Pricing problems

A controversy has been set off by the pricing announcements of the two vaccine makers — Serum Institute and Bharat Biotech — for their supplies to the private market and the state governments. The criticism is two fold — one, why should State governments pay a higher price than the Centre, and two, why should private supply be priced at such a high level. The allegation is that vaccine manufacturers are indulging in ‘price gouging’ and therefore need to be reined in. But this cannot be farther from the truth. The two vaccine makers have invested considerable risk capital in their businesses, Bharat Biotech especially because it developed the vaccine completely on its own. The costs of development and at-risk manufacture (Serum produced the vaccines even before the final approvals were in) need to be defrayed. The Centre managed to squeeze out a good deal for itself when it initially contracted for supplies in January but that price may not be reflective of the actual costs plus a margin for the vaccine makers. While some amount of disclosure from the vaccine makers here on the costs and investments made by them will help, the benefit of doubt has to be given to them at this point in time.

Comparisons of procurement costs for Covid vaccines to those for polio or smallpox are specious, because prices for Covid vaccines at this stage need to compensate innovator drug companies for their research and drug discovery efforts in this fast-tracked rollout. In fact, given that such global pandemics now represent a new normal in healthcare challenges facing nations, India needs to see what it can do to encourage onshoring of such drug discovery efforts. Market-determined, for-profit pricing for those who can afford it, will be a good first step to incentivising Indian pharma firms to invest in research and capex efforts for the future.

The question of why State governments should pay a higher price than the Centre is a valid one. There cannot be discriminatory pricing when the supplies are for the same public health system. There should be just two prices for vaccines — one for government procurement, and second for the private market where people who can afford to pay, do so for their shots. It may be a good idea to constitute a coordination committee of the Centre and the States that will negotiate a single procurement price for government supply and also help in allocating vaccines to the States based on transparent criteria. The Centre must use the ₹35,000 crore allocated in the Budget for vaccination to help needy States to fund their innoculation programmes for the under-45 age group. There is increasing evidence of the second wave severely afflicting younger folk and the Government’s responsibility towards its citizens cannot stop with protecting just the 45-plus age group.

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