic) systems
(Fagerberg 2005). In Malerba’s (2005) chapter in The Oxford Handbook of Innovation
(Fagerberg, et al. 2005) the technological systems literature is counted as a sub-field of the
sectoral innovation systems literature, and Carlsson and Stankievicz (1995), Hughes (1989),
and Callon (1992) are mentioned as important contributions.
It is the techno-economic network model of Michel Callon (Callon 1991; Callon 1992;
Callon, et al. 1992) that will be applied in two papers on this topic. This model is based on
3
actor-network theory, and some concepts from that body of knowledge will also be used in
the following.
Callon’s model is particularly applicable whenever – but not exclusively – a government or
government agency intervenes with direct operational control in a specific sector or technolo-
gical field with the aim of promoting development of a range of targeted products (or other
tangible results). It thus distinguishes itself from both a traditional R&D funding program on
the one hand, in which operational control is absent, and a single-product development pro-
gram (targeting for instance a nuclear bomb or a fighter aircraft) on the other.
Callon distinguishes between two main types of considerations that are made in the course of
such an intervention: the strategic evaluation, and the techno-economic evaluation. The stra-
tegic evaluation is the process of identifying a range of desired products to be developed by
the intervention, and the techno-economic evaluation is the process of identifying the actors
and other resources that are needed in order to reach those goals, and how to organize them.
In other words, the concept of strategic evaluations, understood rather as a continuous, reiter-
ative process than a one-off event, is well suited for the task at hand in the present paper,
namely to analyze the strategic choices and their underlying assumptions, interests and con-
siderations.
This paper analyzes and discusses the strategic evaluations that have been performed in the
Cuban biotech sector, with a certain focus on the vaccine industry. Obviously, given the
emphasis on public health displayed by the Cuban government and the precarious condition
of the Cuban economy (at least during the last 20 years), the strategic evaluations could be
seen as an articulation of the (sometimes, but not always or necessarily, conflicting) interests
of public health and commercialism. The main issue to be discussed in the present paper is
how interests related to public health and economic considerations are articulated and
balanced in the strategic evaluations that have been made in the Cuban biotech sector. There
will be a certain focus on the vaccine related activities of the sector, which will be loosely
referred to as the Cuban vaccine industry. As already stated, the other paper is mainly about
the techno-economic evaluation, i.e. how the Cuban biotech sector and vaccine industry were
established, and how they are organized and managed.
Existing literature on Cuban biotech
Although at least three authors and author groups have done in-depth studies of the Cuban
biotech sector (Feinsilver 1993; Reid-Henry 2007; Reid-Henry 2008; Thorsteinsdóttir, et al.
2005; Thorsteinsdóttir, et al. 2004b), no analysis in an explicit innovation systems perspective
has yet been undertaken.
Feinsilver (1993) is a published doctoral dissertation in political science about the Cuban pub-
lic health system, and one chapter is devoted to a mainly historical treatise of the Cuban bio-
tech sector, seen in the perspective of the ‘symbolic capital’ that the Cuban government gene-
rates by its investment and dedication to public health and biotechnology. Her approach will
be returned to below.
Reid-Henry (2007), frames Cuban biotechnology in more discursive terms, by addressing
issues of post-socialism, post-colonialism and transition economies. In other words, the issue
is rather how the biotech sector may be interpreted and utilized in such discourses, than which
interests that influenced on shaping the sector. Yet, the need for reorientation of foreign eco-
4
nomic relations upon the collapse of the CMEA1 in the early 1990s is emphasized, an issue
that will also be dealt with in the following.
Thorsteinsdóttir and co-workers ran a major research project on medical biotechnology in
developing countries, with Cuba as one case studied, the result of which was published in a
special issue of Nature Biotechnology (Thorsteinsdóttir, et al. 2004a; Thorsteinsdóttir, et al.
2004b), as well as in a number of other journals (Quach, et al. 2006; Thorsteinsdóttir 2007;
Thorsteinsdóttir, et al. 2006; Thorsteinsdóttir, et al. 2007; Thorsteinsdóttir, et al. 2005). These
publications give a good comparative picture of national biotech capabilities in the South, and
point at long term government support and vision, close linkages to the national public health
system, international linkages, and patriotism as key factors for the Cuban success in this field
(Thorsteinsdóttir, et al. 2004b). Although a concept from the innovation systems literature –
‘user-producer relations’ – was applied, the perspective was highly empirical, and was not
based on innovation systems or in any other way explicitly related to theoretical approaches.
Reid-Henry’s other paper (Reid-Henry 2008) is about the ‘epistemic spaces’ and ‘experimen-
tal milieu’ prevailing in Cuban biotech, and deals with innovation in the perspective of
regional development and scientific cultures, rather than that of innovation systems. Thors-
teinsdóttir and co-workers’ and Reid-Henry’s latter contributions will be dealt with in some
more detail in the other Cuba paper.
A guide to the reader
This paper starts with a brief introduction to the concept of the techno-economic network,
with an emphasis on strategic evaluations. Then follows a historical description of the situa-
tion in Cuba in the fields of education and health, but first and foremost biomedical sciences,
when the decision to develop a biotech sector was made around 1980. The assessment of this
situation was an important premise for the initial strategic evaluation of the Cuban govern-
ment. The next section is an analysis of how the interests of public health and commercializa-
tion of biotech products have been expressed in public appearances by former President Fidel
Castro over the formational 15 year period from 1977 to 1991. Then follows an analysis of
the vaccine products portfolio of the Cuban biotech sector. It is assumed that the characteris-
tics of each vaccine product is in part a reflection of the interests that were considered when
the decisions to develop each product was made, so that it is possible infer the relative influ-
ence of the interests of public health and commercialism on the strategic evaluations. Finally,
the economic conditions for import substitution (serving public health interests) and export
revenue generation (serving commercialist interests) of vaccine products are discussed.
Strategic evaluations in techno-economic networks
The basic idea of the Cuban biotech sector was to transform the resources of a strong medical
science basis into products that could either be useful for the national health system or com-
mercialized in overseas markets, by way of a direct government intervention. In other words,
the intervention aimed at transforming the results of a specific knowledge field into a range of
socially useful products (and processes). As stated above, two major types of strategic consid-
erations may be identified. The first type – strategic evaluation – involves defining a set of
desired products that the intervention should generate. This type of decisions would often pre-
cede the intervention itself. Those product targets would then be used as a point of departure
for the second type, namely to define the actors, themes and organizational form that would
be feasible for generating the targeted products – the techno-economic evaluation. Or in other
1 CMEA: Council for Mutual Economic Assistance.
5
words, to identify the scientific, technical and organizational problems that would have to be
solved in order to generate the targeted products.
Despite being analytically distinct, in practice these two types of considerations are closely
interlinked. Although the strategic evaluation precedes the techno-economic evaluation, the
former depends on knowledge about the actors, products, and networks that already exist.
Similarly, knowledge emanating from techno-economic evaluations may result in redefinition
of the strategic target products, so although an initial strategic evaluation most often precedes
the initial techno-economic evaluation, the two continue to evolve in a simultaneous and re-
iterative process.
Figure 1. Strategic and techno-economic evaluations. Adapted from Callon et al. (1992).
In the case of the Cuban biotech sector, it was considerations related to public health and eco-
nomic revenues that motivated the intervention, and in Figure 1 those interests have been
inserted into my adaptation of Callon et al.’s (1992) model. In the following sections the issue
of strategic evaluations will be approached from three different angles. First we give an
account of some aspects of the public health situation in Cuba in the late 1970s that demanded
some new solutions.
The socialist revolution and health, education, and science
This section starts with identifying public health as a fundamental political interest of the
Cuban revolutionary leadership. Then, a brief description of the national public health situa-
tion prior to the initiation of the biotech sector is provided, and the main challenges of the
public health system at that time are identified. The dedication to science and education on
part of the Castro government is also briefly touched upon, before spelling out the main cha-
racteristics of the Cuban biotech sector in some more detail. The section ends with a brief dis-
cussion of the main strategic evaluations that have been reflected in the course of this account.
The ‘symbolic capital’ of health and biotechnology in the revolutionary government
One of the first comprehensive accounts of the Cuban biotech sector was provided by Fein-
silver (1993), who devoted an entire chapter of her published Ph.D. dissertation to a historical
account of the creation of the biotechnology sector. She relates the creation of the biotech
sector, initiated by a pilot project in 1981, to construction of ‘symbolic capital’ by the Cuban
Public health/economic
revenues
Target products
Target products
Themes, actors, organization
Strategic evaluation
Techno-economic evaluation
6
revolutionary leadership. Although she identifies the concrete and immediate rationale for the
biotech initiative …
The production and exportation of biotechnology, medical and pharmaceutical products was
[…] employed first and foremost to remedy domestic problems but was capitalized on later to
convert acquired knowledge into export earnings. (Feinsilver 1993), p 122
… she argues that the fundamental driving force behind the development of the Cuban health
system and the biotechnology sector has been to foster the ‘symbolic capital’ of the political
leadership. In other words, public health has been an intrinsic, high priority national interest.
Feinsilver, like myself, several times heard informants speak of former President Fidel Castro
as the real minister of health,2 and she notes that
[…] he has made health indicators the true test of government efficacy and the health of the
individual a symbol of the health of the ‘body politic’. (Feinsilver 1993), p 200
To a high degree the Cuban government measures its success in terms of basic, but somewhat
crude, health indicators: Low infant mortality rates, low general morbidity rates, and high life-
expectancy (Feinsilver 1993).3 Feinsilver also links the biotechnology initiative to Fidel
Castro’s fundamental belief in science as an instrument for national social and economic
development.
The point to be made here is that health and science (and education) has been a top priority
for the national leadership in general and for Fidel Castro in particular ever since the insur-
rection in the late 1950s. We have thus identified one of the fundamental interests of the
Cuban political leadership: the public health system has been used by the Castro government
as a proof of the success of the revolution.
The point of ‘symbolic capital’ made by Feinsilver may in fact translate into the terminology
of actor-network theory. An important term for conceptualizing power in actor-network
theory is ‘the Obligatory Passage Point’, which is understood as a node in the actor-network
that other actors have to pass through in the pursuit of their respective interests (Latour 1987).
The government positions itself at an obligatory passage point between the Cuban population
and its access to free and universal health services. The message delivered is in reality that the
revolutionary government is the only way the actor-networks of the Cuban society may be
ordered in such a way that a connection is made between the health services and the entire
population. Given this priority granted to public health the strategic evaluations performed in
relation to the biotech sector would have to align or associate the main objectives or potential
benefits of the planned techno-economic networks to this fundamental interest.
The limits of traditional public health interventions
Having now established public health as a fundamental interest in Cuban national policies, the
next step is to look at the public health situation by the late 1970s, just before the biotech
initiative was embarked upon. How did the concrete public health situation at that time influ-
ence on the initial strategic evaluations that preceded the creation of a national biotech sector?
And are interests relating to public health entirely unambiguous?
At the take-over in 1959 the Castro government inherited a health system that in reality con-
sisted of four separate health systems; the state hospitals, the private clinics, the mutualist
(cooperative) clinics, and the military hospitals, most of which were concentrated to the main
2 Personal communication with Gustavo Sierra, Vice President, Finlay Institute, 3 February 2009.
3 Personal communication with José de la Fuente, former Director of Research and Development at
CIGB, 11 March 2002.
7
cities. The health status of the Cuban population in the 1950s, in particular in the rural areas,
was characterized by malnourishment, high prevalence of tuberculosis and parasitic diseases,
an infant mortality rate of 79 per 1000, and virtually no access to affordable medical services
(Feinsilver 1993; Figueras and Pérez 1998).
One of the first major reforms of the Castro government was to create a universal, national
public health system. This comprehensive system included primary health care, policlinics,
secondary and tertiary care, sanitation, immunization campaigns and programs, and estab-
lishment of teaching and research organizations (Feinsilver 1993; Figueras and Pérez 1998).
To cut a long story short, by the 1970s the success of this system resulted in morbidity and
mortality patterns in Cuba starting to resemble those of countries in the North rather than the
South. The infant mortality rate fell from 38.7 per 1000 in 1970 to 19.6 per 1000 in 1980, and
cardiovascular diseases and cancer were replacing infectious diseases as major causes of
death (NHSB 1999). Consequently, in order to further reduce the infant mortality rate, conge-
nital disorders would have to be addressed (Feinsilver 1993). In 1975 congenital malforma-
tions were not a primary cause of death, but in 1980 they ranked as the third most important
cause of perinatal mortality (Majoli 1999).
It was becoming evident that the traditional public health interventions like immunization and
sanitation would be insufficient in the efforts for further improvement of the general health
indicators. A need for high-tech health interventions like for instance mass screening based on
genetic markers and cancer treatment based on modern immunology and genetics was
emerging.4
In other words, by the late 1970s the existing paradigm of the Cuban public health system was
becoming obsolete – a victim of its own success. This public health challenge – a transition
from a ‘traditional’ to a ‘modern’ mortality and morbidity pattern − should be seen as an
important motivation in the initial strategic evaluations preceding the creation of the biotech
sector. Existing techno-economic networks were becoming incapable of providing the neces-
sary strategic products for fulfillment of superior political goals of further improvement of the
selected health indicators.
Revolutionary science and education
It is not only public health that has been top priorities by the Castro government. In the fol-
lowing another fundamental interest of the Castro government is identified. The much-cited
statement by Castro from 1960 …
The future of our country is by necessity a future of men of science, it has to be a future of men
of knowledge, because that is exactly what we are sowing; […]. Sáenz (1990), p 110
… is an early indicator of his belief in the role of science and research in solving social prob-
lems.
The other paper gives an account of how a scientific biomedical infrastructure – a Science (S)
sub-network in Callon’s terms – was developed from the early 1960s. The space here does not
allow for more than briefly stating that the educational system was also developed in a com-
prehensive way, ranging from initiatives like the universal literacy campaign in 1961 to
developing a nationwide system for higher education (Brundenius and Monreal 2004). The
main point to be made here is that instrumental use of science and education for social and
4 Personal communication with Roberto Guilarte, Sales Manager at TecnoSuma International S.A., 23
May 2001.
8
political ends has been a characteristic trait of the political paradigm of the top Cuban leader-
ship.
The Cuban biotech sector
As stated, the other paper gives an account of the creation of a scientific base in biomedicine,
and the subsequent creation of the techno-economic networks in biotechnology. Here, let us
just take a brief look at the main characteristics of the Cuban biotech sector.
Inspired by a visit to Cuba in 1978 by the US cancer specialist R. Lee Clark President Castro
– assisted by the Biological Front that had been established as a consultative body – decided
to initiate a pilot project in interferon production. In less than two years the Cubans were pro-
ducing recombinant interferon for use in clinical trials, and from 1981 several research and
production centers were under construction in what must be one of the most ambitious pro-
grams for public sector biotechnology development yet to be seen on this planet.
In other words, major techno-economic evaluations were carried out from the late 1970s
onwards, and massive investments – a commonly cited figure is USD 1 billion (Reid-Henry
2007) of accumulated investment up to the mid 1990s – secured the creation of the techno-
economic networks that may be referred to as the Cuban biotech sector. Today the core of the
Cuban biotech sector consists of a handful of research and production centers, all of which
connected to the so-called Scientific Pole of Western Havana (hereafter ‘the Scientific Pole’).
As of 1997 there were 15 scientific poles altogether in Cuba, of which this one is dedicated to
biotechnology. More than 60 organizations working in fields that one way or the other are
related to biotechnology are connected to the Scientific Pole, among them some specialized
hospitals, a consulting company, the national drug regulatory agency (CECMED),5 a couple
of faculties at the University of Havana etc.
The most important of the organizations of the Scientific Pole are located in a western suburb
of the capital of Havana. In 1997, when the Scientific Pole consisted of 38 organizations,
some 12,000 workers were employed, of which 1,440 were researchers, and 4,046 held uni-
versity degrees (CITMA 1997). Biotechnology is now the second most important foreign cur-
rency income earner, being surpassed by nickel only. The vaccine industry is not a delimited
sector, but an integral part of the biotech sector. Several centers fulfill different tasks in vac-
cine development and production. The most important biotech centers are the Centre for
Genetic Engineering and Biotechnology (CIGB),6 the Finlay Institute,7 Center for Molecular
Immunology (CIM),8 and Center for Biomolecular Chemistry (CQB).9
CIGB is the flagship of the Cuban biotech sector, being as it is by far the biggest organiza-
tions, and has its main focus on recombinant technologies based on single cell organisms, and
the main products are vaccines as well as other medical, industrial and agricultural biotech-
nology products.
CIM’s focus is on cancer, and its technology platform is recombinant mammalian cell cul-
tures, that is, production of biological substances by inserting genes coding for the desired
substances into cell lines taken from mammals.
5 CECMED: Centro para el Control Estatal de la Calidad de los Medicamentos.
6 CIGB: Centro de Ingeniería Genética y Biotecnología.
7 ’Instituto Finlay’
8 CIM: Centro de Inmunología Molecular.
9 CQB: Centro de Química Biomolecular.
9
Finlay’s product portfolio is dominated by vaccines based mainly on ‘traditional’ bacterial
fermentation technologies. The institute has several processing lines for bacterial vaccines,
and heads the national program for human and veterinary vaccines.
CQB was founded in 2008 by fusing the Center for Pharmaceutical Chemistry with the Center
for Synthetic Antigens at the University of Havana into this new entity. The Center for Syn-
thetic Antigens developed a method for industrial production of synthetic haemophilus B
(HiB) polysaccharide to be used as the active ingredient (antigen)10 in the HiB vaccine, which
protects against otitis, meningitis and sepsis. The center will work on chemical processes
related to biological production, like development of other synthetic antigens and conjugation
technologies for vaccines.
Since the 1981 interferon pilot project investments have not only been channeled into found-
ing new biotech centers. In parallel a legal framework has been developed, with patent legis-
lation in operation since 1983, and a drug regulatory agency has been developed and been
given increasing independence over the same period (Ratanawijitrasin and Wondemagegnehu
2002).
The initial strategic evaluation
We have seen that the Castro government gave health, education and science primary impor-
tance from the very beginning of its reign, and basic health indicators were taken not only as
indicative of the health of the population, but also of the success of the government itself. The
emphasis on fulfilling the social rights of universal and free access to these services has also
been extremely important in legitimizing a regime that has been much less forthcoming in
granting its population political rights like freedom of speech and freedom of organization.
However, by the late 1970s the potential of traditional low-tech public health solutions –
immunization, sanitation, antibiotics distribution, and primary health care – was depleting.
High-tech solutions were called for in order to solve public health problems that were partly
on the increase – like cardiovascular diseases – and partly just gaining relative importance as
other problem were solved – like congenital disorders.
It is becoming clear that public health considerations are not a singular, unambiguous moti-
vating factor. We have seen that in strategic evaluations that give priority to public health
considerations it is sometimes necessary also to decide which types of health problems to
address. In their initial strategic evaluations the Cubans were primarily targeting the morbidity
pattern of ‘modern’, ‘Northern’ societies.
Simultaneously, the CMEA11 system of the Soviet Union and her political allies constituted a
potential export market for reverse-engineered biopharmaceuticals, since intellectual property
rights were not being enforced in these countries. So although commercial interests played an
important part from the very beginning, it seems like they may have been secondary to public
health considerations in the initial strategic decision of establishing the biotech industry.
Let us now approach the question of interests from another angle, by looking at public state-
ments issued by the man that almost personally initiated the Cuban biotech adventure – Fidel
Castro himself. It will be demonstrated that economic conditions precipitated a shift – or at
least an adjustment – in the balance between public health and commercialism in subsequent
strategic evaluations.
10 The antigen is the substance that is intended to induce a specific immune response, i.e. a response
directed at the specific microbe that the vaccine is suppose to protect against.
11 CMEA: Council for Mutual Economic Assistance.
10
Fidel Castro on the rationale for the biotech sector
This section first presents four different interests that hypothetically could have formed a
rationale for developing the biotech sector. Then I examine how those interests are expressed
in a selection of former President Fidel Castro’s speeches and public appearances over a
couple of decades.
Basically, we may speak of three, possibly four, different motivations for creating the biotech
sector: one related to public health, another to economic revenues and development, and the
third to international collaboration and aid. The (possible) fourth rationale would be Fidel
Castro’s firm ideological belief in science as a prime force for the transformation of society.
We have already discussed the motivation of public health. The second motivation comes in
two versions, although the difference is a somewhat subtle one. Firstly, it is commonly stated
that exports were required in order to finance production of biopharmaceuticals for domestic
consumption (Lage 2000; Lage 2006). The other is that the aim was to create an economic
sector that would contribute to general national economic growth, and that domestic con-
sumption would be a way of legitimizing the generous spending of scarce national economic
resources for massive investments in biotechnological research and productive capabilities.
Sáenz (1990) is a compilation of quotes on the topic ‘Science, technology and society’ from
public appearances (speeches and interviews) by Fidel Castro’s from 1959 to 1989, and Sáenz
(1991) covers the years 1989-91. Based on this publication it was possible to make a simple
and somewhat crude analysis of the relative emphasis put on different rationales for creating
the biotech sector by the President himself.
The analysis of the quotes in these books referenced by the subject index entries of the term
‘biotecnología’ shows a clear trend in the direction of more emphasis on economic develop-
ment as rationale for the biotech initiative from 1990 onwards. There were 35 entries for
‘biotecnología’, referring to a total of 22 instances of public appearance, and 15 of these
included statements about purposes, aims, or rationales for the biotechnology sector.12 The
four purposes relevant for this analysis are ‘public health’ (national public health considera-
tions), ‘economic development’, and ‘international collaboration or aid’, and combinations of
these, and ‘scientific development’. The frequency of each rationale (and combinations the-
reof) is listed in Table 1.
Before 1989 economic development was not once mentioned as an independent rationale,
while from 1990 onwards biotechnology is given such a role on five different occasions (2nd
row). International collaboration or aid stands out with relatively low priority.
There seems to be a shift in rhetoric coinciding with the gradual collapse of the CMEA
between 1989 and 1992. This disintegration of international economic relations precipitated a
national economic disaster in Cuba, resulting in a 72 percent reduction in imports, a 67 per-
cent reduction in exports, a drop in the investment rate from 26 percent to 7 percent, and a
GDP reduction of 33 percent over three years only (Fernández 1999). In the midst of declar-
ing an austerity measures package dubbed ‘The Special Period in Time of Peace’ President
Castro also declared continued dedication to three sectors: food supply, tourism and biotech-
nology (Sáenz, et al. 1991). Reid-Henry (2007) locates the origin of this reform to the 4th
party congress of the Cuban Communist Party in 1991.
Investment in tourism and biotechnology continued throughout the Special Period (which to
my knowledge still has not been officially called off); for instance, the Centre for Molecular
12 In the remaining seven instances biotechnology was related to agriculture or other – for the purpose
of this analysis – irrelevant topics.
11
Immunology (CIM) was inaugurated in 1994, which is commonly regarded as the economic
turning point (in other words the year when the Cuban economy touched bottom).
Table 1. Frequency of different stated purposes of the biotechnology initiative in Fidel Castro’s public appear-
ances 1977-91.
Stated rationale of biotechnology initiative
In number of appear-
ances 1977-89
In number of appear-
ances 1990-1
1
Public health
3
1
2
Economic development
0
5
3
International collaboration
0
1
4
Health and economic development
3
1
5
Health and international collaboration
1
0
6
Scientific development (with additional rationale)
1
1
Total
7
8
Fidel Castro, who had had a close supervision and control of the sector from his State Council
office, in about 1993 or 1994 somehow made one step backwards and left the responsibility of
the Pole Office to the Secretary of the State Council José Miyar Barrueco.13 De la Fuente
(2001) asserts that this shifts resulted in a more aggressive commercialization by licensing
and selling technologies and prioritization of production quality and capacity investments at
the cost of research.14
The (possible) fourth rationale can be located in the above-cited statement made by Fidel
Castro in 1960 about ‘men of science’ – hence the emphasis of the revolutionary government
on science and higher education. It is illustrative of this strategy that the Cuban health system
would be based on medical doctors, and not paramedics, or ‘barefoot doctors’ as in China for
instance. Nevertheless, ‘scientific development’ is mentioned only twice in his ‘biotecno-
logía’ speeches, and never as an independent rationale.
This analysis demonstrates that throughout the period when the biotech sector was founded
(1977-91) Fidel Castro stated both the needs of the public health system and economic devel-
opment as fundamental rationales for creating the sector. We may, however, observe a certain
movement in the direction of more emphasis on commercialization after the CMEA collapse
in around 1990, possibly at the cost of public health consideration. In other words, although
the initial strategic evaluations were based primarily on public health considerations, in later
iterations we may observe a shift towards commercialism, but without in any way losing sight
of the former interest.
Interests reflected by the vaccine product portfolio
So far we have looked at the strategic evaluations from the point of view of explicitly stated
interests and considerations. It is now time to ask if it is possible to infer the same interests
and considerations with the resulting target products as a point of departure. How are different
interests reflected by the characteristics of the product portfolio?
The common understanding among my Cuban sources is that the biotech sector works at the
service of national needs, and that the public health system is important in defining the priori-
ties of the operations of the sector.
13 Personal communication with José de la Fuente, 11 March 2002.
14 Personal communication with anonymous source #1, 3 June 2008.
12
These […] centres have the following objectives: 1) to support the health system with high-
technology products, and 2) to be economically self-financing in doing this. That is, the main
aim is to be socially oriented, and commercialization is the means by which to fulfill that
objective.15
Some of the early products were very much about solving domestic health problems. The very
first biotechnological product development project targeted interferon, a protein that at time
was believed to become a ‘magic bullet’ in the treatment of cancer and viral diseases. The
diagnostics equipment MicroSUMA developed at CIE was designed for mass screening of
serum samples, targeting both infectious diseases and congenital disorders. Also CIM’s initial
monoclonal antibody development activities fit into the strategy of targeting a ‘Northern’
morbidity pattern.
However, an important activity of the Cuban biotech sector is development and production of
vaccines, paradoxically enough a product that is associated with ‘traditional’ infectious dis-
eases rather than with modern, genetically and ‘life-style’ related illnesses.16 Another similar,
although less fundamental paradox, is that although intended as a measure against ‘modern’
diseases, the first application of interferon was in the management of the dengue fever epi-
demic in 1981 – a tropical, and thus ‘Southern’, infectious disease.17
This section examines the vaccine product portfolio of the biotech sector, assuming that inter-
ests may be inferred from the product characteristics. However, is it possible to derive or infer
interests from pharmaceutical product characteristics? For instance, is it possible to see a
strong influence of the national public health system on the biotech sector reflected in that
sector’s product portfolio? Are there any specific national public health problems being
addressed by some unique, specific, and domestically developed biopharmaceuticals? In real-
ity, the issue of interests is not that simple and straightforward. The following paragraphs will
reveal that the vaccine product portfolio of the biotech sector reflects a much more complex
pattern of motivations, strategies, and historical explanations. Let us look at the vaccines that
are currently registered and commercially available from Cuban manufacturers (Table 2).
Meningococcal group B and C vaccine
The other paper about the Cuban biotech sector provides a detailed account of the innovation
process resulting in the meningococcal group B and C vaccine, which was developed in order
to combat a national epidemic of meningococcal disease, caused by a group B bacterial strain
against which there was no vaccine commercially available. The epidemic started in the late
1970s, and the vaccine was applied in a national immunization campaign in 1991. It was
developed by the precursor organizations of what is today the Finlay Institute (Valcarcel, et
al. 1991).
This is the product that almost in an archetypical way would exemplify a vaccine industry at
the service of a national public health system. Nevertheless, subsequently the VA-MENGOC-
BC® vaccine turned out to have a commercial potential, and of the 55 million doses have
been produced to date, more than 40 million doses have been exported, mainly to other Latin
American countries (Sotolongo, et al. 2007). Its commercial potential is limited by the fact
that it does not protect against all the group B strains that are circulating globally, so it is not
15 Personal communication with Agustín Lage, Director of CIM, 11 May 2001.
16 As a matter of fact, the term ‘life-style related illness’ could be an equally appropriate label for the
traditional infectious diseases, given their intrinsic association with the ‘life-style’ of poverty and
deprivation.
17 Personal communication with Manuel Limonta, former Director of CIGB, 14 February 2009.
13
directly applicable as a single group B component in a comprehensive meningococcal vaccine
for global use in childhood immunization programs, for instance.
Table 2. Vaccines marketed by Cuban manufacturers.
Trademark
Disease
Finlay Vaccines S.A.:
vax-TyVi ®
Typhoid fever
VA-MENGOC-BC ®
Meningococcal disease, serogroup B and C
vax-SPIRAL ®
Leptospirosis
DTwP-vaccine
Diphteria, tetanus, pertussis
VA-DIFTET ®
Diphteria, tetanus
vax-TET ®
Tetanus
Heber Biotec S.A.:
Heberbiovac HB
Hepatitis B
Quimi-HiB
Haemophilus influenzae B
Trivac HB ®
Diphteria, pertussis, hepatitis B
Heberpenta ®
Diphteria, tetanus, pertussis, hepatitis B, haemophilus B
CIMAB S.A.:
CIMAVax-EGF
Lung cancer (non-small cells)
Hepatitis B vaccine
The recombinant hepatitis B (hepB) vaccine is one of CIGB’s early products. A blood based
preparation of hepatitis B antigen was successfully tested in animal models in 1983 at a medi-
cal research center in Havana, and in 1984 and 1985 different recombinant antigen production
techniques were explored. The first batches were produced in 1987 (Pentón, et al. 1994).
In contrast to the group B meningococcal vaccines, which by existing technologies are highly
strain specific, hepatitis B vaccines using the surface protein antigen can be applied globally.
Hepatitis B was endemic in Cuba as in many other developing countries at that time.
CIGB’s Heberbiovac HB is based on modern genetic engineering, but is largely a reverse
engineered product very similar to Merck’s and SmithKline Beecham’s original designs
(Milstien and Kaddar 2006). The gene coding for the surface protein is inserted into the
genome of bakers’ yeast, the yeast is cultivated, and the protein is purified. The Cuban hepa-
titis B vaccine was registered in 1990, and an immunization campaign directed against child-
ren was launched in 1992. The vaccine was also included in the National Childhood Immuni-
zation Program (Pentón, et al. 1994). The same year 1.125 mill doses were exported to
Colombia (Oramas 2003).
Simultaneously, as a result of extensive vaccine introduction pilot program activities by the
Task Force on Hepatitis B Immunization in South East Asia, the World Health Assembly
endorsed the inclusion of hepatitis B vaccine in the Expanded Programme on Immunisation
(EPI) (Mahoney and Maynard 1999). CIGB’s vaccine received its approval for WHO
prequalification in 2001.
When hepatitis B immunization started in Cuba in 1992, the incidence rate was 20.3 per
100,000 (Galindo 2004), so an obvious potential public health benefit was present. However,
Merck’s and SmithKline’s vaccines initially cost USD 30 per dose, with a three-dose schedule
(Mahoney, et al. 2005), a price that must have been entirely prohibitive at the time of initiat-
14
ing CIGB’s hepatitis B vaccine development project. Thus, there was a rationale for domestic
production as an alternative to imports of that vaccine. Simultaneously, the high price must
have represented an opportunity for export revenues generation.
Haemophilus B (HiB) vaccine
The Cuban HiB vaccine is a truly novel product, being the world’s first vaccine ever to be
based on a chemically synthesized antigen. The first conjugate HiB vaccine entered developed
country markets in 1987, but the complex production technique as well as sluggish demand in
the low-price markets of UNICEF and PAHO contributed to keeping the price up (Chee, et al.
2008). Like with the hepatitis B vaccine, the Cubans decided to develop their own product.
The HiB vaccine became available on the global public sector markets in 1997, and initially it
was sold at USD 5 per dose.18 Already in 1989 two parallel HiB vaccine development projects
had been initiated in Cuba, one located at the Finlay Institute based on bacteria culture, and
one located at the Laboratory for Synthetic Antigens (LAS)19 at the University of Havana,
based on chemical synthesis.
