Crisis And A Price Barrier

Context: Current vaccine policy disregards economic realities. States must form a consortium to negotiate affordable prices from manufacturers.

Issues with the current vaccination policy:

• Disregard for the economic realities of the citizens: In the 3^rd Phase of vaccination (for 18-44 years), state governments will need to procure vaccines from manufacturers directly.
  • Thus, the states will now compete with private healthcare facilities to procure vaccines from a limited number of capacity-constrained vaccine suppliers.
• Exclusionary and prohibitive private vaccination: Pricing of the vaccine at Rs 600 ( for two doses) per person constitute more than 31% (36% for rural) of the overall monthly budget of such an individual.
  • Data from the NSSO time-use survey (2019) suggests that the per capita monthly consumption expenditure for an average Indian is about Rs 1,920 and lower for the rural sector (Rs 1,672).
  • Based on a primary survey of willingness to pay (WTP) for Covid-19 vaccines, the current prices are likely to impede rapid vaccination.
  • The maximum WTP on average stood at Rs 140 for the almost fully effective vaccine and at about Rs 109 for one with 70% effectiveness.
  • This is aggravated by the fact that 66% of the respondents experienced an income shock of over 50% vis-a-vis the past year’s income levels.
• Other factors: Shortage of the vaccine, poor administration coupled with vaccine hesitancy has contributed to an abysmally low rate of vaccination.
  • Incidentally, only 2.8% of the population has been fully vaccinated as of May 12.
  • Leaving sections of the eligible population out of coverage poses further risks of mutations.

Way Forward:

• Coordinated efforts of the states:
  • As it is known that a single buyer can always negotiate a lower price for a product with one or more sellers, states should form a consortium to leverage this “buyers power” in the form of pre-purchase agreements.
  • This step needs to be expedited on three related counts –
    1. Pre-purchase agreements would tackle any uncertainties from the point of view of vaccine manufacturers and allow for faster expansion of production capacity.
    2. Any delays will strengthen the position of potential private buyers and weaken the ability of the consortium to negotiate a lower price (which may promote inequity and black marketing).
    3. This strategy offers a superior mechanism to achieve prices that are affordable in a country that remains poor and adversely affected by the evolving economic impact of the Covid-19.
• On the financial front, curtailing state expenses and creative budgetary solutions like public health bonds offer some solutions for deteriorating public finances.

Conclusion: It is important to heed Shakespeare’s advice of “better three hours too soon, than one minute too late”. A minute later would surely be fatal in this hour of reckoning.