A Policy Difficult To Defend

Context: Recently, the Union government has reversed its vaccination policy and will now procure for the states. However, there was no change to the allocation of 25% to the private sector, which calls for criticism.

Issues with the private sector’s share of total manufactured vaccines

• Demand-supply mismatch: As it is out of sync with private sector’s share of total vaccination centres, which are far fewer than government’s.
• Mistaken assumption of inflated middle class: 25% of allocation is based on 25% of population willing and able to pay for a commodity for which social benefits exceed private benefit.
  • However, affluent form only a tiny fraction of uppermost 25% of our population based on income.
• Regressive market behaviour: Markets tend to under-produce commodities having significant positive externalities.
  • E.g. Preventive services like vaccines generate a lower private demand than curative services.
  • Thus, subsidising or incentivising users and penalising non­users of preventive services are two ways of promoting consumption of such services
• Crowding out effect: As better-off will have better access to free vaccines provided by the government, creating a ‘crowding out’ effect for the poorer sections.
• Overlooks demographic priorities: A large chunk of self-payers are likely to be younger, productive individuals who are at lesser risk of severe disease and mortality than the elderly.
  • However, vaccinating poorer and marginalised sections which is more challenging than vaccinating the easily accessible better-off sections.
  • The resultant disparities along geographic and socioeconomic lines would not be consistent with the notion of herd immunity.
• Concomitant inequities and regressive: As the vaccine production in India is led by out-of-pocket expenditure.

Way forward: The pandemic is the right time to attain the appropriate public-private policy mix.

• Leverage strengths of the private sector: Any engagement with the private sector needs to sufficiently exploit the strengths of the private sector, such as greater reach, innovative processes and efficiency.
• Engage smaller players too: This will be replete with challenges, including the need for strong regulatory and information systems, and more decentralised but accountable regulation might be called for.