May 10, 2021, 4:45 p.m.
In March, European vaccine procurement was the mockery of the world. Europeans were way behind the Americans, British, and Israelis in sourcing vaccines and giving them to citizens. But now the critics are silent. European countries are vaccinating in record numbers, all more or less at the same pace.
Europe is catching up quickly because it has completely flipped the way it does business in the health sector. It used to be an open system where goods and services flowed in and out freely. it is now more controlled and more European. By establishing a real industrial policy and investing in it, Europeans have managed to ensure a steady supply of vaccines. The idea that industrial policy helps, a long taboo in Europe, is here now – and not just for vaccines.
When AstraZeneca announced in January that it could only deliver a third of its promised doses in the first quarter of 2021, the European Commission got all of the flak. The commission, which was asked by the 27 member states to buy vaccines for everyone, was too slow, critics said. The European Commission allegedly focused too much on the price of vaccines and too little on exclusive supply. Meanwhile, the United States, the United Kingdom, and Israel have all made their way to these vaccines, leaving Europeans out in the cold. Many said it was high time Europe flexed its geopolitical muscles.
However, Brussels soon realized that the problem wasn't so very bad contracts or slow negotiations, but the fact that no one in Europe had control of complex supply chains. It wasn't that Europe didn't have the production capacity to fulfill its own orders, or that its share of production was being shipped elsewhere. The problem was that the production process in Europe collapsed. It was a problem that industrial policy should solve – as long as the European Union was able to conduct industrial policy.
Often, even vaccines made in Europe and destined for Europe have to cross many borders before they are ready for use. Components are sourced all over the world. The assembly takes place in several countries. Often vaccines are sent abroad for filling. Until February, these complex chains were barely monitored in Europe. It took a pandemic – when governments wanted vaccines at all costs – to show how fragile this system is.
In response to public outcry over AstraZenaca's failure to deliver on what it promised, Thierry Breton, the European Commissioner for the Internal Market, set up a task force on vaccine procurement. The first thing he realized, he told the French podcast Le Nouvel Esprit Public, was that the EU has had "extraordinarily liberal and Anglo-Saxon policies" for decades.
The European single market, which was designed in the 1980s, focused on customers. The idea was that customers would mechanically benefit from the forces of the free market and tough competition, resulting in lower prices and better quality. The government's role was limited to ensuring and monitoring a level playing field. The Commission had always given strong support to industrial policy that would protect European industry and make it more competitive. The problem was not so much the substance of such a policy, but the fear of the Member States that the Commission would take over multinational power. When it was really inevitable, as it was for the steel industry, they accepted it – resulting in the Davignon Plan that protected and restructured European steelmakers, who were badly hit by an economic crisis in the 1970s.
It took a pandemic to accept that the scope of such policies must be wider. (The fact that this coincided with Britain's exit from the EU and the appointment of an Internal Market Commissioner from France is just a coincidence.) As it turned out, no one had previously monitored the production of the hundreds of millions of vaccines that the Commission ordered. US policy makers did business with vaccine makers, researchers, and manufacturers, and worked towards good production. There was very little coordination in Europe. All parts of the chain worked independently of one another. Doses of vaccine flowed in and out of the internal market without anyone keeping track of things.
Breton began visiting factories and mapping bottlenecks. He soon found that several supply chains were down and no one was doing anything to fix the problems. He had to act quickly. The Commission was tasked with carrying out all vaccine procurement on behalf of the Member States. Last summer, when nobody knew when which vaccines would be available, he commissioned six manufacturers to distribute risks. If a pharmaceutical company couldn't deliver on time, there were always five others on duty. The Member States had asked the Commission to do this for them. If everyone bought their own vaccines, large countries with bigger budgets (or factories on their territory) would get there first. Smaller and poorer countries would be at the end of the line. This would disrupt the internal market and place an intolerable political strain on internal relations. If everyone could get vaccines at the same price at the same time, a catastrophe could be averted.
AstraZeneca manufactured one of the first vaccines in Europe. However, the supply chain system could not handle mass production under stress. Immediately there were problems. The offer was less than planned by the company. Some governments began to push it around, forcing it to move production to their territory, or forbidding it to be exported to others. All companies were under similar strain. Israel, for example, secured its vaccines by handing over citizens' personal information in exchange for guaranteed doses being dispensed at the expense of other countries.
