Availability of livestock vaccines: Onderstepoort Biological Products & Department briefings

Agriculture, Forestry and Fisheries

21 February 2013
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The Chairperson noted that he was only prepared to consider written apologies from Members in the future.

The Department of Agriculture, Forestry and Fisheries (DAFF) and Onderstepoort Biological Products (OBP) briefed the Committee on the vision, mission and goals of the OBP, setting out their challenges and current situation, particularly focusing on the problems with shortage and non-performance of certain vaccines. The Chairperson also noted that they were impacted upon by climate change and poverty, and this must be taken into account. DAFF put the challenges facing OBP into context, noting that it played a significant role in preventing and controlling animal disease, which impacted on food security, human health and livelihoods of South Africans. It was regarded as a strategic national key point, must align with government priorities and plans, and remain competitive in the vaccine and animal health industry, currently worth around R1 billion. It was acknowledged that the Rift Valley Fever outbreak and Swine Flu, along with shortages of Bluetongue vaccine, and the leaking of information about OBP destroying expired stock, had affected its credibility. OBP’s biggest challenge, however, was that it was operating from old premises, using some outdated equipment, and there was insufficient research and development to keep it abreast of new products. There were also challenges around the product, pricing, placement and promotion. DAFF essentially had intervened to improve governance, the institutional arrangements, and to try to update the legislation. It was seeking to sign service level agreements, establish a vaccine bank and develop a disease monitoring and response plan.

OBP outlined its history and described its vision and mission. It was emphasised from the outset that the purpose of vaccination was to prevent, not cure, disease, stressing that it was therefore proactive. The market share statistics showed that OBP was placed about 11th in terms of value sold, but around third in terms of volumes. It concentrated on the vaccine field, whereas other competitors offered a broader range of products. OBP wanted to increase its ranking and get a bigger market share. It was, however, constrained by funding, as it was noted that it was no longer getting any grants. Its facilities and equipment were outdated. OBP explained why there was an urgent need for a vaccine bank, emphasising that this essentially meant installing deep freeze facilities to enable it to build up stock. It was also working on extending the shelf life of its products.

Members noted that there was a focus on the weaknesses, but not on the strengths, which on the one hand enabled the Committee to isolate instances where OBP needed support, but on the other did not give the full picture. Several requests were made for clarity on the shortage of vaccinations, how this happened, the distribution chain and why certain vaccines were destroyed, commenting that this came at a cost. They questioned the effectiveness of vaccines, and the fact that there should be strict vaccination cycles maintained, asking how exactly DAFF and OBP ensured that they communicated effectively with farmers. The Committee noted that the full report on the Swine Flu outbreak was still awaited. Members were generally in support of OBP being recapitalised, and agreed on the importance of establishing the vaccine bank. They also asked about the extent of research and development, engagement with other companies on the distribution and called for a full breakdown on the spending.

Meeting report

Chairperson's opening remarks
The Chairperson tabled the apologies, noting that these were largely due to the meeting having been arranged for a Friday. However, he noted that of these, only two were written apologies, and in future these would be the only form of apology accepted. That would be noted also in the minutes.

He noted that the Department of Agriculture, Forestry and Fisheries (DAFF or the Department) had been asked to give responses and reports on climate change and its work on achieving the Millennium Development Goals, particularly on poverty alleviation. Today the DAFF and Onderstepoort Biological Products (OBP) had been asked to speak to the current availability of livestock vaccines, and challenges around this point for the future. He noted that one of the greatest challenges with OBP was the age of its facilities and equipment.

Department of Agriculture, Forestry and Fisheries briefing on the current situation at Onderstepoort Biological Products (OBP)
Mr Sipho Ntombela, Director General, Department of Agriculture, Forestry and Fisheries, outlined that the OBP played a significant role in preventing and controlling animal disease that impacted on food security, human health and livelihoods of South Africans and indeed all of Africa. OBP had a strategic position as a National Key Point and equally important therefore, was OBP’s alignment to government priorities and plans. Although OBP competed in a very competitive industry of around R1 billion worth, it still maintained a wide range of product offerings and distribution footprint in the industry.

OBP’s reputation had recently suffered damage, due to the Rift Valley Fever outbreak and the current shortage of the Blue Tongue vaccine. Moreover, the OBP was plagued by an identity crisis, and was hindered by outdated equipment, production processes, and insufficient innovation and research and development, leading to the production of outdated products. Finally, OBP faced market challenges around its product, pricing, placement and promotion.

The DAFF had played a central and interventionist role in trying to repair the damaged reputation of the OBP. The areas where it had intervened included governance, institutional arrangements, legislation and infrastructure. It had done so, in the governance area, to uphold the Shareholder Compact. It wanted to sign service level agreement, establish a vaccine bank and develop a disease monitoring and response plan as institutional arrangements. DAFF also wanted to review the legislation and upgrade vaccine products infrastructure facilities.  
  
