On May 13, the government told us that between August and December this year, the covid vaccine availability/production will be ramped to around 216 crore doses. Tweets were published by several government handles. (You can take a look here and here).
Many media reports were also published regarding the same. As the Mumbai edition of The Times of India reported on May 14: “Setting out its roadmap to vaccinate the around 95 crore 18-plus population, the Centre said on Thursday India should be able to access nearly 217 crore doses between August and December.”
The following table shows how the 216-crore number was arrived at.
Source: Ministry of Health and Family Welfare. In case you are unable to see the table, click here.
Several ministers reiterated this message. Prakash Javadekar, who holds multiple portfolios in the government, said: “India will get 216 crore new vaccines by December. India will be able to vaccinate more than 108 crore people with the help of these vaccines.” The health minister Dr Harsh Vardhan also made a similar statement.
The underlying message here was that the vaccine shortage, if any, would not be a problem in the months to come. Over the next few days, WhatsApp and other social media kept buzzing with this message. The above table was shared over and over again. The Be Positive crowd had a field day. So far so good.
The trouble is that the numbers in the table are just that, numbers. Allow me to explain.
75 crore doses of the Covishield vaccine are expected to become available between August and December, a period of five months. This implies a production capacity of 15 crore doses per month on an average.
In a submission to the Supreme Court on May 9, the government had said that the manufacturing capacity of the Serum Institute, the company which manufactures Covishield, is expected to go up from 5 crore doses per month to 6.5 crore doses by July 2021. Increasing production capacity from 6.5 crore doses per month to 15 crore doses per month is going to be some task.
Of course, the government always has the option of importing the Astra-Zeneca vaccine doses (which is locally manufactured as Covishield). But even if the government decides to import, the difference between the local production capacity and the projection of 15 crore doses per month on an average, is huge. Further, any imports will come at the expense of denting the atma nirbharta narrative.
When it comes to Covaxin, the estimated production between August and December has been assumed to be at 55 crore doses. This implies a production of 11 crore doses per month on an average.
The central government told the Supreme Court on May 9 that the manufacturing capacity of Bharat Biotech, the company which currently manufactures Covaxin, is expected to go up from 90 lakh doses per month to 2 crore doses per month, and further increase to 5.5 crore doses per month by July 2021. So, 5.5 crore doses a month is half of the 11 crore doses per month that is required as per the government’s calculation.
Of course, it needs to be remembered that the intellectual property for Covaxin is shared between Bharat Biotech and the Indian Council of Medical Research. Hence, Covaxin will also be manufactured by three public sector manufacturing facilities. These are Indian Immunologicals, Hyderabad, Haffkine Biopharmaceuticals, Mumbai, and Bharat Immunologicals and Biologicals, Bulandshar.
Based on this, the government told the Supreme Court: “This is projected to enhance Covaxin‟s current manufacturing of 1 crore doses/month to nearly 10 crore doses/month in the next 8-10 months.”
So, Covaxin’s production is expected to touch 10 crore doses per month only in 2022. At least, that’s what the central government told the Supreme Court. Nevertheless, that did not stop them from telling you and I, that 11 crore doses per month of Covaxin will be produced on an average between August and December. Given this, the vaccine production projections made by the government, don’t pass the basic smell test.
And we aren’t done with this yet. A close look at the above table tells us that it also includes doses from vaccines which haven’t been cleared for production. In fact, this was precisely the point made by the two amici appointed by the Supreme Court ( Jaideep Gupta and Ms Meenakshi Arora) in the Suo Moto writ petition that the Court is currently hearing.
As Wikipedia points out: “An amicus curiae (literally, “friend of the court”; plural: amici curiae) is someone who is not a party to a case who assists a court by offering information, expertise, or insight that has a bearing on the issues in the case.”
As the Amici told the Supreme Court:
“The [central government] has claimed that it will be able to vaccinate a substantial number of persons (around 100 crore persons requiring 200 crore doses) by December 2021. However, no projections have been shared with this Court regarding how this target would be achieved. Based on reports, it appears that the [central government] has factored a number of vaccines that are currently in their development stages to reach its projected number of 200 crore doses. This approach would be misguided as the success and efficacy of vaccines that are currently in the stage of clinical trials is uncertain and cannot be guaranteed.”
