Two recent experiences have shown the importance of the existence of a state medicines manufacturing capacity.
During the 1998 Asian financial crisis, the Indonesian Government was able to supply hospitals, health centres and other health facilities with essential medicines thanks to the existence of state-owned local pharmaceutical manufacturers. Privately-owned local and foreign companies practically halted production for several weeks as the collapse of the local currency and uncertainty in foreign exchange rates prevented them from importing necessary raw materials.
Another important example has been the success of the Brazilian policy to fight AIDS, which has relied crucially on state pharmaceutical manufacturing capacity. Brazil produces most of the ARVs required for the local market, at prices significantly below those charged by brand-name companies. In addition, the existence of a significant local capacity to manufacture medicines increased Brazil’s negotiating power in discussions with brand-name companies over price discounts.
The existence of a state pharmaceutical manufacturing capacity may also play an important role regarding prices in the international market. If states act as competitors in the global market, that will reduce worldwide prices.