In the meantime, vaccines flowed freely to and from Europe. As such, this was not a problem. Today, as it was a few months ago, Europe exports more than 40 percent of the vaccines produced on its soil. The difference now is that the supply has become so large that the Europeans have more than enough for themselves even with exports totaling 40 percent of production. And from now on they will have more than enough. However, Europe, a large exporter of vaccines, is unwilling to join the US proposed waiver of vaccination patents. European leaders say sending finished doses to countries in need is faster and more efficient than waiving patents: waiving just means developing countries get the right to reproduce vaccines, but they still don't have the "prescription".
Breton is a practical former industrialist whose credo is, "If I run faster than others and they want to keep up with me, they'll all run in my direction." He sleeps five hours a night and calls vaccine manufacturers every day – starting with AstraZeneca's CEO, a French person living in Australia. The first thing Breton did after the AstraZeneca debacle was overseeing the entire vaccine production process. All exports, both of finished vaccines and components, had to be checked by him – not to block them (he never did), but to get an overview: What went where? In this way he managed to avert a second catastrophe.
This time it was Johnson & Johnson vaccines. By insisting that all export inquiries go through his desk, Breton found that J&J vaccines, although made in Europe (by Janssen in the Dutch city of Leiden), had to be bottled in the US before they could be used returned to Europe. However, the U.S. Defense Production Act has severely restricted exports. The chance of J&J vaccines returning to Europe for delivery was slim.
So the European Commission got involved. A German bottling plant for dengue vaccines was temporarily converted for J&J. Now the vaccines no longer need a detour to the USA. Better yet, they'll be delivered faster.
The Commission is also increasing investment in vaccine development and production. With German and European money, the vaccine manufacturer BioNTech bought another factory in Germany and relocated parts of the production process back to Europe. The company is now less prone to disruptions in the production chain. It's also more productive. In April, the commission secured additional BioNTech Pfizer doses for the second quarter. Another 1.8 billion cans had been ordered by 2023.
In March and April it rained contempt from all corners of Europe and beyond on Brussels. Some called it a "mess", others wrote that the "vaccination disaster is the death rattle of the EU" or said Commission President Ursula von der Leyen should resign over this "mess". The toughest comment came from the UK, which injected twice as fast as Europe in mid-April and proudly reopened pubs. In fact, at least half of the 40 million doses the UK had given by then came straight from factories in Europe – mostly BioNTech. However, vaccines made in UK factories for use in the EU have been blocked due to the country's export ban.
In the end, Europe developed a five to six week delay in vaccinating citizens compared to the US, UK and Israel. Eager to resume their lives and businesses, Europeans loathed these delays and put their governments under pressure.
Although national governments were responsible for the lack of European industrial policy in the past, some blamed Brussels and bought vaccines themselves. For example, Hungary bought Russian vaccines even though they haven't been approved by the European Medicines Agency – and probably not for some time. Breton spoke extensively with the Hungarian Prime Minister Viktor Orban and also visited the Austrian Chancellor Sebastian Kurz. He asked Kurz what he and the Danish Prime Minister Mette Frederiksen had done on a high-profile “vaccination trip” to Israel. Kurz supposedly replied: "Not much."
In the meantime, criticism of the EU vaccine procurement has almost stopped. Immunization rates have accelerated everywhere. With the exception of Hungary and Malta, which are ahead, and Croatia, Latvia and Bulgaria, which are behind, most participants move forward at the same speed. This shared pace was the idea behind the joint procurement.
Member States received 14 million doses in January, 28 million in February, 60 million in March and 105 million in April. The commission expects 125 million cans in May and 200 million in June, bringing the block to an annual capacity of 3 to 4 billion cans. Even if new vaccines become available, Europe doesn't need them, Breton said. There are now 53 production sites in Europe, compared to just under a dozen in January. According to Breton, we should be proud of Europe's industrial capacity. His boss von der Leyen said Europe had used this crisis to reinvent itself and become stronger, as has happened repeatedly in the past. She called Europe, which still exports nearly half of its vaccine production, "the world's pharmacy".
The commission sees the vaccine procurement saga as a test case. Last week, greater EU protection was proposed for other sectors vulnerable to (geo-) political weapons and to make the internal market more resilient to supply restrictions, border closings or fragmentation in the future. Fierce talks are expected with some of Europe's strongest free market defenders such as the Netherlands. But The Hague has now also accepted that European “strategic autonomy” and industrialization policy have become key concepts that have to be developed in an increasingly commercial world.