April 25, 2021

Failure of Vaccine Planning and Freedom to make Super Profits

R Ramakumar

THE powerful second wave of Covid infections across the country has invited sharp attention to the role of different instruments of policy in addressing the crisis. Global experience shows that expanded vaccination may help reduce the spread of infections and weaken the links between infections and death. Hence, countries are racing to vaccinate as large a share of their populations as they could in the shortest time span.

India is a laggard in this race to vaccinate the population. As of April 17, 2021, the share of the population vaccinated was 48.2 per cent in the United Kingdom and 38.2 per cent in the United States and 18.9 per cent in Germany, but just 7.7 per cent in India. One of the important reasons for this poor rate of vaccination is a severe vaccine shortage. The daily new doses of vaccinations in India were actually declining after early April 2021, even as the government of India was celebrating a tika utsav (vaccine festival). At the present rate, a large share of India’s population may remain unvaccinated even by April 2022.

In this article, we try to understand the demand and supply for vaccines in India as well as the role played by the policy in ensuring an adequate supply of vaccines over the last four months.

India has a population of about 138 crore (or 1380 million) as of 2020. Out of this, about 30 per cent may be assumed to be less than 18 years old. That is, India must vaccinate 966 million adult persons for 100 per cent coverage. At the rate of two doses, this implies 1932 million doses of vaccines. A 60 per cent target for vaccination would mean coverage of 580 million persons. At the rate of two doses, this implies 1160 million doses of vaccines.

As of April 19, 2021, 123.8 million persons have received at least one dose (i.e., this is the total number of doses). About 107.2 million persons have received the first dose, and about 16.3 million persons have received two doses.

In other words, India must give close to 1036 million doses of vaccines from here on to meet the 60 per cent target, and 1808 million doses from here on to meet the 100 per cent target.

Let us assume further that this target would have to be reached by January 2022. Thus, India has about nine months in hand. So, the monthly target for 60 per cent coverage would be 115 million doses per month or about 3.8 million doses per day. Similarly, the monthly target for 100 per cent coverage would be 200 million doses per month or about 6.7 million doses per day.

This is the approximate overall target.

The Serum Institute of India (SII), which produces Covishield, has a current capacity of 60-70 million doses a month, which is reported to be rising to 100 million doses a month by May 2021. Bharat Biotech (BB), which produces Covaxin, has a current capacity of 6 million doses a month, which is to rise to 15 million doses a month by May 2021 and 58 million doses a month by the end of 2021.

Thus, taking all the estimates of capacities in April 2021 into account, India produced only about 76 million doses a month (or 2.5 million doses a day) of Covishield and Covaxin, which were the only two vaccines approved in India till April 13,  2021. Even if we take the higher projected estimates of May 2021 (100 million doses a month for SSI and 15 million doses a month for BB), the total production capacity would be about 115 million doses a month or 3.8 million doses a day).

From these numbers, the export commitments would have to be deducted. If we make an average of 15 per cent deduction for exports from the capacities, the capacity for Indian use would be 98 million doses per month or 3.3 million doses a day. Given the status of public health infrastructure in India, we would further need to add a five per cent to 10 per cent deduction for vaccine wastages. If we take a five per cent wastage figure, the capacity for Indian use would further fall to 93 million doses a month or 3.1 million doses a day.

Clearly, even after considering the expanded capacities of May 2021, India’s production capacities were to be significantly lower. The government of India surely knew this in January 2021 itself. It knew that India would be a deficit by about 10 million doses a month to 40 million doses a month depending on the targets planned.

Given the nature of vaccine shortages, India should have aimed for an expanded regime of approvals and capacity augmentation in vaccine production. More vaccines should have been given permissions and huge investments should have been directed to public and private vaccine producing firms.  Yet, India was refusing approval for any vaccine other than Covishield or Covaxin till April 2021. The reason appears to be a belief – based on zero evidence – that the two “Made in India” vaccines would be sufficient to meet India’s domestic needs and international commitments.

For example, Sputnik V and Pfizer should have been granted emergency approval in India long back. In February 2021, India refused approval for Sputnik V on the ground that Dr Reddys had not supplied data on immunogenicity. Similarly, Pfizer was forced to withdraw its application for emergency approval because the government insisted that a local bridging study would be necessary. But strangely, Covishield was given approval in January 2021 even though its immunogenicity data were not yet available. Trial data from the UK and Brazil, published in The Lancet, was considered adequate. Similarly, Covaxin was given approval even when its Phase 3 data on efficacy were not available. Why were the same yardsticks not applied to Sputnik V and Pfizer? Its perplexing.

With a raging second wave of infections and a major shortage of vaccines, the government of India appears to have finally realised the blunder. On April 13, 2021, it decided to grant emergency use approval for those Covid-19 vaccines, which were developed and manufactured in foreign countries and which were granted emergency approval for restricted use by USFDA, EMA, UK MHRA and PMDA Japan. This delayed decision marked the end of the hubris of a government, which wanted to more flaunt a misdirected atmanirbhar campaign in the middle of a pandemic than save the lives of citizens.

