Ramping up vaccinations should be accorded top priority by India

With daily cases exceeding 261,000 and reported shortages of hospital beds, essential medicines and even oxygen, the country’s covid crisis has clearly spiralled out of control. There are many things we have to do: ramp up health care facilities and supplies urgently, stop super-spreader events such as election rallies and large religious gatherings, promote masking, social distance and hygiene and introduce selective lockdowns when necessary.

The only good news compared to a year ago is that vaccines are a new weapon we didn’t have earlier. Two domestically-produced vaccines are already in use and more are on the way. And vaccines approved abroad are now allowed for use in India, adding to potential supply.

Ramping up the pace of vaccination is an obvious priority. But achieving it may require moving away from the present highly-centralized system in which the central government is the sole authorized buyer of vaccines, fixing the price and placing all orders.

This system has clearly let us down. It should have placed orders for vaccines sufficiently in advance, including advance orders from companies producing new authorized vaccines. Other countries were doing it, but we didn’t.

The exact reason for the failure is not known, and there will be time enough to do a post mortem. One reason could be the failure to agree on a price. When governments fix prices, they have an understandable desire to keep them low. But this can also endanger supply, as seems to have happened in the case of Covishield. Spokesmen for Serum Institute of India (SII) have said the price that the government was willing to pay was lower than the price for vaccines delivered to the World Health Organization’s Covax programme for distribution in the poorest countries.

A low price was accepted for the initial order, which was probably fulfilled by vaccines already produced, though some of SII’s vials could not be exported because of the ban, a restriction that would’ve hit their expiry date. The company wanted a higher price to ramp up production for future orders, or alternatively, a capital grant. Whatever the merits of the case, the net result was a prolonged delay in placing firm orders.

We should have recognized that private-sector producers cannot be expected to subsidize vaccine supply. They have to be offered a ‘reasonable’ price, if we want them to expand capacity to increase production.

The problem will be repeated as more vaccines become available. Each vaccine has different properties and costs. Will the government fix the same price for each vaccine independent of costs and expect to get the supply it wants at that price? If not, how will prices be fixed for different vaccines?

In the short run, we have no option but to get the existing system to place firm orders to assure ourselves supplies for the next three months or so. Looking ahead, we should consider moving to a system with a greater role for private players.

Move to a dual market: Producers could be required to sell, say, 65% of their production to the government at a negotiated price for the public vaccination programme. This price should be determined on a transparent basis, taking account of reasonable costs with a discount for bulk purchases. The rest of their output could be sold domestically in the free market, or exported. Allowing an export window is essential if we want to retain India’s credibility as ‘the pharmacy of the world’.

As new vaccines are produced, there may be cases where the government does not want to buy 65% of the planned production. In such cases, all production beyond the orders actually placed should be allowed to be sold in the free market or exported.

Introducing a dual-market system described above would significantly reduce the volumes that the government would need to buy. Vaccinating 70% of India’s population (excluding children and pregnant women) by the end of 2021 will require covering 680 million people. The government could plan to cover, say, 480 million through the public free vaccination programme, while the remaining 200 million could be expected to meet their needs through the market. They should remain eligible to get free vaccinations if they want, but most of them will actually choose to go to less-crowded private facilities and pay.

Vaccination in a private facility at present costs ₹250, based on vaccines supplied by the government at ₹150 per dose. Even if the cost per dose rises significantly, it would still be affordable to upper-income groups. The Confederation of Indian Industry has stated that its members will join the vaccination effort, bearing the cost of vaccinating all employees, and possibly also their families.

Transparency: Transparency is critical if we are to avoid a blame game. The government should move quickly to place firm orders with domestic suppliers for the next three months, and publish the resulting supply commitments from different companies. The distribution of these supplies to state governments could also be announced in advance, giving state administrations a clear indication of what they can expect, so that they can plan their vaccination roll-out.

Imported vaccines: Imported vaccines are unlikely to be purchased for the public vaccination programme because they are much more expensive and also require storage at low temperatures which public hospitals will not be able to provide. However, many private hospitals in metropolitan areas can meet the temperature-control requirements and there will be takers for new state-of-the-art vaccines . These hospitals should be allowed to import them for private use.

Imports of vaccines by the private sector for use in India will also encourage the companies that have developed them to engage in licensed production in the country for the domestic market and for supply to other countries. This would help cement India’s position as the pharmacy of the world. It would also be a concrete step towards the kind of vaccine cooperation that was talked about in the recent Quad summit.

Montek Singh Ahluwalia is a distinguished fellow at the Centre for Social and Economic Progress, and former deputy chairman, Planning Commission