Nickeled & Dimed

Penny for your thoughts?

We are accepting articles on our new email:

A Parallel ‘Public-Private’ Approach to the Coronavirus Vaccine

With a number of vaccines coming up globally, several countries have launched widespread inoculation drives. This has been made possible by the use of military logistics for distribution and large-scale procurement of vaccines from the handful of producers. Although most of these producers are private players (barring some like the Chinese manufacturer Sinopharm), the inoculation process remains largely government controlled. Though it makes sense for government control to be put in place at this time, an alternatively planned privatisation of the vaccine’s production and distribution could complement the government’s efforts tremendously. 

According to a report in ThePrint, India was not ready to bring the vaccines in the private sector because of limited stocks and a global urgency to inoculate the priority groups i.e., the frontline workers and people with comorbid conditions. Nevertheless, as Anand Mahindra expresses in his Tweet, privatisation of the coronavirus vaccine is much needed to “dramatically expand distribution throughout India using both private and public sector channels”. India is the world’s largest producer of vaccines and a recent NDTV report indicates that there shall be no shortage of supply of vaccines in India should the government choose to allow some extent of privatisation. In fact, it goes on to say that India is able to export a huge chunk of vaccines to neighbouring states, almost free of cost to ensure that the already produced vaccines do not expire and go waste. Although officially India’s ‘Vaccine Maitri’ was meant as a gesture of goodwill towards neighbours/poorer friendly nation states to help them combat coronavirus, some critics see it as a mere attempt at consolidating India’s dwindling relations abroad. 

Nevertheless, there is clearly a capacity for India to produce more doses and distribute them to more Indians (who can afford it) through already well-established private channels. Privatisation is very common in vaccine production. Most of the vaccines for diseases other than coronavirus are privately produced and distributed. In India, one can say that, with the expertise and the scale of operations, Serum Institute of India (SII) and Bharat BioTech have a ‘monopoly’ over ideas of coronavirus vaccine production. Hence, for other manufacturers to start producing, there needs to be some sharing of these rights over the vaccine ‘code’. In general, privatisation will allow technological transfers and help move the system closer to a ‘pareto efficient’ state in some sense. 

Even if these players aren’t willing to share their rights, they have enough capacity to produce vaccines on a massive scale, enough to meet the demand themselves. Privatisation of the vaccine would for sure lead to a hike in price. The differential pricing of the vaccine in private/open channels can be justified through classic demand-supply curves. However, the price must be regulated by the government to some extent in order to prevent the market from sending the price through the roof, given a relatively inelastic private demand for the vaccine. Although the price of ₹600 for private hospitals and ₹300 for government hospitals is considerably lower than the American, Russian and Chinese counterparts according to the SII statement, the politics and scrutiny of the opposition parties in India over it hasn’t stopped.

The big question that remains for now is, how the government will handle this. Ideally, it should subsidise vaccines to the government hospitals in order to make it accessible to the poorer population. Providing it for free still remains just an election promise, far from practical implementation, although some public intellectuals like Arvind Subramanian still seem to advocate for it.  

As stated previously, the distribution will be impacted too due to privatisation. Most private players have already established end-to-end global cold chains. These ensure production, distribution and administration of the jab to most countries across the globe. For example, Bharat BioTech has an export network spanning 123 countries, covering huge portions of the developing and the underdeveloped world. 

The privatisation of the coronavirus vaccine has numerous pros at the cost of increased price. Practically, this increased price (as long as it is somewhat regulated and does not go through the ceiling) should not be a problem as the primary target of this market would be to make the vaccines available to corporates and private individuals and entities like schools, hospitals who can afford to administer the vaccine at market price. 

Opening of the private channels would speed up the vaccination rate, allowing faster resuming of economic activity throughout the country. The government can focus more on vaccinating the underprivileged, who cannot afford to buy the vaccine off the private markets, through its ongoing subsidised inoculation drive. This will allow the vaccines to reach places where the government couldn’t meet the demand. Such a parallel approach will make the country better off and help attaining the herd immunity levels faster. 

This would also boost productivity in the healthcare sector because it would open more channels of inoculations of the citizens. More private and corporate hospitals would get access to these vaccines allowing them to inoculate citizens who might be low on the government’s priority list but can afford to pay the private prices for the vaccines. 

Along with this, a certain level of Vaccine Universalisation and Vaccine Nationalism must also be practiced. Given the worsening conditions in the country, a move towards universalisation i.e., removal of any and all eligibility criteria for receiving the vaccine, at least in the adult populations, is a must. In this regard, the central government’s move to bring the eligibility age criteria down to 18 years is quite reassuring. Once the efficacy of the vaccine is tested and approved by the concerned authorities in younger age groups (between 0 –18), there is no reason why they shouldn’t also be inoculated. However, the potential roadblock to this would only be in the supply side of the vaccine. Given India’s huge youth population, the suppliers (governmental and private) need to make sure that the demand is satisfied, for the move to be a success. With very low vaccination rates, India also needs to rethink its ‘Vaccine Maitri’. It is necessary to practice some kind of vaccine nationalism, where the export of the vaccine is slowed down for the domestic demand to be satisfied. 

In conclusion, privatisation will in a way incentivise these firms to produce more (to the fullest of their capacities), expediting the inoculation drives and simultaneously generate extra revenue in the process – a win-win situation for the government and the private sector.

Deepanshu Singal is an undergraduate student at Ashoka University with a keen interest in Economics and International Relations.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: