Biswajit Dhar  K.M. GopakumarApril 27, 2021

The new vaccine strategy raises questions, beginning with the Centre giving up its control over the market for vaccines

Just when the spread of COVID-19 has reached catastrophic proportions, with the daily case-load rising faster than that seen anywhere in the world since the beginning of the novel coronavirus pandemic, the Government of India has acted by unveiling a completely revamped vaccine strategy. Two key elements are the hallmark of this new strategy, which will be implemented from May 1. First, the phased roll-out of the vaccination drive initiated on January 16 under which the vaccine-eligible sections of the population were gradually increased, has now been extended to the entire adult population, namely, to those above 18 years. Second, and more importantly, a significant deregulation of the vaccine market has been effected and vaccine manufacturers have the freedom to sell 50% of their vaccine production to State governments and private hospitals, and at prices that can be substantially higher than that hitherto fixed by the government. A third element of the vaccine strategy, which was not announced formally, is a grant of ₹45 billion to the two vaccine manufacturers, the Serum Institute of India (SII) and Bharat Biotech, to boost their capacities.

Handing over the reins

The new vaccine strategy raises a number of questions, not the least from the manner in which the central government has given up its control over the market for vaccines, a key feature of the vaccine roll-out plans thus far. This issue assumes further significance since the Government of India is well aware, as all public authorities around the world are, about the significance of vaccinating every citizen in the country; “none of us will be safe until everyone is safe”. It is, therefore, vitally important that public health authorities in the country take an objective view of the realities of the country before adopting strategies for vaccine availability, for this is absolutely critical for resetting lives and livelihoods disrupted by the pandemic. Several facts suggest that this has not done while rejigging the extant vaccine strategy.

Vaccine exports

The phased roll-out of the government’s ambitious vaccination drive, beginning with health-care and frontline workers in January, followed by the gradual inclusion of senior citizens and people above 45 years in March and April, respectively, was in sync with the availability of vaccines in the country. Although SII, the largest vaccine producer, had initially promised to supply 100 million doses of vaccines a month, in reality it could provide between 50 million to 60 million doses. But, given that India too saw a degree of “vaccine-scepticism”, the Government of India found itself in a situation where it could promise exports of vaccines to 95 countries, mostly in Africa and Asia. As of April 26, these countries have received more than 66.4 million doses of vaccines from India.

Until now, nearly 142 million vaccine doses have been administered in the country, the third highest in the world. However, in terms of population share, less than 2% has received both vaccine doses, while less than 9% has received one dose. But there is one worrying facet, which is that a demand-supply mismatch has begun to appear as the coverage of the vaccine-eligible population expanded. The largest supplier, SII, gave two explanations for its inability to meet its commitments. The first was that the United States Government had used a Cold War piece of legislation, the Defense Production Act, to restrict exports of vaccine culture and other essential materials. Second, the company complained that it lacked the financial capacity to expand its production, requesting a grant of ₹30 billion from the government.

Onus on States

It is the face of this vaccine supply-crunch that the government has announced the new vaccine strategy, by opening vaccination to all adults in the country, and allowing vaccine producers to sell 50% of their production directly to State governments and private hospitals. The new strategy shifts the onus onto the State governments, which have to take decisions regarding free vaccination for people above 18 years, while the central government would continue to support vaccination for people above 45 years, and health-care workers and frontline workers. The government has not fixed the vaccine prices and has allowed the producers to pre-declare the prices they would charge from the State governments and private hospitals, a sharp departure from the extant strategy.

Thus far, government facilities have provided vaccines free of cost, while private facilities are allowed to charge no more than ₹250 per dose. The central government played the role of a sole procurement agency that helped in driving down prices, thus addressing the issue of affordable access to vaccines. However, the new strategy abandons this mechanism and fragments the market into three layers namely, central government procurement, State government procurement and the private hospitals. This layering of the market would allow the producers to charge high prices from the State governments and private hospitals. In fact, both SII and Bharat Biotech have immediately announced their intentions to raise vaccine prices. SII will sell Covishield to State governments and private hospitals would have at ₹400 and ₹600 per dose, respectively, while the corresponding figures for Bharat Biotech’s Covaxin are ₹600 and ₹1,200 per dose.

The new strategy would shift the burden of vaccination of the young population, namely, those between 18-44 years, entirely on the State governments. This implies that the vaccination of a significant section of the population depends on the financial health of each State government, resulting in inequitable access to vaccines across States. Moreover, given their poor state of finances, most State governments may not be able to procure the required number of vaccine doses to meet the demands of the targeted population. In such a situation, a large share of the vaccine quota (50% of domestic production) earmarked for the State governments and the private hospitals could end up with the latter.

In the U.S.

The decision to substantially deregulate the vaccine market raises serious questions in view of the reported advance of ₹45 billion made by the Government of India to the two vaccine producers in India for expanding their production capacities. The Federal government in the United States has done similarly, providing financial support to vaccine producers, who are now set to rake in their billions by charging high prices. Several public interest groups in the U.S. have asked questions as to why the tax-paying public should bear the high prices of vaccines when Federal taxes have been used to beef up the vaccine producers. This question is more pertinent in India, where access to affordable vaccines is critical for ensuring “vaccination for all”.

More open licensing needed

It is somewhat ironic that the new vaccine strategy, which could undermine “vaccination for all”, comes from a country that has long championed the cause of access to affordable medicines in international forums. Rather than hand over the reins of price determination to the duopoly in the vaccine market, the government should have urgently addressed the serious doubts over affordability of vaccines by ensuring a competitive market for vaccines. According to recent estimates, existing producers in India will be unable to meet the country’s vaccine requirements by some distance, and therefore, India needs more vaccine manufacturers to ensure uninterrupted supply. One positive step that the government has taken in this direction is to increase production of Bharat Biotech’s vaccine through the involvement of three public sector undertakings, including Haffkine Institute. We would argue that there is a need for more open licensing of this vaccine to scale up production. This would enhance competition in the market, enabling the vaccines to reach every citizen in the country.

Biswajit Dhar is Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi. K.M. Gopakumar is Legal Adviser, Third World Network (TWN). The views expressed are personal