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‘Vaxonomics’ or Vaccine Economics in India

*Note: This article only contains excerpts from the interview. To listen to the entire interview, head to our Interlinked page or check us out on Spotify.

The horrors of the second wave that ravaged the nation acted as an eye-opener for a lot of Indians and highlighted the importance of taking the coronavirus vaccine as soon as possible. However, with the opening of vaccination for all adults in May 2021, India experienced a steep rise in demand, which was barely met by the suppliers. This mounted to a big challenge for the policymakers and an interesting study for the economists. We saw that during the past few months, actions were taken by the centre & state governments in conjunction with domestic and international vaccine producers to satiate this demand. 

In this interview with Dr. Anil Kumar Angrish, we will look at these very steps and measures from an economic point of view to understand the market dynamics of the coronavirus vaccine in India and the role of foreign pharmaceutical giants. 

Dr. Anil has completed his Ph.D. from University Business School, Panjab University, Chandigarh. He is presently an Associate Professor (Finance and Accounting) in the Department of Pharmaceutical Management, NIPER SAS Nagar (Mohali). He has a teaching and research experience of more than 20 years. He has authored and co-authored about 55 publications in reputed journals (e.g., Research Bulletin), newspapers (e.g., Business Line), magazines and books. He has conducted the studies for the World Trade Organisation Cell, Union Ministry of Health and Family Welfare, Competition Commission of India (CCI), and the Department of Pharmaceuticals. He has reviewed two manuscripts for Pearson Education and Tata McGraw. In past twenty years, he has been associated with more than 70 institutional and outside Committees. He has also served as an Internal Audit Officer, Deputy Registrar (Finance and Accounts), Associate Dean (Student Affairs), and Officiating Registrar of NIPER SAS Nagar.

We first began by looking at the domestic demand, supply and pricing mechanism of the coronavirus vaccine in India. Following this, we briefly talked about India’s Vaccine Maitri and its future before concluding the talk with revisiting some promises that other countries made to India in terms of providing raw materials for vaccine production or the vaccines themselves. 

On the domestic demand angle, Dr. Anil shared his insights on the reasons behind an asymmetric demand for vaccines throughout India. He highlighted that the stereotypes certain communities have towards modern medicine played a significant role towards this. A lot of biases, superstitions, and misinformation about how vaccines made people sick (though getting a slight fever after taking the vaccine is a sign that it is working) made people more apprehensive of taking the vaccines. In addition to the rural-urban information divide, Dr. Anil pointed out that there was a gender gap also in the vaccination numbers. Lack of faith in the system and trust in the vaccine, which was seen as something foreign, also led to the asymmetry in demand of the vaccines. These were some of the socio-political factors which have influenced the demand of coronavirus vaccine in India. 

Following this, we discussed some of the economic factors determining the demand of the vaccine. Dr. Anil explained how economic modelling of vaccines is different from that of other goods such as FMCG or ‘Over the Counter’ (OTC) products. The efficacy of the vaccine, reactions of particular populations to a certain kind of vaccine, climatic conditions, number of doses required per beneficiary, local and global regulations, competing products, influence the vaccine demand in their own different ways. On accounting for all of these factors, data suggests that the price elasticity of demand of the coronavirus vaccine in India is less than one i.e., the demand is fairly inelastic. In simple words, changes in income of the beneficiaries or the price of the vaccine do not affect the demand of the vaccine significantly. However, trends show that when the central government gave out free vaccines on a larger level, the aggregate demand for the jabs grew. This observation is quite intuitive. 

When asked about the supply shortage of vaccines in India, Dr. Anil mentioned it depends greatly on the manufacturing capacity of the firm producing it. He added that it is imperative to look at supply of vaccines in the short run and the medium to long run differently. With a constant number of market players, it is virtually impossible to increase the supply in the short run. Conventional economics also supports this argument by asserting that in the short run firms have fixed capital (means of production). Further, in the medium to long run, according to Dr. Anil, the data suggests that Indian vaccine manufacturers have ramped up their production. Moreover, Dr. Anil highlighted that the supply of the vaccines is expected to increase further as the number of players in the market increase i.e., new vaccines are accessible to Indians. 

In the second half of the discussion, we touched upon some key aspects of India’s Vaccine Maitri program and looked at other foreign commitments that were made to India in boosting its inoculation drive. In regard to India’s exports of its coronavirus vaccines under the Vaccine Maitri program, Dr. Anil observed that exports were made in the form of grants and commercial commitments to poorer nations, Indian neighbours, and countries with large Indian diaspora. A lot of these commitments were made under WHO’s COVAX initiative as well. These exports happened when the case of load in India was relatively lesser. However, with the onset of the second wave, the Indian government cut back on its exports. Dr. Anil estimates that the resumption of the program will be possible when India’s R-factor, production of vaccine, among other factors, are stable and India gains some degree of herd immunity. 

On the status quo of contracts and understanding made with foreign governments regarding the export of the raw material or vaccines themselves, the progress is slow. The Drugs Controller General of India (DCGI) has been giving out waivers for bridging trials in India to certain manufacturers who are Food and Drugs Administration (FDA) approved and/or on WHO’s emergency use list to expedite the process. India also expects delivery of a certain number of doses under the COVAX initiative – something to which India earlier donated. Indian pharmaceutical giants like Cipla are also supporting foreign companies such as Moderna to expedite entry of more vaccines into the Indian markets. Joe Biden’s government pitched in to help India by lifting all restrictions on exports of all ingredients of the coronavirus vaccine; however, there is meagre progress made on that front. 

To listen to the full conversation, you can head to our Interlinked page on the website or check us out on Spotify.

This podcast was conducted by Deepanshu Singal, an undergraduate student at Ashoka University, who has a keen interest in Economics, Political Science and International Relations.

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