With daily cases crossing 261,000 and hospital beds, essential medicines and oxygen shortages being reported, the country’s acute crisis is clearly out of control. We have a lot to do: urgently increase health care facilities and supplies, stop super-spreader events such as election rallies and large religious gatherings, promote masking, social distance and cleanliness, and introduce selective lockdowns when needed.
The good news is that vaccines are a new weapon we have never had before, compared to a year ago. Two domestically produced vaccines are already in use and are on the way more. Vaccines approved abroad are now allowed for use in India, which contributes to potential supply.
Increasing the speed of vaccination is a clear priority. But to achieve that it is necessary to move away from the current high-centralized system in which the central government has the sole power to purchase vaccines, set the price and place all orders.
This system has clearly disappointed us. Orders for vaccines must be placed in advance, including pre-orders from companies that produce new authorized vaccines. Other countries are doing it, but we are not.
The exact cause of the failure is unknown and there will be enough time to do the post mortem. Failure to accept the price may be a factor. When governments set prices, they have an understandable desire to keep them low. As in the case of Covshield, this also puts the supply at risk. Representatives of the Serum Institute of India (SII) said the price the government was willing to pay was lower than the cost of vaccines distributed to the World Health Organization’s Kovacs program for distribution in poor countries.
A lower price was accepted for the initial order, which was fulfilled by vaccines already produced, although some pots of SII could not be exported due to the ban, which was a limit that touched their expiration date. The company sought a higher price to increase production or alternatively provide capital for future orders. Whatever the merits of the case, the net result is a long delay in the issuance of company orders.
We recognize that private sector manufacturers cannot afford to subsidize the supply of vaccines. We need to offer them a ‘reasonable’ price if we want to expand the capacity to increase production.
The problem will recur as more vaccines become available. Each vaccine has different symptoms and costs. Can the government independently determine the same price for each vaccine and obtain the desired supply at that price? If not, how are prices for different vaccines determined?
In the short term, we have no choice but to give the current system commanding orders to ensure that it supplies us for the next three months or so. Looking ahead, we should consider moving to a system that has more role for private players.
Go to the dual market: Producers are required to sell 65% of their product to the government at a negotiated price for the government vaccination program. This price should be determined on a transparent basis, taking into account reasonable costs with a discount for bulk purchases. The rest of their product can be sold or exported domestically in the free market. Allowing the export window is essential if India is to maintain its credibility as a ‘global pharmacy’.
As new vaccines are produced, there may be times when the government is reluctant to buy 65% of the planned product. In such cases, all product beyond the orders actually placed should be allowed to be sold or exported in the free market.
The introduction of the dual-market system described above will significantly reduce the volumes that the government will have to buy. By the end of 2021, 70% of India’s population (excluding children and pregnant women) will need 680 million people to be vaccinated. The government plans to cover 480 million through the public free vaccination program, while the remaining 200 million can meet their needs through the market. They should be eligible to get free vaccines if they wish, but most of them choose to go to less crowded private facilities and pay.
Vaccination in a private facility at current costs ₹250, based on government-supplied vaccines ₹150 per dose. Although the cost of dosing has increased significantly, it is still affordable for high-income groups. The Confederation of Indian Industry (CII) has said that its members will join in the effort to vaccinate their employees and their families at the cost of vaccinating all employees.
Transparency: Transparency is essential to avoid the game of blame. The government should move quickly to place firm orders with domestic suppliers over the next three months and publish supply commitments from various companies. The distribution of these supplies to state governments can also be announced in advance, giving the state administration a clear indication of what they can expect so that they can plan their vaccine roll-out.
Imported Vaccines: Imported vaccines cannot be purchased for the public vaccination program because they are too expensive and need to be stored at low temperatures, which are not provided by government hospitals. However, many private hospitals in metropolitan areas can meet temperature-control requirements and are equipped with new state-of-the-art vaccines. These hospitals should be allowed to import for private use.
The importation of private sector vaccines for use in India encourages the companies that developed them to participate in the licensed production in the country for the domestic market and to supply to other countries. It will help consolidate India’s position as the world’s pharmacy. It would also be a positive step towards vaccine cooperation, as discussed at the recent Quad Summit.
Montek Singh is a Distinguished Fellow at the Ahluwalia Center for Social and Economic Progress and Former Deputy Chairman of the Planning Commission