Why is private sector investment in the pharmaceutical industry necessary?
The need for better access to drugs and treatments for developing countries could not be more urgent. Noncommunicable diseases such as cancer, diabetes, and cardiovascular disorders are on the rise globally and disproportionately impact poor people. About 73 percent of deaths from noncommunicable diseases—and 82 percent of premature deaths from these diseases—occur in low- and middle-income countries, in part because developing countries are less likely to have the necessary diagnostics to detect and monitor these illnesses, and less access to needed treatments.
Investing in pharmaceuticals means investing in people—and in stronger economies. The global pharmaceutical industry employs more than 5.5 million people, and indirectly through its supply chains, is responsible for more than 45 million jobs. Expanding capabilities requires better workforce training, which itself has positive spillover effects on economic development and people’s opportunities.
Governments and other public stakeholders are often at the forefront of the call for increased private sector involvement. WHO and other international and regional organizations — the African Union, PAHO, Gavi, Global Fund, CEPI, and ASEAN—have made strengthening the regional manufacture of vaccines and other health products a priority and asked for more support in this effort. Closing gaps in access in developing countries requires substantial investments, both public and private.
Together with GAVI, the World Bank Group is working to localize the manufacture of vaccines, along with expanding financing for immunization and primary healthcare systems in low- and middle-income countries. Only this way can we ensure more equitable access. Private sector investment is critical to meeting this goal, and we are committed to derisking investments and strengthening regulatory systems to help attract private capital. Gavi’s African Vaccine Manufacturing Accelerator, which will make up to US$1.2 billion available over ten years for commercially viable vaccine manufacturing, is already paving the way.
We believe that health systems are strongest when they leverage the full power and innovation of the private and public sectors to improve the resilience of health systems and benefit all patients. Together, through greater partnerships and complementarity, we can help elevate the standards and achieve Universal Health Coverage. “Poor health causes a loss of productivity and slows economic growth,” Indonesia’s Health Minister, Budi Gunadi Sadikin, said at a recent conference organized by IFC. “Therefore, the best investment is investment in health.”
Why is the local production of vaccines, pharmaceuticals, and other medical supplies important for development?
Developing countries often lack the infrastructure, financing, and skills needed to produce vaccines, pharmaceuticals, and medical equipment—essential medical supplies for resilient and responsive health systems. The COVID-19 pandemic highlighted the critical importance of reliable access to medical supplies—but even in non-crisis times, countries face shortages. In Africa, over 70 percent of medicines and 99 percent of vaccines are imported. Nations in Southeast Asia and Latin America depend on larger Asian and high-income countries for active pharmaceutical ingredients, which are key raw materials for drugs.
Governments are key players in this space, and many have made strengthening their pharmaceutical industries a priority, setting policies and regulations, funding research and development, training the labor force, and taking other steps to build the foundation for a sustainable and responsible industry. The African Union has set the goal of having 60 percent of the vaccines, medicines, and diagnostics used in Africa made in Africa by 2040. Nigeria wants to reduce its reliance on imported medical supplies and, in the next five years, produce 70 percent of those supplies domestically, through increased private sector investment. The Rwandan government wants to establish the country as a biotechnology hub and has set up a zone for private companies to operate there. Indonesia, with the World Bank Group’s help, has launched a program to expand private sector participation to build a more resilient health system. Brazil aspires to increase local production of critical healthcare products from the current 42 percent to 70 percent by 2033.
Governments recognize that they cannot do it alone—the public sector is not equipped to meet the development and production demands for vaccines and medicines. The private sector is critical, not only for bringing the needed production and delivery capacities, but also for research and development capacities that lead to new drugs, innovative treatments, and diagnostics. In 2023, for example, research and development spending in the pharmaceutical industry reached US$276 billion globally. The private sector is also well placed to attract and train the right workforce, as well as to establish successful distribution systems.
The private sector cannot do it alone. Governments set the regulatory frameworks necessary to monitor and ensure safe and effective medicines and create enabling industrial and procurement policies that encourage the development and availability of medical products. To realize its potential, the private sector also needs financing, investments in infrastructure, and people with the necessary skills.
What is the World Bank Group’s role?
The World Bank Group is committed to helping countries deliver quality, affordable health services to 1.5 billion people by 2030. Each institution within the World Bank Group brings distinct capabilities.
On the public sector side, the World Bank (IBRD/IDA) works with governments to build stronger, more resilient health systems by supporting regulatory reforms, designing industrial policies, and encouraging public investments that create a conducive environment for equitable access to health supplies, including building local manufacturing and distribution capacities. This includes helping countries improve regulatory capacity, strengthen procurement systems, and invest in the enabling infrastructure — such as energy, logistics, and digital connectivity — that these manufacturers and distributors depend on.
For example, the World Bank supported Senegal's pharmaceutical and vaccine sector by helping the national regulatory agency achieve WHO Maturity Level 3 status. This level is defined by the WHO as a stable, well-functioning, and integrated regulatory system, a key milestone in positioning the country as a vaccine and pharmaceutical manufacturing hub. In parallel, IFC helped develop a multi-vaccine manufacturing project with Institut Pasteur de Dakar.
The World Bank also supports governments in using their public procurement function strategically to shape markets—through pooled procurement, demand forecasting, and competitive tendering—to create stable demand signals that attract quality manufacturers. These interventions help build resilient health systems and catalyze private sector investment in the local production of health supplies.
On the private sector side, IFC’s support for local manufacturing of vaccines, pharmaceuticals, and other medical supplies is a key part of improving health systems and helping countries meet their Universal Health Coverage goals.
IFC selects partners carefully, evaluating the quality of their operations and the strength of their regulatory oversight and compliance systems for manufacturing and distribution of products. All of IFC’s clients must agree to IFC’s Environmental and Social Performance Standards, which lay out the clients’ responsibility for managing risks related to environmental impacts, working conditions, and other potential areas of concern in manufacturing. IFC requires clients to meet local regulatory requirements and high standards.
IFC also aims to increase access to high-quality medicines. IFC clients often have in-house research and development capacities and focus on generic and biosimilar products. In fact, many of IFC’s pharmaceutical clients manufacture generic drugs, a key component of a strong health system. Generics offer a lower-cost alternative to prescription drugs, expanding access to needed medicines and reducing the burden of out-of-pocket spending. Encouraged by governments, which often set prices, companies that manufacture generics play a role in lowering the overall cost of medicines. As confirmed by the World Bank Group’s Independent Evaluation Group, consumers benefit from IFC projects through increased access to generic drugs and over-the-counter products, evidenced by a higher production and distribution volume of such products. IFC also ensures clients maintain high quality by requiring that they are fully compliant with good manufacturing practice standards.
Having private sector manufacturing infrastructure in place is key to maintaining the continuity of medicine availability. When multinational pharmaceutical companies exit emerging markets—declining margins, political instability, and foreign currency fluctuations are common reasons—local manufacturers can ensure continued access to these companies’ products by acquiring their manufacturing capacities and product portfolios. This safeguards supply and stimulates job creation by expanding domestic production capabilities.
Updated July 2025