Synthetic production of the HiB polysaccharide is not a Cuban invention, but the development
of the industrial scale manufacturing process was done by the LAS in collaboration with a
laboratory at the University of Ottawa in Canada, which co-authored the patent. A conjuga-
tion technology was developed by the LAS. The CIGB also participated in the development
project (Kaiser 2004).20
The HiB vaccine project at the Finlay Institute was abandoned in 2001, when the synthetic
product of the LAS entered clinical trials. When imported HiB vaccine was introduced in the
Cuban National Childhood Immunization Program in 1998,21 the incidence rate was about 1.5
per 100,000. The price offered through PAHO’s Revolving Fund was at this time USD 2.50
per dose. The Quimi-HiB® vaccine was first distributed domestically in January 2004 (Anon.
2004a). Subsequently exports have been made.22 WHO-prequalification is pending.
Both the HiB vaccine and the hepatitis B vaccine may be regarded as being part of long-term
technology platform development strategies. The HiB vaccine development project, unlike all
the other vaccine development projects, was located at a research center at the University of
Havana, which underscores the basic research aspects of the project. It also operated with an
unusually long time horizon to Cuban standards, and apart from the vaccine itself it resulted
in creation of technological capabilities in chemical polysaccharide synthesis. In particular the
pneumococcal conjugate vaccine under development at the CQB is based on the chemical
technique of polysaccharide conjugation that was developed with the HiB vaccine. Similarly,
the hepatitis B vaccine development project at the CIGB pioneered the exploration of several
different recombinant protein expression systems, which must have been important expe-
riences on which to found subsequent product development projects based on recombinant
technologies.
Like is the case with the hepatitis B vaccine it is easy to identify both import substitution and
export earnings generation as important objectives for the HiB vaccine, and it is equally diffi-
cult to determine the relative importance of these two rationales.
18 Personal communication with Claire Frijs-Madsen, UNICEF Supply Division, 5 June 2009.
19 LAS: Laboratorio de Antígenos Sintéticos.
20 Personal communication with Vicente Vérez, Director of CQB, 4 February 2009.
21 Personal communication with Vicente Vérez, Director of CQB, 4 February 2009.
22 Personal communication with Vicente Vérez, Director of CQB, 4 February 2009.
15
The pentavalent DTP-hepB-HiB vaccine
Combination vaccines save on cold chain capacity, on disposables like needled and syringes,
and on number of injections required for each child. The pentavalent DTP-hepB-HiB vaccine
was offered through the Revolving Fund from 1999 at the price of USD 3.50 per dose (PAHO
2006). Thus, the potential for import substitution was moderate, while the potential for export
revenues generation in non-PAHO and non-UNICEF supplied middle-price countries like
Russia and China must have been substantial when development of the Cuban pentavalent
vaccine was initiated around 1994.
Recently, sales of the pentavalent vaccine have increased dramatically in the low price market
served by UNICEF, after a somewhat sluggish introduction period: procured volumes for
2009 are 130 million doses, double that of 2008 (Matthews 2009).
The DTP (the traditional triple vaccine) and the DT combination vaccines are used as booster
doses in the Childhood Immunization Program (see Table 3 on page 19). The DTP is also an
input for the pentavalent vaccine, and likewise, the antigen of the tetanus monovalent vaccine
is used as a carrier protein in Quimi-HiB®. The DT-hepB trivalent combination is not used
domestically, and is probably primarily an export commodity.
There is possibly a commercial potential in the DT-hepB trivalent vaccine. The remaining
vaccines – the pentavalent, the DT combination, and tetanus monovalent – display a more
mixed rationale, like is the case for hepatitis B and HiB.
The typhoid fever vaccine
Finlay Institute’s typhoid fever vaccine is a polysaccharide vaccine quite similar to one being
marketed by Pasteur Mérieux, and replaced an older Cuban inactivated whole-cell vaccine
(Azze, et al. 2003). Typhoid fever vaccine is not in the PAHO Revolving Fund procurement
portfolio, so it may be assumed that import prices have been somewhat higher than those of
the traditional childhood vaccines, although recently Sur et al. (2009) reports sales of a
corresponding vaccine in India at no more than USD 0.50 per dose. The Cuban vax-TyVi®
vaccine is presented as a ‘low-price’ vaccine intended for domestic use, for exports to other
developing countries, and as a travelers’ or risk groups’ vaccine (Azze, et al. 2003).
The leptospirosis vaccine
Leptospirosis is a zoonotic bacterial disease – also known as Weil’s disease – which transmits
to humans by ingestion of urine of infected rodents, with agricultural workers as one of the
high-risk groups. Clinical manifestations range from asymptomatic to relatively rare fatal
cases, and it is commonly confused with malaria, dengue fever, yellow fever and others
(Bharti, et al. 2003). Incidence rates in Cuba were increasing from 1991 onwards, partly
because ‘urban’ and private backyard farming became widespread as the economic crisis
unfolded. Imports of the Soviet vaccine were abandoned, also as a result of the CMEA colla-
boration collapse.
In my view, Finlay Institute’s inactivated whole-cell leptospirosis vaccine should be regarded
as a vaccine targeting a domestic health need, although import substitution may also have
been an issue. Since the global disease burden and strain epidemiology of leptospirosis is
poorly estimated, the potential for exports must have been unclear, at best. It seems like Fin-
lay initiated the development program in 1991, and that the vaccine was registered in 1996
(Martínez, et al. 1998; Martínez, et al. 2000). Since killed whole-cell vaccines are likely to
have short-term protection (Bharti, et al. 2003), it is possible that risk groups in Cuba are
repeatedly and routinely immunized.
16
Therapeutic cancer vaccines
By one source CIM’s therapeutic cancer vaccines were presented as export oriented products,
targeting high-price markets in developed and middle-income countries,23 while another
claimed that the main rationale is to export the products in order to finance domestic use.24 It
remained a bit unclear to me why domestic use of these vaccines should be of such minor
importance. One possibility is that the chemotherapy and radiation therapies that have to
accompany therapeutic cancer vaccines are simply to costly to be in common use in Cuban
hospitals, but this is entirely my own speculation.
Other vaccines
One more product, and two development projects, need mention in order to complete the pic-
ture. Finlay Institute is supplying meningococcal group A polysaccharide in bulk for final
processing at Biomanguinhos in Brazil, to be distributed by WHO in immunization cam-
paigns in the ‘Meningitis Belt’ in sub-Saharan Africa. The first shipment of 5.2 million doses
was donated (ACN 2008), reflecting a motivation bordering on international aid and medical
diplomacy. Another similar project is a recently initiated collaboration with the National
Institute of Public Health in Norway for developing a meningococcal group A outer mem-
brane protein vaccine for use in the Meningitis Belt.
The other development project is a genetically attenuated oral cholera vaccine which is cur-
rently approaching clinical trials. There is no cholera in Cuba, so this vaccine is intended to
combat or prevent cholera epidemics abroad. Gustavo Sierra at Finlay Institute gave me a
vivid account of how Fidel Castro one day in 1991 appeared at the recently inaugurated
organization with a copy of a news cable reporting the first cases of a cholera outbreak in
Peru, declaring that Cuba should develop a cholera vaccine.25 This project should be seen as
an expression of Castro’s medical diplomacy ambitions, and its potential benefits for the na-
tional public health system are not easy to spot.
Multiple interests – and two paradoxes
An analytical problem is that in most cases it is difficult to distinguish between the interest of
domestic needs and that of export earning potentials. The point is that there are very few
health problems caused by infectious diseases that are specific or unique to Cuba. Thus, the
vaccine product portfolio reflects the fact that infectious diseases are global health problems,
so that most vaccines serving domestic needs also have a commercial potential overseas. The
same applies the other way around; in most cases vaccines that have been demanded abroad
would also be needed at home. So perhaps one should not expect of a vaccine product portfo-
lio unambiguously to reflect any of these two interests.
It does not come as a surprise then, that this analysis reveals that the product portfolio reflects
highly mixed interests. The meningococcal group B and C vaccine and the leptospirosis vac-
cine are products that were intended for domestic use only, and the subsequent commercial
success of the former was neither predicted nor planned for when the vaccine development
project was initiated in 1983. The other extreme – almost exclusive focus on overseas markets
– is represented by the therapeutic cancer vaccines and the DT-hepB trivalent vaccine. Simi-
23 Personal communication with Luis Henrique Fernández, Director of Vaccine Department at CIM,
17 September 2008.
24 Personal communication with Rolando Pérez, Director of R&D at CIM, 5 May 2009.
25 Personal communication with Gustavo Sierra, Vice-President at Finlay Institute, 3 February 2009.
17
larly, the hepatitis B vaccine is an expression of a desire to combat a ‘traditional’ morbidity
pattern, while the cancer vaccines target illnesses of the ‘modern’ pattern.
The production of bulk meningococcal group A polysaccharide stands as a borderline case
between commercialism and medical diplomacy, while the cholera vaccine that is under
development is an expression of the latter. Development of technology platforms seems to
have been additional rationales for both the hepatitis B and HiB vaccines.
The other vaccines seem to have been intended both for domestic use and for exportation. To
put it short, in the different strategic evaluations the selection of products has been influenced
by a mix of interests. The relative emphasis of considerations of public health and commer-
cialism has differed between the various vaccine products in the product portfolio, with tech-
nology development and medical diplomacy as additional motivations for some vaccines.
There is a paradox that although the biotech sector was established with the initial motivation
of addressing new, ‘Northern’ health problems, a vaccine industry emerged as an important
part of the sector, developing a product portfolio that almost by definition addresses more
‘Southerly’ associated, infectious diseases. How come that vaccines have become so impor-
tant? The other paper will demonstrate that the Cuban biotech sector was not designed based
on strategic interests and scientific opportunities alone. The serious and acute public health
problem of the meningococcal epidemic called for a biopharmaceutical solution that would
turn out to have irreversible consequences in terms of the organization, functioning and prod-
uct portfolio of the emerging techno-economic network.
Another paradox is that when the vaccine industry eventually started to target the ‘Northern’
health problems that were the initial rationale for the biotech initiative – with the introduction
of therapeutic cancer vaccines – the emerging products seem not to be intended for the
domestic market, but are targeting high-price export markets in high-income countries.
Opportunity cost, import substitution and export earnings
Having now studied the considerations underlying the strategic evaluations in Cuban biotech
– with a focus on the vaccine industry – by first looking at explicitly stated rationales and then
at the interests reflected by the portfolio of vaccine products, in this section we will look at
the interests surrounding the strategic evaluations from yet another angle, by analyzing the
economic conditions imposed on the Cuban vaccine industry by the international and domes-
tic vaccine markets. The main question to be addressed is whether domestic vaccine manu-
facturing primarily contributes to substituting imports, or if it is in terms of export revenue
generation that it has the most important economic impact. It may be possible to infer under-
lying interests from such an analysis. In the previous section the issue was to reconstruct the
considerations as they may have appeared at the point in time when the strategic evaluations
were in fact undertaken, while the task now at hand is to assess the actual economic impact as
seen in retrospect.
In this section we will be looking at both strategic and techno-economic evaluations. The rea-
son for dealing with both almost simultaneously is that while the selection of particular prod-
ucts with more or less known characteristics, like for instance commercial potential, is part of
strategic evaluations, the choice of a particular marketing strategy, for instance by deciding to
develop exports into some markets and not others, is part of the techno-economic evaluation.
Again, we observe that although the two types of evaluation are fairly easy to distinguish
from each other in principle, in practice they turn out to be more intertwined.
As stated in the introductory paragraphs of this paper the techno-economic evaluations are
about how to intervene in and develop the three main sub-networks science (S), technology
18
(T), and market (M), as well as the intermediary sub-networks S-T and T-M. In these theo-
retical terms, the techno-economic issue to be discussed here is how the Cuban vaccine
industry relates to domestic and overseas markets (M), or in other words, how the T-M sub-
network is used and developed in order to connect to or relate to the international part of the
sub-network of the vaccine markets (M).
First, the dilemma of opportunity cost is developed. Then, the value of import substitution
generated by the Cuban vaccine industry is estimated, and it is demonstrated that it is difficult
to economically justify the massive costs of investment by reference to these benefits. The
next paragraphs study how the marketing strategy of the Cuban vaccine industry seems to try
and resolve the opportunity cost problem, i.e. it is asked what techno-economic evaluations
that have been made. The final part of this section makes some rough estimates of the value of
Cuban vaccine exports. Based on these findings the concluding paragraphs attempt at casting
light on the questions of the interests underlying the strategic evaluations that resulted in the
selection of these vaccine products.
The problem of opportunity cost
The problem of opportunity cost arises from the fact that Cuba has access to very low-priced
vaccines through the Revolving Fund of the Pan American Health Organization (PAHO).
This problem confronts vaccine manufacturers in all countries that have access to the low-
revenue markets represented by PAHO’s and UNICEF’s vaccine procurement services.
Except for the meningococcal group B vaccine, the leptospirosis vaccine, and possibly the
typhoid fever vaccine all vaccines currently in use in routine immunization in Cuba are com-
mercially available in low-price international public sector markets. With vaccines imports
available close to marginal costs, why then establish domestic development and manufactur-
ing capabilities? Or in other words, what kinds of economic interests are currently being
served by the domestic manufacturing of these products?
We saw in Table 2 on page 13 that in total the Cuban vaccine industry holds a portfolio of 12
registered vaccines for human use. Ten of these are used in the National Childhood Immuni-
zation Program. The one against the zoonosis leptospirosis is used in risk groups, like agri-
cultural workers, and the last one is a therapeutic cancer vaccine manufactured by CIM.
Heber Biotec also markets a veterinary vaccine, GAVAC, for use against a tick-borne disease
in cattle. The first step in the following analysis is to estimate the value of the domestically
manufactured vaccine products (for human use) in terms of import substitution.
The Cuban National Childhood Immunization Program
The Cuban National Childhood Immunization Program covers twelve diseases: tuberculosis,
diphtheria, tetanus, pertussis, hepatitis B, Haemophilus influenzae type B (HiB), meningococ-
cal disease, mumps, measles, rubella, typhoid fever, and polio (Anon. 1997; Anon. 2004b).26
Eleven different vaccines are used, see Table 3. In the public health system Cuban products are
consistently preferred to imported products.
In addition to routine immunization, immunization campaigns are sometimes carried out. For
instance, in 2004 the Ministry of Health distributed some 1.4 million doses of MMR vaccines
for a campaign directed at adolescents, at a total cost of about USD 2 million (Armas and
Gómez 2007). Also foreign student residing in Cuba are routinely immunized with MMR,
hepatitis B, and tetanus vaccines. And the high volume of tetanus vaccine application proba-
26 Cuban documents, like Reed (2007), list 13 diseases by counting the meningococcal group B and C
bacterial strains as two separate disease agents.
19
bly means that it is used as a prophylaxis in the treatment of minor and major wounds in the
public health system. The coverage rate for the childhood vaccines range from 94 percent for
HiB to 99 percent for most of the others,27 a figure that ranks among the highest in the world.
Table 3. Vaccines used in the Cuban National Childhood Immunization Program, and estimated value of imports
and import substitution for 2007.
Vaccine
No. of
doses
pr
person
Given at age
Origin
No. of
doses pr
year
Price
per
dose,
(USD)
Import
cost
(USD)
Imports
saved (USD)
BCG (tuberculosis)
1
At birth
Imported
111 854
0.1036
11 588
hepB
1
At birth
Domestic
182 683
0.2343
42 803
Polio
4
At birth, 11 months, 3
and 9 years
Imported
507 040
0.1478
74 941
DTP-hepB-HiB*
3
2, 4 and 6 months
Domestic
103 278
3.9200
1 214 549
Mening. B and C
2
3 and 5 months
Domestic
110 590
n.a.
n.a.
MMR (measles,
mumps, rubella)
2
12 months and 6
years
Imported
113 751
0.9000
204 752
HiB
1
18 months
Domestic
108 216
3.1500
340 880
DTP
1
18 months
Domestic
72 392
0.1580
11 438
Diphtheria and teta-
nus
1
6 years
Domestic
133 470
0.0891
11 892
Tetanus
1
14 years
Domestic
951 204
0.0645
61 353
Typhoid fever
3
10, 13 and 16 years
Domestic
472 788
n.a.
n.a.
Sum
291 280
1 682 915
* The pentavalent vaccine
Sources:
The Cuban National Immunization Program: Reed (2007)
Number of doses per year: ONE (2008a)
Vaccine prices: PAHO (2007)
As already stated, Cuba has access to vaccine purchases through the Revolving Fund of the
Pan American Health Organization. Apart from broad operational and technical assistance,
the Revolving Fund requests bids from vaccine suppliers based on regional forecast and
demand, and procures vaccines on behalf of the member countries. PAHO charges a 3 percent
fee, which is used to capitalize the fund. The fund capital is used to forward payment of deli-
veries, and thus ensures liquidity, and no country may place new orders until their account is
in balance (Andrus, et al. 2008). The vaccine suppliers offer their vaccines close to marginal
cost, which is sometimes just 1/200 of the price the same vaccine may be sold at in Northern
markets (Plahte 2005).
The Revolving Fund is a double edged sword for Cuba. On the one hand (or edge), vaccines
that are not domestically produced are available at a low cost. The BCG and MMR vaccines
are sold at around USD 0.10 per dose, for instance, and it may be estimated based on PAHO’s
price list for 2007 that Cuba’s total human vaccines imports for that year cost about USD
291,000.
On the other hand, such low vaccine prices reduce the potential value of domestic vaccine
manufacturing intended for import substitution. Based on the same price list, we may estimate
27 However, although the reported rate for the 3rd DTP dose is 99 percent, the figure of 72 392 for the
4th shot at 18 months is in fact closer to 60 percent, but the 4th shot is not reported in WHO’s statistics.
Apart from that, the reported vaccine spending figures and coverage rates correspond well to a control
estimate I calculated on the basis of the size of the birth cohorts.
20
the value of import substitution of the vaccines that are available through PAHO at no more
than USD 1.7 million in 2007. The lion’s share of that value stems from the pentavalent DTP-
hepB-HiB vaccine.
The value of substituting imports of the typhoid fever vaccine is more difficult to estimate,
since it is not procured by PAHO, and public price lists do not exist. However, Sur et al.
(2009) states that a typhoid vaccine similar to the Cuban product costs USD 0.50 in India.
Both Sanofi Pasteur and GSK, as well as several manufacturers in India, Vietnam and China,
market such capsular typhoid vaccines. Since India and Cuba both have per capita GDPs just
above the USD 1000 mark, it should be quite safe to assume that overseas vaccine manufac-
turers would be willing to supply the Cuban public sector market at a similar price. In that
case, the Cuban typhoid fever vaccine saves imports worth about USD 236,000. Added up
with the value of import substitution of the other vaccines, the Cuban vaccine industry subs-
titutes imports of about USD 2 million in total.
Lastly, the unique group B component of the meningococcal B and C vaccine is impossible to
value in terms of import substitution, so the value of this vaccine may only be estimated in
terms of its public health impact, which of course is beyond the scope of this analysis.
It should be noted, however, that when some of these vaccines came on the market, the price
was extremely high. The initial price of the recombinant hepatitis B vaccine was USD 30 per
dose when it exited Merck’s pipeline in the early 1980s (Mahoney, et al. 2005), and in 1993,
when it was offered through UNICEF for the first time, it still cost USD 2.07.28 The Cuban
hepatitis B vaccine was licensed in 1992.
Note also that the above figures do not reflect the full imports expenditures related to immu-
nization activities in Cuba. In addition to vaccines, there will be purchases of syringes, refri-
gerators and other cold chain equipment, as well as operational costs related to planning, pro-
curement, storage, distribution, epidemiological surveillance, adverse effects monitoring etc.
Most of the cold chain equipment used in Cuba is imported. The annual total cost of the
immunization program was estimated to about USD 18 million for 2006, of which about USD
12 million were spent on vaccines and supplies (MINSAP 2006).29
The point to be made is to formulate the problem of opportunity cost: since vaccines may be
imported at a price close to marginal cost, how can it be made economically justifiable to
establish development and manufacturing capabilities for such products? Or put slightly diffe-
rently: since it may hardly be defended to invest hundreds of millions US dollars in vaccine
development and manufacturing capabilities in order to save 2–3 millions annually, in what
other ways is the vaccine industry justified? Which strategic and techno-economic evaluations
may be undertaken in solving this problem?
Firstly, at the time of initiating the development of several of these vaccines the world market
prices were very high, and establishing domestic production capabilities could be regarded as
a relatively attractive option. However, both the HiB vaccine and the hepatitis B vaccine have
been subject to substantial price reductions since their initial introduction – in the case of
hepatitis B the price has dropped from the initial USD 30 per dose price through the above
USD 2.07 per dose price in 1993, to today’s PAHO offer of USD 0.27 per dose (PAHO
2009). Thus, the problem arises in the medium to long term; international competition shar-
pens as additional suppliers enter the market with identical products, in line with traditional
product cycle theory.
28 Personal communication with Alison Rowe, GAVI, 20 January 2009.
29 It is not stated how the domestically manufactured vaccines were valued in this estimate.
21
In other words, the initial strategic evaluation – resulting in a decision to develop a product
whose price in the international marketplace is prohibitively high at the outset – is being
undermined by decreasing international prices, which in turn calls for techno-economic eval-
uations in order to solve the emerging problem of reduced savings from the import substitut-
ing domestic manufacturing.
Second, the following paragraphs will reveal that the solution to the opportunity cost problem
is commercialism and exportation. But which markets may be targeted when UNICEF and
PAHO are flooding the markets of most of the countries in the South with vaccine products at
rock-bottom prices, and the Northern markets purchase their vaccines almost exclusively from
Northern suppliers?
While strategic evaluations are about selecting the products to be targeted by an intervention,
techno-economic evaluations are about how to order and engineer the techno-economic net-
works in order to reach those targets. The choice of market outlets implies establishing rela-
tions between T and M, or to construct the M sub-network itself.
The marketing strategy of the Cuban vaccine industry
Which techno-economic evaluations have been made concerning the marketing strategy of the
Cuban vaccine industry? Are there any markets open to Cuban exports in which the price
margins allow for full or partial recuperation of costs and investments?
Firstly, the Cuban vaccine industry is not targeting the global public sector markets,30 i.e. the
low-revenue markets that are dominated by the procurement services of PAHO’s Revolving
Fund, which was mentioned above, and UNICEF’s Supply Division, which purchases vac-
cines on behalf of African and Asian countries (Andrus, et al. 2008). According to the annual
reports of UNICEF Supply Division31 the only vaccine supplies originating in Cuba were
Heber Biotech’s (CIGB’s commercial arm) sales of not more than about USD 1 million worth
in total, most probably hepatitis B vaccine, in 2004-6. Based on UNICEF’s hepatitis B vac-
cine prices for these years this corresponds to some 4.2 million doses only. CIGB’s hepatitis
B vaccine received its WHO-prequalification approval in 2001 (Oramas 2003). It is not
known if CIGB has sold hepatitis B vaccine to PAHO.
Let us look at the hepatitis B vaccine again. As a result of something that appears to be a work
accident by the censorship authorities, a table appeared in the regional statistics section of the
2008 CD-ROM edition of the Cuban Annual Statistical Yearbook in which production figures
for some selected industrial products originating in the Playa municipality in western Havana
were quoted, among them CIGB’s hepatitis B vaccine. Average annual output is 13 million
doses for the years 2002-7 (ONE 2008b), which is comparable, albeit not directly correspond-
ing, to the Lopez et al. (2006) figures of average annual exports of ten million doses. Accord-
ing to Table 3 above annual domestic consumption is about 290,000 doses (ONE 2008a). So
where do these exports go? Which markets are tapped into in order to achieve the average
price of USD 2.20 per dose quoted by Lopez et al. (2006) – almost ten times the going rate on
the global public sector markets?
Biopharmaceutical exports are not listed in Cuba’s export statistics. The only information
CIGB representatives have been willing to provide on the topic of their main markets, is that
they primarily target middle-income countries that are ‘not eligible for the EPI, like Venezu-
30 Personal communication with Eduardo Martínez, Director of Development Unit, and Yair Quiñones,
both CIGB, 19 September 2008.
31 Contracts worth less than USD 100,000 are not included in these reports.
22
ela and Argentina et cetera’.32 However, both Venezuela and Argentina, like all other Latin
American countries except for Mexico, have access to vaccines through PAHO’s Revolving
Fund (Andrus, et al. 2008) at a price close to one tenth of CIGB’s average price. It is possible
that vaccines have been sold to Venezuela and Argentina independently of the Revolving
Fund’s procurement services, but at a price very close to the PAHO price. After all, the USD
2.20 per dose price is an average price, and still higher prices may have been charged of other
buyers. Yet another possibility is that the sales to Venezuela and Argentina are parts of com-
prehensive bilateral cooperation agreements that also cover trade and exchange of other prod-
ucts and services. And finally, vaccines may have been sold to the private retail markets of
these countries at higher prices than those charged through PAHO.
In an analysis of international vaccine trade patterns Da Silva (2009) identifies the following
countries as importers of Cuban vaccines in 1996: Argentina, Brazil, El Salvador, Columbia,
Chile, and Mexico. The volumes and prices are not listed.
Apart from Venezuela and Argentina, the Cuban vaccine industry does have some other
potential markets. According to one source Russia, China, South Korea and South Africa are
main customers of Cuban vaccines.33 This source could not say anything about the prices
charged in these markets.
Let us look at how this information fits with some basic intelligence about the global vaccine
markets. Say we make a list of potential markets for Cuban vaccines: countries that are open
to vaccine imports from non-Northern suppliers – which in practice excludes the entire
OECD-area – and that have either middle to high BNP per capita, or large populations, and
are not using UNICEF’s or PAHO’s procurement services. That list includes Mexico, China,
South Korea, Thailand, Singapore, Iran, Saudi-Arabia, the United Arab Emirates, Egypt,
Libya, South Africa, Russia, and Belarus.34 Of these, Saudi Arabia, the United Arab Emirates
and five other Arab countries have formed the Gulf Cooperation Model, which is a joint vac-
cine procurement operation similar to that of UNICEF and PAHO (Andrus, et al. 2008). The
prices offered in this market are not known to this author, neither are the suppliers. We are left
with Belarus, Mexico, Thailand, Singapore, Iran, Russia, China, South Korea, and South
Africa. The last four of these were mentioned by my anonymous source above.
Middle and low income countries represent in general two market segments: the public sector
market, and the private retail market. Although prices in the former can be very low, in par-
ticular in those countries that use UNICEF or PAHO procurement services, private retail vac-
cine markets in low and middle income countries can be on level with corresponding markets
in high income countries, that is USD 10 per dose and upwards. As already stated, one may
speculate that Cuban vaccine manufacturers make some of their revenues in private retail
markets in Latin American countries, as well as in the four countries that were mentioned
above.
The multinational vaccine manufacturers operating out of countries in the North use the
mechanism of tiered prices by facilitating low-price high-volume sales to UNICEF and
PAHO by charging high prices in their low-volume home markets (most probably, the multi-
nationals export into middle-price markets also). In other words, since they are mainly private
companies with access to public and private high-price home markets, they do not face the
same opportunity cost problem as their Cuban counterparts. In contrast, as vaccine products
32 Personal communication with Eduardo Martínez, Director of Development Unit, and Yair Quiñones,
both CIGB, 19 September 2008.
33 Personal communication with anonymous source #1, 29 April 2009.
34 Based on a map graphic appearing in Matthews (2008).
23
‘mature’ on the global markets the Cuban vaccine industry is facing increasing price
competition, calling for techno-economic evaluations about how to extend their T-M activities
into new overseas markets where higher profit margins may be defended.
We will now make some rough estimates of the export earnings of the Cuban vaccine indus-
try. What is the economic impact of the marketing strategy of the Cuban vaccine industry –
resulting from a techno-economic evaluation – of directing the marketing activities into a few
selected middle-income country markets (M)?
Export earnings
If it is cumbersome to calculate the imports expenditure, then estimating the export earnings
of the Cuban biotech sector is a real challenge. Figures on prices, quantities and revenues are
regarded state secrets, and are not quoted in the statistics of the National Statistics Office
(ONE)35 or any other official publications. The biotech centers do not publish annual reports
or anything of that sort.
Nevertheless, as stated above, in a rare instance of openness, a group of senior executives and
scientists at the CIGB disclosed that
$220m worth of [HepB] vaccine were sold in ten years and 100 million doses have been used.
(Lopez, et al. 2006), p 8 36
It is not clear which ten-year period that is being referred to, but supported by information
from an anonymous source I assume that it is the ten years prior to the publication: 1996 –
2005. The annual average would be ten million doses, and average annual revenues would be
USD 22 million.
The Finlay Institute’s meningococcal group B and C vaccine is the world’s only group B
meningococcal vaccine commercially available.37 It has been sold in 15 different countries, in
a total of 55 million doses (Sotolongo, et al. 2007), 40 million of which before 1997 (Anon.
1998). The only source that supplies any financial information about these sales, is Feinsilver
(1993), and her conflicting sources quote per dose prices for the initial sales to Brazil in 1989-
91 within the USD 5.50 – 10.00 bracket. Assuming that the initial sales to Brazil are repre-
sentative of the prices that were obtained in all subsequent contracts, average annual revenues
from VA-MENGOC-BC® sales may thus be estimated to be in the USD 22.2 – 40.4 million
bracket for the 1989-97 period, and in the USD 6.9 – 12.5 million bracket for the 1998-2007
period. Accumulated revenues of VA-MENGOC-BC® exports from 1989 to 2007 would end
up in the USD 271 – 494 million bracket.38
Much less is known about the Cuban HiB vaccine and the pentavalent vaccine. The Quimi-
HiB® vaccine was first distributed domestically in January 2004 (Anon. 2004a). Subse-
quently exports have been made,39 and WHO-prequalification is pending. The pentavalent
DTP-HepB-HiB combination vaccine was licensed in Cuba in 2004, and WHO-prequalifica-
tion is pending on this vaccine also. Export figures for these vaccines, or for any other of the
Cuban vaccines, are not available.
35 ONE: Oficina Nacional de Estadísticas.
36 This is the only financial figure that was provided in the entire paper, despite its appearance in the
Journal of Commercial Biotechnology …
37 A similar vaccine was developed by Chiron Vaccines in collaboration with the Norwegian National
Institute of Public Health for use in New Zealand, but to my knowledge that vaccine has not been
registered outside New Zealand. See case study on page Error! Bookmark not defined..
38 Estimated domestic consumption subtracted.
39 Personal communication with Vicente Vérez, Director of CQB, 4 February 2009.
24
Economic impact of the vaccine industry
Based on these somewhat fragmented figures it is at least possible to make a rough estimate
the total average annual export earnings of the hepatitis B and the meningococcal group B and
C vaccines for the 1998–2005 period. During that period the average annual revenues were
USD 22 million for the hepB vaccine, and USD 6.9–12.5 for the meningococcal group B and
C vaccine, totaling approximately USD 28.9 – 34.5 per year. Exports of other vaccines could
be added, but as stated, no figures are available.
This analysis suggests that the value of vaccine import substitution is one order of magnitude
less than the value of vaccine exports. So in terms of economic impact the exports vastly out-
weigh import substitution. It should also be assumed that Heber Biotec will be able to intro-
duce the new hepatitis B antigen containing pentavalent DTP-hepB-HiB vaccine on the same
markets that are now exploited by the monovalent hepatitis B vaccine, so the same effect may
be anticipated for that product.
It was tentatively concluded above that the product characteristics reflected a multitude of
interests. The analysis of former President Castro’s speeches identified a certain shift in the
balance between stated rationales of the massive investments into the biotech industry in the
direction of stronger emphasis on commercialism after the onset of the national recession
from 1990 onwards. The analysis of the actual economic impact of the most important vac-
cine product demonstrates that the commercial impact of exporting it is disproportionately
higher than its impact in terms of substituting imports for the National Childhood Immuniza-
tion Program. Or in other words, most of the public health impact of that program could theo-
retically have been achieved at a cost that is much lower than the value of the vaccine exports.
In this light, does it make sense to speak of the vaccine industry as science and technology at
the service of domestic public health needs – as my Cuban sources quite consistently do? In
terms of actual economic effects, is it not rather the case that the vaccine industry is highly
export oriented, and that a production surplus – subsidized by these exports – is transferred to
and consumed by the national public health system?