The interesting thing is that the central government hasn’t presented any projections of vaccine availability to the Supreme Court and in an affidavit submitted to the Court on May 9, it said: “It is difficult to predict the projections for vaccines given that it depends on variable factors such as introduction of new foreign vaccines, capability of increased production by existing manufacturers, among others.”
Of course, the variable factors did not stop the government in confidently telling us that 216 crore vaccine doses would become available between August and December, later this year. Something, it didn’t have the confidence to tell the Supreme Court on May 9, it told the country on May 13, four days later, and has been saying it over and over again since then.
What this tells us is that the submissions to the Supreme Court are clearly not good WhatsApp material and hence, things can be said as the way they are.
Nevertheless, the Solicitor General, during the course of his oral submissions to the Supreme Court, did say: “He is in a position to address these concerns of this Court and that the UoI aims to vaccinate approximately 100 crore persons by the end of December 2021.”
Nonetheless, there is a huge difference between an aim, a plan, and a projection, as we have seen in the calculations earlier in this piece. Numbers are just numbers and can easily be tortured to arrive at what one wants to say. The table accompanying this piece is an excellent example of this phenomenon.
But then on WhatsApp who is bothered about the details and the nuance. So, the main aim of the government was to project a confident be positive narrative and it did just that.
To conclude, it is safe to say that there is one truth out there for the Supreme Court and another for the country at large.
The second wave of coronavirus continues to unleash its horror in India. This crisis has brought in focus the significance of mass vaccinations being carried out at a very quick pace. Without vaccinating a vast majority of our population against Covid-19, there is no pathway to normalcy and achieving herd immunity.
Policy-makers in India have finally awakened to this reality or at least that is what we hope. That they have been found so lacking – in planning, preparation, and priorities – speaks volumes of the caliber of our political and bureaucratic class.
As a piece in The Times of India, dated May 10, points out, at the current rate of vaccination, it will take around 1,000 days to vaccinate the adult population of 94 crore (around 94.3 crore to be precise). But assigning blame will not solve this crisis. Timely, considered action and policies might.
In this article, we try to assess the logistical readiness of a mass vaccination plan by looking at the capabilities and capacities at each step of the vaccination process. Specifically, we look at current and future vaccine supplies and discuss key issues related to vaccine administration.
There are two vaccines available in India currently – Covishield manufactured by the Serum Institute of India (SII) and Covaxin manufactured by Bharat Biotech. In addition, we will be importing Sputnik V from Russia starting this month, with a small amount already having come in, and are likely to receive shipments of Astra-Zeneca vaccines from the United States. Also, Zydus Cadilla has announced that it expects to get emergency authorisation for its 3-dose vaccine shortly.
The table below lists the different vaccine sources and their estimated/committed doses for the next six months. Projections beyond October are subject to too many assumptions which can lead to wide variations in estimates. For now, a six-month planning and estimate window seems appropriate. Even then, these are estimates that may prove to be incorrect.
Let’s discus the above table in a little more detail.
These are broad estimates derived from publicly available information as on May 7, 2021. The intent behind this exercise is to consolidate information emerging from various sources to provide a coherent and a reasonable picture of the vaccine supply scenario.
There might be major changes in either direction, that is, actual supply might increase due to new production or distribution agreements or actual supply might decrease if manufacturers are not able to deliver to their committed/planned volume. As we said earlier, this is a broad estimate.
1)The estimates for Covishield are based on their total production capacity projections given by Adar Poonawalla, the CEO of Serum Institute of India (SII). SII’s current production capacity is between 6 to 7 crore per month. We have assumed it to be at 6.5 crore per month. By July, SII expects to raise its production to 10 crore, as reflected in our estimates starting August. We assume that an increase in production will start hitting the market in the next month.
On April 28, 2021, the government of India placed an order with SII for 11 crore doses for May, June and July. Over and above this, SII has announced that it has a separate order of 11 crore doses from state governments and private hospitals. But the delivery schedule for those orders is not publicly known.
To add another layer of ambiguity on the demand side, SII is also obliged to export 20 crore vaccine doses in 2021 as part of its agreement with Astra-Zeneca and World Health Organization. Currently, vaccine exports have been halted due to the domestic crisis in India. It is possible that export of Covishield doses will resume once the crisis abates. In fact, 5 million doses of the Covishield vaccine which were to be exported to the United Kingdom have now been made available for inoculating those in the 18-44 age group.