OBP briefing on Agriculture, Forestry and OBP
Dr Steve Cornelius, Chief Executive Officer, OBP, gave an introduction setting out the OBP mandate, vision and mission, and a chronological historical background (see attached presentation). He also highlighted the governance, the OBP structure, workforce profile and graphical layout. He noted that OBP’s core function was to prevent and control animal diseases that impacted on food security, human health and livelihoods. It was aiming to be a global player in the biotechnical vaccine manufacturing industry. It was first established in 1908, but its dedicated vaccine facility was only established in 1968, and it was able to fund itself from its vaccine sales by 1981. OBP became a separate entity in 1992; receiving its final funding grant of R9 million from Department of Public Works in 2000. At the moment, it was not funded at all and had to find its salaries entirely from vaccines. Over the next few years, it had received an official transfer to itself of formerly state-owned land and buildings, achieved an ISO accreditation certificate, and achieved revenue milestones of up to R150 million.

The OBP was now a state-owned company, and an entity of the DAFF, operating under the OBP Act No 19 of 1999. It followed all relevant corporate governance codes and protocols. It was aligned with several programmes, including the Medium Term Strategic Frameworks, the New Growth Path, DAFF Strategic Plans, Industrial Policy Action Plan, National Development Plan and Presidential Infrastructure Coordinating Commission (point 11).

OBP had a total of six Executive Managers, 73 skilled/advanced operational and 32 basic skilled employees.

Dr Cornelius recognised that the OBP’s reputation had suffered, due to the Swine Flu outbreak, Rift Valley Fever and destruction of Clone 13.

He noted that, by definition, a vaccine was a preparation of dead or weakened pathogens, or their antigenic components, which induced protective immunity against the specific pathogen, but which did not itself cause the disease. He emphasised the importance of vaccines, as protecting livestock against diseases, preventing the spread of diseases, and emphasised that the ultimate purpose of vaccination was to ensure animal health and wellbeing, thus addressing the problems of hunger, malnutrition and poverty.

Veterinary vaccines were important for protecting individual animals, controlling emerging re-emerging and exotic disease of animals and people. They reduced transmission of food borne diseases, reduced animal suffering, reduced the need for antibiotic or more costly treatment alternatives if animals became sick, controlled disease of companion animals and horses and. most importantly, ensured safety and efficiency in food production.

A food security analysis showed that the growing population in the world meant there had been a growth in the demand for food and food security, to feed the growing population. Veterinarians must play a major role in striking equilibrium between the need for efficient food production, conservation of the environment and animal welfare. For this reason, animals must be disease-free and must be vaccinated regularly. This would also prevent people contracting disease from animals. He stressed that vaccinations were not a cure, but rather a pre-emptive method of prevention.

Dr Cornelius outlined that in 2009, the South African Animal Health Market was estimated to be worth R1.633 billion.  In 2012, the estimated market size was estimated to be R2.5 billion and OBP's estimated total market share was 5%. OBP used to have a bigger share in the market but this had dropped in 2012.

He reiterated that OBP, although it was a state-owned company, competed against other corporate businesses in the market. An analysis showed that OBP covered around 20% of the product range, compared to other commercial companies like Pfizer and MSD Animal Health (Design Biologics), who offered a full product range. The products in the market included antimicrobials, antihelmitics, endectocides, ectoparastic, vaccines, vitamins and minerals and others. OBP specialised in vaccines only, which explained the percentage of coverage. OBP offered bacterial vaccine products, viral vaccine products and other products such as frozen infective blood.

In the company ranking analysis, OBP was ranked number 11 amongst all companies (see attached presentation for full details). Ideally it wanted to move to the top three. Dr Cornelius said that although the ranking on this list was number 11, OBP in fact ranked in the top three for volumes sold, an indicator that its products were cost effective. 

OBP distributed to co-operatives, vets, wholesalers and government. All these bodies then distributed on to farmers. OBP also collected data from its primary distribution clients in order to forecast the products that would be needed by farmers.

Dr Cornelius said that he could not over-emphasise the need for vaccine banks, which would ensure that vaccines were always available when needed. This was one of the major initiatives that OBP needed, in order to strengthen itself and its offerings. The vaccine banks used deep freezers to deep freeze and then store vaccines. Some of OBP’s other needs were outlined as including a small stock unit, security, facilities, to be secured from access control and organisms process and boundaries. There was a growing need for African horse vaccines as well and the OVI had started on this project.

