Sustainable pricing

Govt and vaccine makers should be transparent

The number of daily Covid-19 cases has dropped sharply over the past few weeks and has prompted many state governments to ease restrictions on public mobility. But the number of new cases is still high in absolute terms and state governments will need to be alert to avoid a potential third wave, which can be more devastating than the second. The only way to convincingly contain the pandemic is mass vaccination, as is evident in some of the advanced economies.

Unfortunately, India has faltered at multiple levels in the roll-out of its vaccination programme. As a result, the pace is much lower than desired. Bharat Biotech, for instance, on Tuesday said the government’s procurement price at Rs 150 per dose for Covaxin was not sustainable in the long run. This effectively means that the firm has little or no incentive to increase production, which can directly affect the vaccine roll-out. The other manufacturer, Serum Institute of India, has also expressed dissatisfaction over the pricing issue.

To be sure, Covid-19 vaccine manufacturers not being able to cover costs and make reasonable profits is the last thing India needs at this stage of the pandemic. Bharat Biotech told this newspaper that it invested Rs 500 crore from internal accruals and also repurposed plants for manufacturing Covid-19 vaccine. This means it is sacrificing revenue from other products as well. It is reasonable to expect that a firm would want to recover the investment with some amount of profit. Since the government is going to be the only large buyer with no competition, it is incumbent on it to arrive at a fair, transparent, and sustainable price of vaccines. A government looking to increase the scale of the vaccination programme should not have squeezed manufacturers on pricing beyond a point.

However, pricing has not been the only problem. The government first did not correctly anticipate the actual requirement. Consequently, it neither negotiated with global manufacturers nor placed sufficient orders with domestic producers. It should engage with the manufacturers without wasting any more time to get the pricing right and enable an increase in the scale of production. The government has placed orders for vaccines to be supplied between August and December, but the pricing is not clear yet. While a transparent formula should be the responsibility of the government, the private manufacturers have a role to play, too. Differential pricing of vaccines demands that the companies disclose their cost of production, pricing strategy, as well as revenue projections.

The government has again capped service charges in the private hospitals at Rs 150 per dose, which is not viable for many hospitals. This can not only affect the pace of vaccination, but also the realisation for manufacturers from the private channel because of lower offtake. India still has a long way to go having administered just about 260 million doses. Therefore, the government needs to get the basics right to be able to increase the scale. In fact, these issues should have been settled long ago. Apart from saving lives, faster vaccination will also boost economic recovery and government revenue. India’s Covid-19 vaccination programme should not suffer because of less-than-adequate planning.