Thus, our estimates allocate the entire production of Covishield for domestic use. Please note that if export of Covishield vaccines resumes, the actual supply numbers for India will be lower than estimated numbers.
Currently India faces a supply problem. In May, the supply of vaccine doses is expected to be around 8-9 crore. As one of us had earlier estimated, the total number of vaccine doses needed to vaccinate the remaining part of India’s adult population, stands at around 178-190 crore doses. The gap between what is available as of now and what is needed, explains the prevailing chaos when it comes to vaccines.
2)For Covaxin, once again, our estimates reflect the total monthly capacity. Bharat Biotech, the makers of Covaxin, have announced that they will be able to ramp up their annual production capacity to 70-80 crore vaccine doses by July. In an interview given in late April, Krishan Ella, the CEO of Bharat Biotech had remarked:
“Last month we produced 1.5 crore doses, this month we are reaching 2 crore doses, next month we will be making around 3 crore doses followed by 7 to 7.5 crore doses. We are ramping up the production and by July-August we will be able to reach 70 to 80 crore doses production capacity per annum.”
Using this as a guideline, we have budgeted 2 crore Covaxin doses for May, which ramps up to 3 crore in June, rising to 6 crore doses per month starting in July (6 crore per month x 12 = 72 crore per year).
3)The first pilot batch of 1,50,000 doses of the Russian Sputnik V vaccine, was shipped to the Hyderabad based Dr Reddy’s Laboratories in early May. We have not counted those since the number is too small for this estimation exercise. As per the agreement between Russian Direct Investment Fund which is marketing the vaccine and Dr Reddy’s, 12.5 crore doses are to be imported to India between April and June 2021 .
We have split that number up from June to September (12.5 crore/4 = 3.13 crore), given that a bulk of these vaccines have not been delivered as yet . For October, we have kept the number at 3.13 crore. It is likely that the Sputnik V dose availability might go up after a few months since six local manufacturers are supposed to manufacture 75 crore doses of the vaccine after the initial batch of imports. The timing of the locally manufactured Sputnik V is difficult to predict. So, as a rough estimate we have retained the 3.13 crore figure for October as well.
4)It is likely that the US might begin to share some of the stockpile it has of the Astra-Zeneca vaccine, with India. We have estimated that to be 1 crore doses a month, starting in June.
5) Zydus Cadilla is expecting to get an approval for its three dose Covid vaccine in May. Their initial production capacity is slated to be 1 crore doses per month, which is expected to rise to two crore doses per month. Given that the vaccine has not yet been approved we stick with the initial capacity of one crore doses.
This vaccine is a three dose vaccine, hence, the “value” of a single dose is two-thirds of the other vaccines – all of which are two dose vaccines. Thus, the equivalent monthly supply estimate for Zydus Cadilla is 0.67 crore (two-thirds of one crore).
6)Another indigenous vaccine made by Biological E based in Hyderabad may become available in August. Since the vaccine hasn’t been approved yet, we have not included it in our supply estimates.
7) During any vaccination drive, some amount of vaccines get wasted due to improper handling, theft and human errors. The following chart shows the rate of vaccine wastage in a few states as of May 10.
Source: Ministry of Health and Family Welfare.
We have not included wastage in our analysis to keep things slightly simple. Having said that, doses lost due to wastage will decrease the available supply for inoculation.
Finally, with these caveats, we can say that there will be a supply around 102 crore additional vaccine doses between May and October 2021. What this means is that vaccines will continue to be in short supply in the short-term.
The efforts highlighted above to get the various vaccines available in India are all positive steps. But as the numbers indicate, the supply pipeline is not adequate to meet our vaccination needs of close to 180 crore vaccine doses.
The primary reason for this shortage is that the government of India waited too long to place vaccine orders and when it did, it didn’t order enough doses. This can be seen in the chart below that compares the vaccination order timelines for different countries.
Now let’s take a look at the possible steps that can be taken to augment the vaccine supply.
A supply of more than 100 crore doses of different vaccines by October, if achieved, will be no mean feat. But even that is not fast enough given our vast population. The following steps can be taken to increase the supply of vaccines. These are medium term solutions and will likely yield results over the 6-12 month horizon. This means that the supply of vaccines will continue to be an issue over the next few months.
