Why Indonesia is blocking a bird flu vaccine

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The circumstances surrounding the Bernard Matthews bird flu outbreak just get murkier and murkier.

Delays around vital documentation being handed over; news that birds have been shipped back to Hungary, possibly reintroducing the H5N1 virus into Europe, threaten to cause a diplomatic scandal; and meanwhile, sales of the company’s products have fallen by as much as 50%, reports The Times.

But meanwhile, on the other side of the world, a different storm is brewing over bird flu. And this could be much more important, as it threatens to get in the way of finding a vaccine for any human variant of the virus…

The Indonesian government is refusing to supply bird flu samples to foreign scientists. GlaxoSmithKline has attacked the decision, which will hinder its efforts to develop a human vaccine for the virus.

So what’s the problem? The Indonesians want the World Health Organisation (WHO) to provide guarantees that the samples won’t be used commercially.

The Indonesian government is worried that if it hands over the samples, they’ll go from the WHO to big pharma vaccine-makers such as GSK, who’ll then create vaccines that the poor in developing countries won’t be able to afford.

The reason that Indonesia is so important in the hunt for a bird flu vaccine is because it has seen the most human fatalities as a result of H5N1. There have been 64 recorded deaths in the country, and as Robin Pagnamenta in The Times says, it is “considered one of the most likely places where a human pandemic strain could emerge.”

Any decision to pull out of the current WHO system, whereby countries share information on flu viruses freely, could have serious knock-on consequences. The agreement to share information on flu viruses has stood for 50 years. “Any decision to pull out would be the first in the system’s history.”

However, despite the worries, and the anger of the drug makers, the WHO concedes that Indonesia does have a point. “Indonesia is rightly concerned about its access to a vaccine. At most, manufacturers will be able to produce only 500 million doses – far short of what will be needed in the event of a pandemic. The vaccines will be in limited supply and will probably be available only to countries which have manufacturing capacity.”

As 95% of that capacity is in North America, Europe, Japan and Australia, Indonesia would be some distance down the pecking order before it could get its hands on any vaccine.

The country is already talking to US vaccine giant Baxter about a potential deal to develop a vaccine outside the WHO system, and others (such as Vietnam) might do the same. As the WHO says, it’s understandable that these countries want to look after their own interests, but unfortunately, not sharing information is likely to delay the development of effective drugs.

It’s a tough nut to crack, and has been a consistent bugbear of the drugs industry – how do you find a model that encourages innovative and rapid research into killer diseases, but then make sure the results are available to those who need them, regardless of ability to pay?

We don’t have the answer, but some reform of patent law is probably at least part of the solution. As Graham Searjeant points out in The Times, the way patents work has a lot to do with why it’s becoming too expensive to develop cost-effective drugs. “Trials and approval take up an ever bigger chunk out of the typical 20-year patent period,” he says. Because “the clock starts when a chemical is first protected” companies have to charge high prices “to recoup costs and earn returns fast” before the patent expires.

It does point up the problem with attempting to play bird flu by investing in vaccine makers. Under serious pandemic conditions, it would be very difficult to make any money from the vaccine. Governments would likely seize any supplies available and distribute them as they saw fit.

But that’s not to say that you shouldn’t buy into drug makers – in the current issue, analyst Charlie Gibson suggests that GSK looks good value at the moment. You can read his views in the current issue of MoneyWeek.

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Turning to the stock markets…

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Weakness in the commodity sector offset strong gains for new owner of India’s Hutchison Essar, Vodafone, yesterday. The FTSE 100 index of leading shares closed 29 points lower, at 6,353, as the likes of Cairn Energy and Royal Dutch Shell weighed. For a full market report, see: London market close.

Elsewhere in Europe, the Paris CAC-40 slumped 48 points to a close of 5,643 as stocks tracked Wall Street lower. In Frankfurt, the DAX-30 fell 51 points to end the day at 6,859.

On Wall Street, stocks closed lower as disappointing news on M&A activity – including Nasdaq’s decision to abandon its bid for the LSE – dented sentiment. The Dow Jones Industrial Average slipped 28 points lower to a close of 12,552. The tech-heavy Nasdaq bore the brunt of the day’s losses, falling 9 points to 2,450. The broader S&P 500, meanwhile, fell 4 points to close at 1,433.

In Asia, the Nikkei hit a six-year high of 17,628 in intra-day trading, and ended the day 117 points higher at 17,621, with the biggest boost coming from the property sector.

Crude oil was trading at $57.94 this morning, whilst Brent spot was at $55.35 in London.

Spot gold was last quoted at $662.50, down from $663.45 in New York late last night. Silver had dropped to $13.68/oz.

And in London this morning, Bradford and Bingley – the UK’s top provider of mortgages to buy-to-let investors – announced a forecast-beating 8% rise in annual profits this year on the back of record lending. However, chief executive Steven Crawshaw concurred with analysts’ predictions that the company’s margin would narrow this year. Bradford and Bingley shares were unchanged as of 0830 today.

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– Last week was a good one for London’s wealthiest art lovers and dealers, with the top auction houses achieving sales of $578m in just four days. But these record prices have little to do with the paintings on offer, says Adrian Ash. For a particularly useful lesson in art appreciation, read:
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