And following this line of thought, would it not be fair to argue that development and pro-
duction of vaccines that are used domestically serve as political legitimization for the huge
investments that have been made in the biotech sector. By the nationally universal distribution
of domestically manufactured vaccines the entire Cuban population gets access to tangible
results of the biotech sector in a way it would not if other products were exported in order to
purchase imported vaccines. And Cuban authorities emphasize that the public health system is
always a prioritized recipient, and that only the ‘surplus’ left after the domestic needs have
been met that is exported.
In this respect vaccines have the virtue of being administered to the whole population, as
opposed to most therapeutic drugs, which enhances the ‘visibility’ of that intervention in the
population. Moreover, the fact that the vaccines are used domestically is a strong motivational
factor for the scientists and workers in the biotech sector, but in my view this is rather a con-
sequence of, rather than a rationale for, domestic use of the products.
Another matter that puts domestic consumption in an instrumentalist light, is international
drug regulatory requirements that make the pathway to vaccine exportation conditional upon
prior domestic registration and use of the vaccine (Srinivas 2006).40 This underscores the
40 See also the decision centered vaccine innovation model paper on page Error! Bookmark not
defined..
25
importance of preferring domestically manufactured vaccines to imported products by the
National Childhood Vaccine Program.
Other biotech exports
We now turn to the economics of a few non-vaccine products manufactured by the Cuban
biotech sector. Data on the total exports earnings of the biotech sector is no easier to access
than data on vaccine exports. Nevertheless, one source stated that the value of total exports for
2008 was USD 50 million for the CIM, and somewhat less for the Finlay Institute and CIGB
respectively, in total some USD 150 million.41 Another source stated that CIGB’s annual total
export earnings oscillated between USD 28 and 40 million over the last five years, with a
growing trend.42
It seems like the product portfolios of CIM and the CIGB include some low-investment
‘bread-and-butter’ product intended as stable cash earners. For CIM this would be recombi-
nant erythropoietin (a growth factor stimulating the production of red blood cells) and a
growth factor stimulating white blood cell production.43 CIGB’s corresponding product would
be recombinant streptokinase, which is used for dissolving thromboses. Other exported prod-
ucts are interferons marketed by the CIGB, and monoclonal antibodies sold by CIM. The last
product to be mentioned here is the diagnostics equipment SUMA, developed and marketed
by the Center for Immunoassays (CIE),44 whose expected export revenues for 2001 were
about USD 2.5 – 3 million.45
Cuban biotech also gains some revenue from technology licensing agreements. For instance,
CIGB has licensed its yeast based recombinant hepatitis B expression system to both Indian
Panacea Biotec (Milstien, et al. 2007) and to an Iranian biotech company – the latter deal also
encompassed an Escherichia coli expression system and the purification protocols for recom-
binant streptokinase production (De la Fuente 2001).
Similarly, CIM has established joint venture companies in Canada, China, India and Spain.
The activities of these companies include development, production and commercialization of
virtually all the product categories in CIM’s portfolio: therapeutic cancer vaccines, monoc-
lonal antibodies, and erythropoietin (CIM 2008). Figures on the economic benefits of these
activities are not available.
It should be mentioned that for pharmaceuticals other than vaccines price discrimination is
highly uncommon (Trouiller, et al. 2002), and prices on international markets are probably
much closer to those on Northern markets. In other words, from the perspective of the Cuban
government domestic manufacturing of non-vaccine pharmaceuticals is relatively more
attractive compared to imports, than what is the case for vaccines.
The exports of the Cuban chemical pharmaceutical industry are quoted in the national statis-
tics, and by applying the official exchange rate for Cuban (non-convertible) peso to the US
dollar, the total value for 2007 would amount to about USD 12 million (ONE 2008a).
41 Personal communication with Juan Triana, Professor at Centro de Estudios de la Economía Cubana,
27 January 2009.
42 Personal communication with anonymous source, 29 April 2009.
43 Personal communication with Rolando Pérez, Director of R&D at CIM, 5 May 2009.
44 CIE: Centro de Inmunoensayo.
45 Personal communication with Roberto Guilarte, Sales Manager at TecnoSuma International S.A., 23
May 2001.
26
Summary, import substitution versus export earnings
In this section the dilemma of opportunity costs in the vaccine industry was identified: import
substitution does not save large amounts of foreign currency, because the world market prices
are close to marginal costs. Vaccines that are sold at prohibitively high prices initially may
experience price reductions of one or two orders of magnitude as the number of international
suppliers increase, as the case of the hepatitis B vaccine demonstrates.
This creates challenges for the export strategy: it has been necessary to tap into markets where
prices are higher than in the global public sector low-price markets. It seems like the Cubans
have managed to exploit vaccine markets in a few middle-income countries with relatively
large populations. Consequently, it turns out that the value of exports is one order of magni-
tude greater than the value of import substitution.
The discussion of this section confirms that in practice it may be difficult to separate strategic
evaluations about selection of products on the one hand, from the techno-economic evaluation
of developing a marketing strategy on the other.
Two remaining, unresolved issues
In this paper the issue of the interests that underlie the strategic evaluations performed in rela-
tion to the Cuban biotech sector has been triangulated: first the issue was illuminated by
existing literature, then it was studied by analyzing the content of Fidel Castro’s public
appearances during the decisive period when the sector was created, then the interests were
inferred from the characteristics of the Cuban vaccine products portfolio, and finally the issue
was approached in an economic perspective.
Before making some concluding remarks two issues that have been identified need some fur-
ther elaboration. First, despite the emphasis on the emerging modern morbidity pattern in the
initial strategic evaluations, the biotech sector developed a vaccine industry that to a high
degree has been targeting diseases that are rather a part of a traditional morbidity pattern. This
will be elaborated upon in the other paper.
Second, the Cuban vaccine industry has not supplied any substantial quantities of vaccines
through the procurement services of UNICEF and PAHO. This is paradoxical in several ways,
as the following paragraphs will demonstrate.
The great paradox
We have identified a strong emphasis on national public health considerations, particularly in
relation to the initial strategic evaluations. Referencing Feinsilver (1993; 2006), a substantial
emphasis on international medical diplomacy has also been identified. In (Plahte 2005) it was
demonstrated that vaccine sales into high-volume low-price markets could be profitable. Then
why has not CIGB’s hepatitis B vaccine been marketed by way of UNICEF’s and PAHO’s
procurement services?
Such a tactic would not only have contributed to improving the public health in the poorest
countries of the world, it would also have reinforced the image of Cuba as a ‘world medical
power’, as Feinsilver puts it. Moreover, in theory selling at tiered prices can be of great bene-
fit to the manufacturer, even when the low-price market price approaches marginal cost. And
given Cuba’s extremely precarious foreign currency balance situation, one should expect that
every possibility for making an ‘extra buck’ would be exploited. One of my sources states that
27
Cuba would readily sell to any interested buyer.46 Would it not be a strange twist of irony that
vaccine manufacturers of socialist Cuba join ranks with those of capitalist (and political) arch-
enemy the USA in refraining from supplying these markets? Lastly, and similarly, to some
readers it may appear a bit paradoxical that a self-declared socialist actor distributes its life-
saving medical products according to purchasing power rather than need, in particular since
the global public sector markets – in theory – could have been profitably served, and as a
complement – not an alternative – to serving the middle-price markets.
Plahte (Plahte 2005) lists three preconditions that have to be fulfilled in order to make the
tiered pricing mechanism a win-win-win situation: the demand structures have to be different
in the two markets, there must be no re-sales from one market to the other, and there must be
diminishing marginal costs to scale. We should also be aware that the global public sector
markets are highly competitive, despite UNICEF’s recent shift of policy of purchasing vac-
cines according to a price bracket including up to four suppliers for each vaccine, instead of
its previous practice of going unilaterally for the lowest bid for each vaccine product
(Matthews 2008). UNICEF and PAHO obtain prices on a comparable – if not exactly the
same – level. So marginal costs must not only be diminishing to scale, costs must be suffi-
ciently low also in absolute terms.
The two first preconditions apply equally to Cuban vaccines as they do to vaccines from any
other supplier. In other words, the answer may be found in the cost structure of the Cuban
vaccine. There is the possibility that the CIGB is simply unable to manufacture its hepatitis B
vaccine at a sufficiently low cost – in absolute terms – to sell profitably to UNICEF and
PAHO. Alternatively but similarly, it is possible that the productive capacity of the Cuban
vaccine industry reflects a product function that reaches its marginal cost minimum at a quan-
tity below the level required in order to serve the high-volume low-price markets in addition
to the middle-price markets – in which case costs would increase with increasing scale.
Like all other pharmaceutical companies the Cuban biotech centers are extremely secretive
about issues relating to production costs, so there is no data to directly support this hypothe-
sis. Neither does UNICEF or PAHO reveal the identity of their bidders or suppliers. It is only
by eliminating the alternative hypotheses that we may end up with this one as a residual ex-
planation.
It would be quite untenable to underestimate the Cubans by speculating that they are not
aware that tiered pricing may be profitable to the supplier. Price discrimination is a topic cov-
ered by most general economics textbooks, so that option should be ruled out.
One could also hypothesize that the Cuban hepatitis B could be of inferior quality, and as
such be non-eligible for these markets. However, this option must be ruled out, since the
Heberbiovac was prequalified for WHO in 2001.
Another hypothesis is that there could be political reasons for Cuba’s absence on the global
public sector markets. For instance, one could imagine that Cuban vaccines were marketed as
but one element in more comprehensive bilateral trade and cooperation agreements, and that
there were no ‘surplus’ vaccines to be sold on these global markets. The possibility of vaccine
shipments as an instrument for supporting international diplomatic relations should not be
ruled out. The point is, however, that according to the economic theory underlying the price
discrimination mechanism such arrangements would be complementary, and not alternatives,
to selling on the low-price high-volume markets, since the diminishing marginal costs to scale
in vaccine manufacturing would make it profitable to expand the productive capacity in order
to serve these markets – provided that the overall cost level is sufficiently low.
46 Personal communication with anonymous source #1, 7 May 2009.
28
Despite the lack of data on costs, there is some circumstantial evidence to support the cost
hypothesis. First, on the one hand, the most important factor driving operational costs down is
the low cost of highly skilled labor in Cuba. In 2001 the monthly salary of a scientist was only
about USD 20, and in 2009 it has been raised to about USD 40. With collective and individual
bonuses it may double.47 These costs can be a bit misleading, however. Many workers in the
biotech centers have access to subsidized housing, but it is not clear if these schemes are
funded directly by the biotech centers or indirectly by the government. Among the indirect
subsidies of labor cost by the state are subsidized public transportation, free education on all
levels, free health care, and subsidized food on ration cards.48
Second, and on the other hand, since a high proportion of the inputs and technical equipment
has to be imported the cost of establishing a bioproduction facility cannot be expected to be
much lower in Cuba than in a high income country. It is mainly the cost of property and the
cost of constructing the buildings as such that may make a difference. This not only applies to
Cuba, but to bioproduction companies in most low and middle income countries.