1) The central government should work closely with both SII and Bharat Biotech to enable them to hit maximum production capacity. Additionally, both manufacturers should be asked to furnish a weekly supply schedule for better planning and coordination, if that is not already happening. With multiple buyers in the mix now (with state governments and private hospitals) such a supply schedule assumes even greater significance.
2)India is the vaccine manufacturing headquarters of the world. According to Central Drugs Standard Control Organisation, there are 18 private and three public sector vaccine manufacturers in the country. One potential route to increase vaccine supplies is to leverage spare local vaccination manufacturing capacity to increase supply of Covaxin using licensing and/or royalty agreements with Bharat Biotech.
The intellectual property for Covaxin is jointly owned by Bharat Biotech and the Indian Council of Medical Research (ICMR), a government body. In fact, an arrangement along this line is already in motion where the Mumbai based Haffkine Institute, one of the oldest biomedical research institutes in the country, has been granted permission by the central government and funding by the Maharashtra government to start production of Covaxin.
Vaccines production from this plant is expected to take atleast one year. Other efforts, similar to this could be spawned with other vaccine makers after an assessment of technological and supply chain feasibility. However, based on the Haffkine timeline, it is clear that such efforts will not help in the short term. Having said that, we don’t know if the current wave is the last wave of Covid.
3)India can import additional vaccines from the United States. The United States has a contract with Astra Zeneca for 30 crore doses of which six crore doses are either in stockpile or will be shortly available. Since the Astra Zeneca vaccine has not been approved in the US, India can apply a concerted effort – both diplomatically and/or financially- to receive a substantive portion of the stockpile.
India should also look at importing additional vaccines directly from vaccine makers. The Municipal Corporation of Greater Mumbai has such plans.
Among the major vaccines approved and in use elsewhere, the Johnson and Johnson (J&J) vaccine is the most attractive given that it is a single-shot vaccine and it does not need extreme cold storage. The J&J vaccine may not be the best use of taxpayer money, but one that private companies could pursue and make available to the general public at a higher cost.
Vaccine supplies are no good if they don’t translate into inoculation. En-masse administration of vaccines depends on several factors including number of vaccination sites, available personnel, location of sites, and public willingness to get vaccinated. Let’s look at this in some detail.
The following chart shows weekly vaccination rates in India.
Here are some observations from the above graph.
1) The vaccination rate was quite low till early March. The spread of the second wave of covid clearly catalysed the public into action and the vaccination numbers rose steadily till the first week of April, barring a small dip towards the end of March.
From just over 4 lakh vaccinations in the week of February 27 to March 5, numbers jumped to almost 2.5 crore in the week of April 3 to April 9. After hitting that peak, numbers have dropped down to around 1.15 crore vaccines for first week of May. This is a drop of around 54% over just one month. As covid has spread, our vaccination rates have been dropping. Vaccine supply shortages are mainly responsible for this drop in inoculation in recent weeks, and the lockdown imposed across large parts of the country may also have contributed to this.
2)The peak rate of around 2.5 crore weekly vaccines is an important statistic. It translates to a monthly rate of 10 crore vaccines – more than the projected supplies for May but about 30% short of the projections for June. What this tells us is that the distribution capacity can handle the imminent vaccination volume, but will need to start ramping up soon to keep up with the projected supply.
3) According to the Cowin dashbord, as of May 7, there were 58,214 vaccination sites (55,822 government sites and 2,292 private sites). Along with using government hospitals in the urban centres, the government has wisely activated the rural healthcare system for vaccine delivery as well.
The rural healthcare delivery system in India is a three-tier system. The smallest unit, called sub-centres, are health outposts which are meant to be the first contact point between the community and the healthcare system. A group of sub-centres are served by a single primary health centre which has a doctor (medical officer) and nurses on staff. A group of primary health centres feed into a community health centre– which is akin to small hospital with specialist doctors and diagnostic equipment.
A study of the vaccination sites in different states on the Cowin dashboard reveals that many states are using sub-centres, primary health centres and community health centres, as vaccination sites. The rural population is being targeted here.
However, as is often the case, enterprising citizens often outthink policy makers, resulting in unanticipated policy outcomes. In this case, there are reports that urban Mumbaikars, who are digitally more savvy than the rural folks, are showing up in rural areas to get vaccinated. This phenomenon highlights the need to make the registration process more accessible to all.
