Access to quality diagnostics is a fundamental requirement for effective health care systems worldwide, and investing in locally manufactured diagnostics is critical to achieving global health care equity. As the recently adopted WHO Resolution on Diagnostics recognizes, strengthening the local production capacity of diagnostics in low- and middle-income countries (LMICs) is vital for achieving universal health coverage.
However, obtaining affordable and quality diagnostics in LMICs remains a significant challenge. While past investments have been limited due to capacity gaps and dependence on traditional donors, a recent virtual event highlighted promising opportunities to support indigenous companies with their products. Development finance institutions, including development banks, impact investors, and commercial investors, can play a vital role in bridging this gap. By leveraging clear business cases and innovative funding models, we can enhance capacity, regulatory systems, and collaboration, ultimately reshaping health care, promoting equity, and ensuring a sustainable future.
Local manufacturing has quickly become a priority for many stakeholders; however, the investment case and commercial viability, specifically for diagnostics, have yet to be well articulated. Moreover, the reliance on traditional sources of donor funding has limited the pool of financing available. There is untapped potential to bring in new partners and diverse sources of capital.
PATH and the Open Society Foundations organized a virtual event to address these issues, bringing together 15 organizations, including development banks, impact investors, and philanthropic organizations. The event showcased ripe opportunities for investment in diagnostics manufacturing companies in sub-Saharan Africa. It highlighted the role that development finance institutions (DFIs) could play in helping to boost diagnostics capacity. Through clear and articulate business cases, the team identified investment-ready opportunities that meet essential criteria regarding health impact, market sustainability, and potential return on investment.
The investor convening highlighted the urgent need for comprehensive investments that address market failures, leverage blended finance for long-term viability, and facilitate appropriately sized and risk-adjusted investments to stimulate and mitigate risks associated with local diagnostics manufacturing.
Overview of investment opportunities reviewed during the investor convening. Image: PATH/ Shiri Brodsky
Key insights from the investor convening
Africa-led innovation
The investor event provided a platform to showcase the untapped potential, ambition, and talent, as well as the technical expertise and experience on the African continent. Each of the companies featured boast leadership who are living and working in sub-Saharan Africa and deeply committed to serving health needs on the continent through providing quality-assured diagnostics products. These individuals and their management teams are passionate about improving the health and livelihood of people in their country and throughout the region directly through increasing access to quality health care and indirectly boosting local economies. Locally developed and manufactured diagnostic solutions are also more likely to serve local needs and health conditions, giving these companies a competitive advantage. The product portfolios of showcased companies include, or plan to include, diagnostic products relevant to local needs, such as those for infectious diseases most common in sub-Saharan Africa. This helps fulfill the pressing need for quality diagnostics and foster Africa-led innovation, driving transformative change and shaping the future of health care delivery.
Streamlining regulatory systems
A crucial takeaway from the event was the urgent need to strengthen and harmonize regulatory systems, which poses a risk to investments in the opportunity for sustainability and return on investment. Efficient and streamlined approval processes for diagnostics are crucial to facilitate the manufacturing and distribution of locally produced diagnostics. However, in many cases, the time and resources required for various layers of approvals outweigh the return, jeopardizing commercial sustainability. This poses a risk for companies and their investors. Investments in local manufacturing require supportive regulatory frameworks that prioritize speed without compromising quality and safety standards. Efficiencies across the ecosystem must be evaluated to ensure quality and safety while also reducing and minimizing redundancies. Addressing regulatory barriers faced by local manufacturers is key to catalyzing investment and expediting access to reliable diagnostics in LMICs.
Balancing supply and demand for sustainable market growth
While investment in locally manufactured diagnostic products supports the supply side of the market, addressing the demand side of the diagnostics market is vital for achieving sustainable and resilient access to quality diagnostics. Stimulating local demand for locally manufactured products is as vital as boosting supply through promoting local manufacturing capacity. For instance, the US President’s Emergency Plan for AIDS Relief (PEPFAR) recently announced an intent to set bold manufacturing targets for Africa to accelerate regional manufacturing of HIV health commodities. Given the significant role that PEPFAR plays in shaping the market for products, this announcement provides a tangible opportunity to stimulate demand and ensure market sustainability for locally manufactured products.
Collaborating with procurers, donors, and governments committed to purchasing locally manufactured diagnostics and creating a supportive ecosystem will help to achieve market sustainability and resilience.
Financing and willingness to pay for sustainable market development
Investing in local manufacturing requires adequate financing to overcome the initial barriers and establish sustainable market growth. Investments into smaller, local diagnostics manufacturers, however, can be challenging as these only sometimes meet the minimum ticket size needed to engage with many investors. The event illuminated the need to explore mechanisms that are financially viable and sustainable for local diagnostics manufacturers and DFIs, such as the reduced administrative burden that drives ticket size constraints, expanded investment opportunities, or multi-investment portfolio approaches.
In addition to generating interest among investors, sensitizing donors and procurers to the value of procuring locally manufactured diagnostics is essential. In the short term, Africa-led manufacturing is unlikely to be cost-competitive with incumbent manufacturers, especially those in China and India who benefit from large local markets. However, the direct and indirect benefits of local manufacturing must also be considered. Sensitizing donors and procurers to these factors is necessary to increase willingness-to-pay thresholds for diagnostic products that are locally produced. By exploring incentives and defining higher willingness-to-pay thresholds, we can garner financial support for long-term market development and improved access to quality diagnostics in LMICs.
Managing risks to ensure sustainable investments
While risks are associated with investing in locally manufactured diagnostics, they are not insurmountable. We can build a resilient ecosystem that supports sustainable investments by identifying and managing market, technical regulatory, and partnership risks. Governments, manufacturers, investors, donors, procurers, implementing partners, and health care providers must collaborate to drive meaningful change. Collaboration facilitates knowledge sharing, innovation, and the development of comprehensive strategies to overcome the complex challenges associated with increasing access to quality diagnostics. Each stakeholder has a critical role in catalyzing investments and creating sustainable solutions, whether that be defining the gap in health care that needs to be filled, establishing product specifications for regulatory approvals or procurement, or mobilizing resources to facilitate local production of diagnostics across the value chain.
Read how PATH has helped to overcome technical, regulatory, and market hurdles to increase access to simple and affordable point-of-care diagnostics critical to supporting curative treatment for Plasmodium vivax malaria. <INSERT: https://www.path.org/case-studies/malaria-diagnostics-g6pd-deficiency>
Tackling health inequities
A recent Lancet Commission on diagnostics determined that 47% of the world’s population has little or no access to diagnostics. Only about 19% of patients in LMICs can access the most basic diagnostic tests at the primary care level. Catalyzing investments in diagnostics can make a substantial impact, particularly for underserved populations in sub-Saharan Africa.
It is crucial to design for equitable delivery, reducing reliance on global supply chains and charitable intentions. Every region must have the capability to meet its health needs through local manufacturing and development, ensuring supply security and safeguarding population health.
By leveraging Africa-led innovation, investing in local manufacturing, streamlining regulatory systems, balancing supply and demand, securing financing, and fostering collaboration, we can create a sustainable ecosystem that addresses market failures and ensures equitable access to quality diagnostics. Together, we can seize this opportunity to drive transformative change in global health care by investing in locally manufactured diagnostics.