Third, the extremely strict and unlawful economic embargo imposed by the US Government
complicates the provision of inputs to the Cuban biotech sector and vaccine industry, driving
costs in a way not experienced by any of its competitor vaccine suppliers on the global vac-
cine markets. Not only are US suppliers of technical equipment, reagents, culture media, and
so on ruled out in the first place, probably resulting both in less supplier competition on the
Cuban market than elsewhere, and forced selection of economically sub-optimal technical
solutions. Even worse, European or Asian suppliers operating in Cuba risk having the US
embargo legislation applied on them to the effect that their US market becomes closed off in
retaliation for selling to the Cubans, so the Cubans are very careful about maintaining foreign
supplier confidentiality. Moreover, if an overseas non-US supplier is acquired by a US com-
pany, the substitution of that supplier’s component with another may imply that the entire
validation of a production process has to be repeated in order to comply with drug regulatory
requirements. All these circumstances contribute to raising both investment and operational
costs.
This means that although the productive capacity of the Cuban vaccine industry should reflect
a product function whose marginal cost minimum is above the level at which the low-price
tier vaccine markets may be profitably supplied, it is possible that even further investment in
capacity expansion would not overcome the problems resulting from this hypothetical exces-
sive overall cost level. Or in other words, capacity expansion is useless if the costs in absolute
terms nevertheless remain too high for making competitive bids in the low-price markets.
Another related explanation could be that it is the production methods used in manufacturing
the hepatitis B vaccine in themselves that are inefficient. A fact that undermines that hypothe-
sis is that Panacea Biotech in India is licensing recombinant protein expression system tech-
nology from CIGB for production of the hepatitis B component of its pentavalent DTP-hepB-
HiB vaccine (Milstien, et al. 2007).
One last complementary explanation is that the global tendency of switching from multi-dose
to single dose vials has created bottlenecks also in the filling facility at BioCEN, which is the
center that does the final processing of the hepatitis B vaccine, as also happened in vaccine
47 Personal communication with Gustavo Sierra, Vice President, Finlay Institute, 3 February 2009.
48 That being said, for the sake of a balanced account it must be added that public transportation
services are both overcrowded and underdeveloped, hard currency is required in order to purchase
both university text books and many drugs, and for most Cubans the staple goods that can be acquired
by the ‘libreta’ rationing card must be supplemented by expenditures in both national currency and the
convertible ‘hard’ peso in order to secure an adequate food supply.
29
manufacturers globally. It is possible that the extra investment that would be required to
expand this capacity has not been regarded profitable, since the prices on the global sector
markets are close to marginal costs.
In short, for the sheer lack of alternative plausible explanations it is somewhat speculatively
concluded that despite the low salaries paid in Cuban biotech, the production costs may be too
high to make competitive bids towards UNICEF and PAHO, whose prices can be very close
to marginal costs. If this should be the case then, the lack of Cuban supplies to the global
public sector markets may be a result of exogenously imposed or also purely technical factors,
and not of any purposeful strategic or techno-economic evaluations on part of the Cuban vac-
cine industry. Note that in theory these cost factors would not preclude competitive bids in the
middle-income markets into which the Cuban hepatitis B vaccine is exported if the Cubans
are willing to accept lower profit margins than their competitors.
Conclusion
In a historical perspective the Cuban biotechnology sector may be seen as an amalgamation of
the government’s strategic priorities of education, health, and science. These three areas have
received special attention from the revolutionary government since the takeover in 1959.
Nevertheless, despite the indisputable and strong personal dedication to these political values
on part of the Cuban revolutionary leaders, health in particular has also been used instrumen-
tally in stabilizing and legitimizing the Castro regime. The general message has been that the
revolutionary government is the guarantee for a universal and free public health system.
Consequently, it was necessary to align the social objectives of the emerging techno-eco-
nomic networks of the biotech sector to the issue of public health for all. And initially, a main
objective of the massive investments in a biotechnological industrial complex was to confront
an emerging morbidity and mortality pattern that resulted from a depletion of the existing
public health paradigm, which targeted a ‘traditional’ pattern dominated by infectious dis-
eases. In other words, public health is not an unambiguous interest.
Instrumental use of science and technology for social purposes was a core element in the
political thinking of the Cuban government since the early 1960s. Nevertheless, technological
and scientific development was not stated as an important objective in its own right in Fidel
Castro’s public appearances during the years when the biotech sector was created. Instead a
shift could be observed by which the relative emphasis on public health diminished somewhat
as the need for economic recovery gained importance from about 1990 onwards.
Then a number of paradoxes emerge. Despite the intention of confronting the emerging ‘mod-
ern’ disease pattern of cancer and cardio-vascular and congenital disorders, a main part of the
biotech complex – the vaccine industry – made infectious diseases of the ‘traditional’ mor-
bidity and mortality pattern its main target. Moreover, a vaccine product intended to be used
in the combat against a purely national meningococcal group B epidemic, turned out to also
yield several hundred US dollars worth of export revenues. The other paper will explore how
these two issues in fact may be causally connected to each other.
Also the economic interests surrounding the biotech sector may be ambiguous. A problem
that had to be dealt with was that while domestic development and manufacturing of vaccine
products that were initially prohibitively expensive on international markets could be
defended on economic grounds, subsequent price reductions also reduced the value of these
products as import substitution factors. Simultaneous pressures resulting from the national
economic recession following the collapse of the East Bloc created a need for generating eco-
30
nomic surpluses, and since high price markets in the North were not accessible high price
markets in middle income countries were exploited.
The interests underlying the strategic evaluations that selected the vaccine targets are not nec-
essarily those that eventually are served by the actual socio-economic impact of the resulting
products. The export strategies have been so successful that the export revenues outnumber
the value of import substitution by one order of magnitude.
The domestic public health system is the priority recipient of the biotech sector products, at a
very low cost. Thus, it is necessary to tap into middle-price or high-price markets in order to
recoup investments in R&D activities and productive infrastructure.
The greatest paradox is that the Cuban vaccine industry has remained absent from the global
public sector markets serving the world’s poorest populations, and instead has gone for the
dollar, despite its focus on national public health, despite its medical diplomacy, despite its
socialist ideology, and despite the fact that in theory such sales would be profitable. The most
plausible explanation – an excessive cost level, one way or the other – forces us to conclude
that even practical philanthropy sometimes may depend on the possession of a competitive
edge. In this case the competitive edge would consist in the capability of producing vaccines
in high volumes at very low cost.
One way of displaying the ambiguity of interests is presented in Table 4. The meningococcal
vaccine was conceived of as a public health measure – the first quadrant – but subsequently it
ended up in the fourth. The hepatitis B vaccine – apart from also being a strategic technology
platform development project – was initially targeting the national market, but it is difficult to
disentangle the commercial and public health considerations, since both would be served by
that product. Later on also the hepatitis B vaccine generated substantial export revenues, but
failed to enter the grey zone of being marketed at tiered prices at the global public sector mar-
kets. The more recent therapeutic cancer vaccines seem to be motivated primarily in the
fourth quadrant, and since they are unique products and do not replace existing therapies like
chemotherapy or radiation they have no place in the second, but to the extent that they
become applied nationally they may also have a domestic public health impact (first qua-
drant). The meningococcal group A vaccine manufacturing assignment for the benefit of the
countries in the Meningitis Belt in Africa also somehow falls in a grey zone between (or
across) the third and fourth quadrant.
The full extent of the ambiguities is not even visible in the table, since the public health inter-
ests in the first quadrant sometimes may have to prioritize either modern or traditional health
problems. Similarly, in order to further complicate the issue one could include diverging
interests of different patient or social groups, which is beyond the scope here. We have also
observed that strategic and techno-economic evaluations are performed in a continuous and
reiterative process, and that the underlying interests are not necessarily stable over time.
Table 4. Ambiguous interests.
Application
Philanthropy
Commercialism
National
1
Public health
2
Import substitution
3
4
International
International aid
Tiered prices
Export revenue genera-
tion
31
The first sentence of this paper unilaterally associated the Cuban public health system to the
values of philanthropy and humanitarianism, placing it squarely in the first quadrant, which
appears as a contrast to the mixed interests that have been in play in the biotech sector. How-
ever, the Cuban health system is influenced by almost exactly the same interests as the bio-
tech sector: the fact that close to 40,000 foreign medical students on scholarships have been
trained in Cuba between 1961 and 2001 fits into the third quadrant. Huge numbers of Cuban
doctors are working abroad on different assignments: some missions are part of Cuban huma-
nitarian aid programs, sometimes funded by third parties (third quadrant); some missions are
paid for by the host government (fourth quadrant); some missions are part of comprehensive
packages involving trade and political agreements (third and fourth quadrant); and the dollar
clinics in Havana (officially open to foreigners only) receive affluent patients from all over
Latin America and the Caribbean (fourth quadrant). Since Cuba has never relied on imports of
medical services, only the second quadrant is somehow irrelevant. In short, medical services
exports generated approximately USD 1.5 billion worth of revenues in 2005 – slightly more
than tourism (Feinsilver 2006), and almost six times more than the total biopharmaceutical
exports.
The aim has not been to reconstruct concrete decision making processes, and apart from Fidel
Castro himself the main powerful actors in terms of individuals remain anonymous and
unseen. Although we do not know the exact details of the how-s, who-s, when-s, and where-s,
some important why-s have been discussed, and it has been possible to infer some of the deli-
berations and considerations that have been made. Despite all the paradoxes and ambiguities,
the ‘triangulating’ method of approaching interests of public health and commercialism from
several different angles resulted in a relatively consistent narrative about some major strategic
and techno-economic evaluations that have been performed in the Cuban biotech sector.
Michel Callon’s model of techno-economic networks – with its concepts of strategic and
techno-economic evaluations – turned out to be an appropriate tool for studying the political
thinking underlying the Cuban biotech sector. In contrast to most other approaches in innova-
tion studies, which focus on knowledge creation, interactive learning, and autonomous firms
operating in a context of public and private institutions, the techno-economic network model
deals explicitly with interests and strategic decisions – exactly the phenomena that were under
study in this paper.
As already stated, one issue remains unresolved. The apparent switch of focus from modern to
traditional disease patterns represented by the emergence of the Cuban vaccine industry may
have been induced by the need to combat the acute and serious meningococcal epidemic that
hit the island in the late 1970s. This hypothesis is elaborated on in detail in the other paper
about the Cuban biotech sector (Plahte 2010).
Acknowledgements
I am grateful to Bjørn Asheim, Tomas Hellström, Torben Hviid-Nielsen and John-Arne
Røttingen for comments on drafts of this paper. I also acknowledge the kind and patient coop-
eration and assistance of the interviewees. My research has been funded by the Research
Council of Norway.
32
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