Now let’s look at state wise vaccination data. As of May 7, 2021, around 16.75 crore vaccine doses had been given. How do different states compare in this vaccine drive? The table below provides some insights.
In the above table, we show the five states that are performing the best and five that are performing the worst when it comes to vaccination rates, among states which have a population of over 1 crore.
Uttar Pradesh has the worst vaccination rate, where only 4.6 % of the population has gotten at least one dose of the Covid vaccine, and just above 1% has been fully vaccinated. It appears that the energy spent by state leadership in image management, has come at the expense of an effective vaccine roll-out strategy.
Bihar, Assam, Tamil Nadu and Jharkand, are the other laggards with no state having fully vaccinated over 2% of their population (except Tamil Nadu which is marginally over 2%). In case of Assam and Tamil Nadu, among other things, the recent state assembly elections may have been responsible for low vaccination rates.
Among states that are doing well, Kerala and Gujarat – with their oft-cited competing models of development – are doing remarkably similar when it comes to vaccinating their people. Uttarakhand, Jammu and Kashmir, and Rajasthan, are the other vaccination leaders.
The ratio of folks fully vaccinated is not starkly different between the leaders and the laggards – 4.83% for Gujarat vs 1.17% for UP – but the figures for people with one shot taken does show a significant difference (17.28% for Kerala vs 4.59% for UP).
Till the end of April, states were dependent on the centre for getting vaccines. So, the discrepancy in vaccination rates is likely to have been a function of the centre’s distribution decisions, as well. The central government has not released the criteria used for vaccine distribution to the states, something that they should be doing for transparency and efficacy auditing.
Having said that, Gujarat has clearly been a beneficiary of the allotment mechanism, receiving the highest quota of vaccines from the centre after taking its population into account. As an April 19 newsreport on moneycontrol.com points out:
“As on April 8, the supplies to Maharashtra covered just about 8.5 percent of the population. For Delhi, it was 10.4 percent. On the other hand, Gujarat, which can’t be regarded as the most impacted state if one goes by official numbers, had got enough vaccines for 16.4 percent of its population – the highest.”
It appears that when it comes to competition between states, Prime Minister Narendra Modi continues to root for his home state.
Starting May 1, the state governments can procure vaccines directly from the manufacturers. Having states compete for what is essentially a fixed supply isn’t a great idea since it will not increase the total vaccines available nationwide. Instead, the states and private corporations will fight over the 50% pool that has been de-regulated.
So states that have more leverage with vaccine makers or more financial clout/headroom stand a better chance of pulling ahead in the vaccination race. It will be interesting to see the trajectory of vaccination rates of different states as they begin to place their vaccine orders in the coming weeks and months. Also, this is clearly creating an access problem for the poor.
As the supply of vaccines increases in the coming months, the question is do we have enough health care workers and vaccination sites to keep up with supply.
First, let’s look at the manpower question. As per the Fifteenth Finance Commission Report tabled in February 2021, there were a total of around 27 lakh healthcare workers in India in December 2017. These include registered nurses (RN), registered midwives(RM), lady health visitors (LHV) and auxiliary nurse midwives (ANM). Specifically, there were 20,48,979 RNs and RMs, 56,469 LHVs and 8,60,927 ANMs, serving in the country. All these healthcare workers are capable of administering a vaccine.
Now, consider a full-throttle vaccination campaign with 1 crore doses/day. Assuming that a healthcare worker administers 50 doses a day, we would need 2 lakh healthcare workers which is less than 8% of the total available personnel. Thus, it is evident that labour won’t be a bottle-neck to ramp up the vaccine drive.
Next, let us look at how many potential vaccination sites are available. Recall that currently, around 61,000 sites are being used. As per the Rural Health Survey of 2019, there are 1,57,411 sub-centres, 24,855 primary healthcare centres and 5,335 community health centres, across the country.
Thus, even without counting government hospitals and private clinics, there are over 1,87,000 potential vaccination sites, almost three times than are being currently used. Thus, vaccination sites also are not limiting factors in scaling up vaccine delivery.
One potential hindrance in getting maximum number of people to sign up for the vaccines is the current vaccination registration process. A huge rush for vaccines has made the signing up process a bit of a lottery. In fact, techies have resorted to writing scripts to alert them when an elusive spot opens up. For everyone else, the process consists of repeated tries on loop.