An outcome of the delay in approving vaccines like Sputnik V is that it will take a few more weeks, if not months, for its supply to begin in India. The Russia Direct Investment Fund (RDIF) has a contract with 6 Indian firms to produce 650 million doses, which will enormously help India meet its targets for vaccination. But given the delays in approval, the first dose of Sputnik is likely to arrive in India only by June 2021, which is at least 6 weeks away. There is still no clarity on the number of doses that would become available per month.

A more universal vaccine rollout based on an expanded vaccine production policy may have saved India from much of the present horror. It is in this context that the government of India took an important decision on April 20,  2021 to expand vaccine rollout to every person above 18 years of age from 1st May 1, 2021. However, this new decision has been accompanied by a series of new measures that would essentially liberalise vaccine sales and deregulate vaccine prices.

Till now, the government of India was supplying vaccines to the states free of cost. The SII and BB, which produce Covishield and Covaxin respectively, were selling vaccines to the government of India at a regulated price. Excluding taxes, Covishield was sold at Rs 150 per dose and Covaxin was sold at Rs 206 per dose. However, both these companies were unhappy at being asked by the government of India to sell at a regulated price. They wanted the removal of the price ceiling and freedom to sell vaccines in the open market.

Even the subsidised price of Covishield and Covaxin provided a normal profit per dose to SII and BB. For example, in an interview with NDTV on April 6,  2021, Adar Poonawalla admitted that SII was indeed earning a profit on every dose of Covishield sold. He said: “is it still profitable today, on a per-dose basis? Yes, absolutely…I would not say we are not making any profits, but we have sacrificed what we call super-profits.” He further noted that SII would be content with normal profits only for “a temporary period”; on making super profits, he said: “we can always make those profits after a few months.”

What is a super profit? Poonawallah said that while the Oxford-AstraZeneca vaccine was being sold at present at about US$ 3 per dose, “the average price of this product is US $20 upwards in the world”. By “this product”, he was referring to the prices of other Covid vaccines. For instance, Pfizer’s vaccine was priced at US$ 19.50 per dose (or  Rs 1431 per dose), Moderna’s vaccine was priced at US$ 32-37 per dose (or Rs 2348–2715 per dose), Sinovac’s vaccine was priced at US$ 14 per dose (or Rs 1027 per dose) and Johnson & Johnson’s vaccine was priced at US$ 10 per dose (or Rs 734 per dose). Compared to these prices, the subsidised price of Covishield in India was low, and Poonawallah was staking a claim to have the freedom to fix the Indian price of Covishield at a much higher level than Rs150 plus tax per dose. In an interview with ANI, he stated the expected price too: “in the private market, for those who want to purchase the vaccine, the price would be Rs1,000 [per dose]”.

According to the new decision of the government of India on April 19, 2021, the central government will provide vaccines free of cost for only the first 30 crore vulnerable persons. Afterwards, vaccines would not be subsidised, as at present. The government of India would be entitled to 50 per cent of the production of vaccine manufacturers, while state governments would have to directly purchase the remaining 50 per cent of the production directly from the vaccine manufacturers. For this sale to the state governments, “private vaccination providers shall transparently declare their self-set vaccination price.”

Two issues immediately arise. First, would there be any ceiling on the “self-set vaccination price”? It appears not. In short, the government of India has fully deregulated the vaccine prices after May 1, 2021. If we go by Poonawallah’s expectation, the price of Covishield is likely to rise from Rs 150 plus tax per dose to close to Rs 1,000 per dose and Rs 2,000 for two doses. State governments would have to pay this higher price and buy the vaccine from SII. Secondly, the government of India would allocate a certain quantity of vaccines to the states from its quota of 50 per cent. The press release of April 19, 2021, provides no indication of whether this allocation would be free of cost. It is most likely that once the coverage of the first 30 crore persons is completed, the state governments would have to pay the government of India for the allocations from the central quota also.

Either way, vaccine prices would rise sharply unless the state governments decide to subsidise the vaccine from their budgets. However, given the poor financial status of states, it is unlikely that states would be able to shoulder this financial burden. Assuming a vaccine price of  Rs 1,000 per dose, purchasing two doses for 100 crore persons would collectively cost the state governments Rs 2 lakh crores. Thus, the most likely outcome is that high vaccine prices would end up excluding millions of people from voluntarily coming forward to vaccinate themselves.

There is an additional reason why the government of India appears to have changed its vaccine policy. The government of India appears to have anticipated that vaccine supplies would not improve even by May 2021, and that it would increasingly become a subject of ridicule in the eyes of the state governments and the public at large. It clearly wanted to avoid being at the centre of such embarrassment. Thus, the decisions of April 19, 2021 were also a disingenuous attempt to deflect criticisms away from the government of India. By asking the states to directly procure 50 per cent of the production, the government of India could shrug off all responsibility for the future vaccine shortages and transfer the blame on to the state governments for their “failure” to procure vaccines.

The decision of the government of India to deregulate vaccine prices is a generous gift to the private vaccine companies amid the pandemic. This gift is in addition to the decision of the government of India to provide new credit lines of  Rs 3,000 crore to the SII and Rs 1,500 crore to the BB to help them expand capacities. Both SII and BB are also likely to be among the recipients of the government of India’s R&D grants worth Rs 900 crore under the Covid Suraksha Mission. Regardless of such generosity, the vaccine producers insisted on their right to make super profits, and the government of India has succumbed to the pressure.