OBP outlined its major challenges as sustainability, the need to obtain a Good Manufacturing Practice (GMP) accreditation, the need to fulfil expectations of shareholders, employees and clients.

Dr Cornelius stressed again that one of OBP’s major challenges was that its equipment was very old, some dating back to 1968. It urgently required upgraded facilities, equipment and processes that were in line with the Pharmaceutical Inspection Cooperation Scheme (PICS) standards. He urged that government must give priority to giving it financial support, which would only benefit the entire country as it would then be able to upgrade and set up a vaccine bank. It also ideally would like to increase its product range and facilities, and offer more combination vaccines. Not only should there be upgrading but there was also a need for government to invest in upgrading and/or establishing new facilities and contingency plan for vaccine reserves. The importance of working towards a joint plan, that would involve different stakeholders, and establishing a shared vision was emphasised. OBP was, however, grateful for the grant of R500 million that it had received from the Cluster.

Discussion
The Chairperson felt that the OBP presentation was rather too focused on weaknesses, and he would like also to hear about its strengths. He thought that OBP also should outline what mechanisms it had to protect its position.

The Chairperson requested clarity on the market share comments.

Ms A Steyn (DA) enquired why OBP distributed through another company.
Dr Cornelius responded that the Competition Act required OBP to use another company for distribution It was working with its present company, because Beyer did not produce vaccines in South Africa, and the companies had a complementary relationship.

Ms Steyn questioned why Bluetongue vaccines had not been available. She noted that annual vaccination programmes were set, so that farmers would vaccinate throughout the year. However, when there were no vaccines, it was impossible to vaccinate, and this disrupted the whole vaccinating cycle. She emphasised that vaccines must be available at the relevant times.

Dr Cornelius agreed that this was quite correct.

Ms Steyn asked Dr Cornelius to list the vaccines that were available, those not available and when they would be available. She noted that there was not sufficient equipment, but asked whether OBP had put something in place to ensure that in fact sufficient products were produced.

Dr Cornelius said he would provide a written answer on these points.

Ms Steyn was shocked that there was not a reserve, as she had always thought that this was being maintained. She also asked when OBP had last developed a new vaccine.

Dr Cornelius responded that OBP had in fact never had a reserve bank, and reiterated that it was seeking a freezer of below 60 degrees to maintain frozen vaccine and ensure that it would be available when farmers needed it. He explained that there was a reserve of stock not sold for certain reasons which would be destroyed.

Mr P Van Dalen (DA) said he fully supported the initiative to have a vaccine bank.

Ms Steyn noted her concerns also about the African Horses vaccine, noting that she had heard that some farmers had been vaccinating yearly but their horses still died. She wanted to know if there were any programmes to assess the relevance and effectiveness of the vaccines being used.

Dr Cornelius responded that the African horse vaccines were still relevant, and OBP had developed it but was unable to upscale it.

Ms Steyn added that the Committee was still waiting for the Rift Valley Fever report, and asked why the official responsible for this was not at this meeting.

Dr Cornelius responded that an expert, Mr Swanepoel, researched and  had done an impartial report on the Rift Valley Dr Cornelius was now waiting for his signature on the report, but it was difficult to get hold of him, due to his work commitments.

Ms Steyn emphasised that the export market was dependent on the Department and the vaccine manufacturers and that until the report was submitted, there would be no trust.

The Chairperson noted that the DAFF official responsible was abroad.

Ms Steyn later asked about the 700 cattle that died in Mpumalanga, noting that the cause was apparently unknown.

Mr Ntombela said that DAFF would be drafting a full report.

Ms N Pilusa Mosoane (ANC) noted that the report did not give clarity on when the work would start, nor were there timeframes set out. The DAFF report was little more than a repetition of what this Committee had been hearing for several years, with nothing new.

Ms Pilusa Mosoane asked in which provinces OBP worked.

Dr Cornelius responded that they were working with all nine provinces, but that there had been structural challenges in Limpopo, KZN and Mpumalanga, where work was slowed.

Ms Pilusa Mosoane asked Dr Cornelius to clarify the fact that OBP was number 3 on one list and number 11 on another.

Dr Cornelius repeated that OBP listed number 11 in terms of the rand value of the sales, but number 3 in terms of the numbers of vaccines, or volume that it had sold.

Ms Pilusa Mosoane was concerned to hear of the stock that had expired and was destroyed, which seemed to indicate that it supplied more than was demanded. This had an implication on costs.

Dr Cornelius responded that unfortunately, nothing could be done with expired stock other than to destroy it. He noted that OBP was trying to prolong the life product to five years.

Ms Pilusa Mosoane asked OBP how farmers were being informed about vaccinating.