One major problem experienced by folks trying to sign-up for a vaccine is the non-receipt of a one-time password (OTP). The OTP is a pre-requisite to move ahead in the registration process, and many folks have been unable get past the OTP step. Technical glitches in the early stages of an app/website roll-out are not unheard of, but given the importance of this issue, one would have expected the “routine” bugs to have been ironed out before mass adoption.
That such glitches are so widespread indicates that the en-masse registration was not planned with adequate lead time. Here too, like most aspects of the Covid response, the government’s lack of readiness is being exposed.
The online registration will likely smoothen out over time, but currently it only caters to the internet-savvy comfortable in English. Online sign-ups may not totally work for all folks, both rural and urban. Systems that allow a registration method that is appropriate and accessible for those not comfortable with the current digital setup, need to be created. .As a start, the Cowin registration website needs to become multi-lingual.
The language barrier automatically excludes the majority of the country. As per the 2011 Census, only around 13 crore people identified English as first, second, or a third language. It is mind-boggling that the government decided to offer the registration process only in a language that the vast majority does not understand. That the registration process cannot support the major Indian languages, is again a sign of a system put together in haste.
Vaccine hesitancy can also potentially derail the entire vaccination drive. If too many adults choose not to sign up for the vaccine, it won’t be possible to reach herd immunity quickly. In some ways, the severity of the second wave makes the most compelling argument for the need to vaccinate. Yet, for a variety of reasons, people tend to be hesitant.
Safety concerns, efficacy concerns, and ignorance (wilful or genuine) about the seriousness of Covid-19, are prime reasons that drive this hesitancy. WhatsApp messages and fake news exacerbate the psyche of suspicion and distrust. The best anti-dote to that is positive messaging and increased awareness about the benefits of vaccination. Given this administration’s core competence of narrative management, mass communication to encourage vaccine enlistment should not be a big hurdle.
As a more directed policy step to incentivise vaccinations, especially in rural areas, the central government could consider linking a Public Distribution Service (PDS)-based benefit with a vaccination dose. For example, for each vaccine dose a voucher for a few kgs of rice/wheat, which can be redeemed at the local ration shop, can be given.
This should not cost the central government much (other than perhaps transport and administration) since the Food Corporation of India storehouses are overflowing with way more grain than the strategic and operational buffer that needs to be maintained.
The pathway to a fully vaccinated Covid free India is not easy and won’t happen overnight. But, with proper planning and execution, we can make significant progress over the next several months. We all need to do our bit to succeed in this effort.
I recently wrote a piece for livemint.com, explaining why the central government should ensure that free vaccination against covid is available even for those in the 18-45 age bracket, and why the principles of free market do not work in this case.
In this piece, I carry the argument forward.
One of the arguments being made is that the companies making the vaccines should be allowed to price the vaccine at a price they deem to be appropriate because they need to be compensated for the risk that they are taking on.
In a normal situation, I would completely agree with that. But this is not a normal situation. We are in the midst of a health emergency of a kind India has not seen in a long time. Also, more than that, allowing companies to decide on the price of the vaccine is bad economics. (I had explained this in the livemint piece and I make a new point here).
Let me explain. There are two companies which are supplying vaccines, Serum Institute and Bharat Biotech. They have access to the entire Indian market for the next few months, before the foreign competitors come along. Of this, Serum Institute has been supplying 90% of the vaccines up until now. Basically, it has more or less got a monopoly over the Indian market.
This is a very important point that needs to be taken into account. As per India Ratings and Research 84.19 crore out of a total population of 133.26 crore are now eligible for the vaccine, basically people over the age of 18. This is something that the central government needs to keep in mind.
Even if these companies made Rs 100-150 per dose of the vaccine, there is a lot of money to be made, running into thousands of crore, and that is an adequate compensation for the risk involved. Also, it is worth remembering that Serum Institute did not develop the vaccine. It is a contract manufacturer. These points cannot be ignored.
Other than letting the vaccine companies decide on a price, the central government has also decided to let state governments procure vaccines directly from these companies. The price fixed for the state governments by the Serum Institute is Rs 400 per dose. Bharat Biotech has priced it at Rs 600 per dose.