Dr Cornelius responded that OBP set up schedules with the farmers, some of this via the internet. There was also a new rural development plan and programme to teach farmers about vaccines. The sales team collected data from co-ops and information would be sent to sales manager. Suitable schedules were then worked out according the 53 products that OBP made.

Ms Steyn asked if it was necessary for OBP to produce 53 products, instead of focusing on the most relevant.

Dr Cornelius said that this was a policy decision of government and OBP could not make those decisions alone.

Mr van Dalen, commented that, in contrast to the Chairperson, he preferred to hear a focus on the challenges, so that the Committee could see where it needed to assist. He emphasised that the OBP had been neglected by government, and that more money must be injected into its projects, for betterment of livelihoods of South Africans. He recommended that OBP must be recapitalised in order to become the world leader in the vaccine market. He added that if the premises and equipment of OBP were outdated, then it was likely that their vaccines also were not the most modern.

Dr Cornelius responded that the premises and equipment were old, but the testing system and what was produced were still very much up to date.

Mr Dalen later urged that OBP must be assisted to get new equipment that was more effective.

The Chairperson agreed with Mr Van Dalen, saying that this was the spirit that the President had emphasised when saying that people had to work together.

Mr L Gaehler (UDM) also endorsed Mr Dalen's recommendation and stressed the importance of this Committee becoming part of the solution. He asked about the Swine Fever outbreak, questioning also the effectiveness of OBP's research unit. He noted that Cuba provided good examples of excellent research units. He also wanted to know what systems had been put in place to assist and inform farmers.

Mr Ntombela clarified that South Africa had Swine flu but it took the form of a strain from Europe, caused by exports and imports through the Eastern Cape. 

The Chairperson also asked how much money of DAFF's budget was put into research.

A DAFF official responded that DAFF was getting assistance also from other stakeholders. DAFF mainly did research into policy, which did not involve huge amounts. However, he reminded the Committee that OBP was running like a business and not a government institution. This needed re-consideration.

Dr Cornelius responded that the OBP had released clone 13 in 2010, and it could grow it but could not upscale. He stated that OBP’s part of the research mainly focused on how to commercialise vaccines, and stated that the National Research Foundation (NRF) was also helping with research. It would take a long time, but there was a need to train PhD students.

Mr Gaehler asked the specific cost of destroying Clone 13.

Dr Smith, Executive Manager, OBP responded that this comprised both the cost of making the vaccine and the opportunity lost. There had been 4 million doses manufactured, which would have sold for R60 per dose. The cost of the opportunities lost would have been higher.

The Chairperson asked how the leakage of information about the destruction of Clone 13 had happened.

Dr Cornelius responded that the information indeed was leaked incorrectly. The truth of the matter was that the vaccines had expired, and had to be destroyed in terms of the legislation.

Ms N Twala (ANC) asked about government tenders, and how the Committee could assist. She also asked OBP what they meant by the reference to obsolete products.

Ms Steyn commented that she saw the vaccine issue as a bigger problem than land ownership and said that something must be done. She also proposed that Agricultural Research Council’s
Onderstepoort Veterinary Institute, OBP and Animal Health visions should be integrated.

Ms Steyn asked for a full budget breakdown on vaccines
and asked Dr Cornelius how OBP would spend its most recent funding.

Dr Cornelius said a report would be given on how money would be spent.

Ms Steyn also argued that some provinces, particularly the Eastern Cape, did not have facilities to store the vaccines.

An OBP official responded that vaccine storage in provinces would be discussed, and that each province had a coordinating team..

Mr Gaehler agreed with Ms Steyn that nothing positive was happening in some provinces. He added that some coordinating teams were ineffective and said that the Heads of provincial Departments must come up with solutions.

Ms Pilusa Mosoane asked what DAF meant by a proper financial plan, and asked if OBP was complying in full with the Public Finance Management Act (PFMA).

Mr Ntombela noted that DAFF had spoken to National Treasury around upgrading the infrastructure. There was a possibility of recapitalising the OBP, by amending the OBP legislation. The challenge would be to sustain OBP and achieve a proper balance between outside funding and business.

The Chairperson also asked OBP if it had any South African distributors, particularly black owned companies.

Dr Cornelius responded that there was engagement with Beyer, but at a different level, according to which it would be dealing with local partners/distributors, and adhere to the Broad Based Black Economic Empowerment protocols.

The Chairperson noted that Parliament’s five year term was drawing to a close, and there needed to be more action and creative thinking. He emphasised the recommendation to recapitalise OBP and acknowledged that OBP had had three entities to focus on, but now positive actions were required. He urged that set goals and objectives be stated, so that by the end of each project, OBP and DAFF could be judged on their performance. He looked forward to receiving the new strategic plans.

The meeting was adjourned.


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