For the private hospitals, the price has been fixed at Rs 600 per dose and Rs 1,200 per dose, respectively. Of course, these are wholesale prices, and the price eventually charged in the private hospitals, will be higher than this, as those entities need to take their costs of administering the vaccine into account and make a profit as well.
Over and above this, central government will continue to buy vaccines from these two companies and continue supplying them to state governments for free, so that those over the age of 45, can continue to be vaccinated for free, at government vaccination centres.
What will this do? Multiple price points for the vaccines in the midst of a health emergency is bad strategy to say the least. It will encourage black marketing, with black marketers sourcing vaccines from the cheapest source (central government supplying to state governments for free) and selling it for a higher price in the open market. This, especially at a time when there is a shortage of vaccines.
Hence, it makes sense that central government continue to buy the vaccines from the manufacturers and allocate it to the state governments. This does not mean that the private hospitals should not be involved in the vaccination effort. They should be because the aim is to vaccinate as many people as fast as possible.
But at the same time it needed to be ensured that the government vaccination centres vaccinated everyone for free, and not just those over 45. This would have ensured that the private hospitals could not have charged a very high amount to vaccinate. This would have keep prices in control and those who wanted to pay could have paid for the vaccine, as well.
Many state governments have declared that they will vaccinate those in the 18-45 age group, for free. While this is a good move, it needs to be said that this is something that should have happened at the central government level. The central government has many more ways of raising money than a state government. Also, the central government had allocated Rs 35,000 crore towards vaccination in the budget, with a promise to raise the allocation if required.
Over and above this, there is a more important point. But before I explain that. Let me deviate a little here and talk about an Irish-French economist called Richard Cantillon, who lived in the seventeenth century. Cantillon came up with something known as the Cantillon effect.
He made this observation based on all the gold and silver coming into Spain from what was then called the New World (now South America). When money supply increased in the form of gold and silver, it would first benefit the people associated with the mining industry, that is, the owners of the mines, the adventurers who went looking for gold and silver, the smelters, the refiners, and the workers at the gold and silver mines.
These individuals would end up with a greater amount of gold and silver, that is, money. They would spend this money and thus drive up the prices of meat, wine, wool, wheat, etc. Of course, everyone in the economy had to pay these higher prices.
How is this relevant in the world that we live in?
When central banks print money as they have been doing regularly since 2008, in order to drive down interest rates, they do so with the belief that money is neutral. So, in that sense, it does not really matter who is closer to this money being printed and who is not. But that’s not how it works.
The Cantillon effect has played out since 2008. When central banks printed and pumped money into the financial system, the large institutional investors, were the ones closest to the money being printed.
They borrowed money at cheap rates and invested across large parts across the world, fuelling stock market and bond market rallies primarily, and a few real estate ones as well.
The larger point being that if a central bank prints money and throws it from a helicopter, those standing under the helicopter, get access to this money first.
The important word here is access. With state governments and private hospitals being allowed to buy vaccines directly from the two companies, access becomes very important. When vaccination for those between 18-45 opens up on May 1, demand will go through the roof. But the supply will not go up at the same speed, with companies taking some time to scale up. So, how will the vaccine companies decide who to sell how much to?
Should they fulfil the demands of state X first or should they sell more to state Y? Or should they sell more to private hospitals, because the price is higher in that case. In this scenario, access becomes very important. This is the Cantillon effect of vaccines. The phones of the CEOs and the top management of these two companies won’t stop buzzing in the months to come.
What will also happen is that many corporates will look to vaccinate their workforces (in fact, they already are), so that everyone can get back to work fast (Please remember everyone can’t work from home. India has large banks and many service businesses, in which people can’t work from home). In this scenario, private hospitals will have to decide whether they should vaccinate individuals or should they vaccinate corporate work forces, first.
Corporates might decide to pay a higher price for vaccination simply because it might be more profitable for them to have a vaccinated workforce going out there and doing their work, than not.
The current structure of vaccination at multiple price points makes the issue of access to vaccination very important and that shouldn’t be the case. The central government shouldn’t be propagating inequality in access to vaccines.
Hence, the central government should have bought vaccines directly from the manufacturers and supplied it to the states.
Nevertheless, this is not going to happen simply because that would mean that the strategy of multiple price points was a mistake. And the government doesn’t make mistakes, especially even when it makes them.