On April 19, the Ministry of Health and Welfare announced the third phase of its vaccination policy at the time the country was in the throes of a second wave, opening vaccinations to anyone above the age of 18 from May 1. Doing so, it also firmly placed the burden of vaccinatinating those between the ages of 18 and 45 on state governments. Further, state governments have to spend a lot more than the Union government did to procure the vaccines, putting a huge fiscal burden on states. Public health experts say that this approach is problematic — and that the Union government should be the one paying for the vaccines, which should be provided free of cost to the whole population.
Why vaccines should be free for the public
K Srinath Reddy, President of the Public Health Foundation of India called the new policy a matter of great concern because vaccination is a national public duty. “It is absolutely important that public financing pays for it, and nobody who requires it and wants it should be denied a vaccine because they are unable to afford the cost. If the states are unable to pay for it by themselves and the individual is denied the vaccine despite needing it and wanting it, that would be a failure of public duty,” he said.
Economist, professor at the Tata Institute of Social Sciences, and a member of the Kerala State Planning Board, Ramakumar, says free vaccination for everyone is to ensure that we have a vaccination service in India that truly meets the standard of a global public good. “The vaccine should be available universally for everyone and everywhere affordably, safely, effectively and in a way that is easily administered,” he says. The only way to ensure that these conditions are met equitably, he says, is to ensure that the vaccines are free.
Rijo John, a health economist, says Indians are known to have vaccine hesitancy, and it is going to be very challenging to have them shell out such amounts for the vaccine, even at Rs 400 per dose, or Rs 800 per person. “For a family of four, imagine how they have to pay. Look at the average monthly income of households below the poverty line or even at the median of the Indian population. This would constitute nearly half of their monthly incomes,” he says.
Srinath Reddy says he refuses to accept the argument that there are people who can afford and hence have to pay. For a poor family, he says, this is going to be a challenge and a large number of people will not get the vaccine if they cannot afford it.
Why state governments shouldn’t be paying
The Union government had never committed to vaccinating everyone for free; however, during the 2021 Union Budget, Finance Minister Nirmala Sitharaman allocated Rs 35,000 crore for the purpose of vaccination, and said it will be increased it as per need. Most states had not budgeted for vaccinating adults between 18 and 45. In December 2020, the Business Standard reported that the Union government had asked states to potentially look at using bank guarantees to buy vaccines. States are also prohibited from borrowing beyond a certain limit from the market.
It is important to note that the decision to open up vaccination to all adults comes at a time that vaccines continue to be in short supply, and the average number of vaccinations per day has fallen.
When the Centre announced the policy, it was being blamed for both the second wave as well as the shortage of vaccines which exacerbated the situation. The policy to push the burden onto states, experts say, will let the Union government shift the blame to the states for failure to procure vaccines, because vaccine production is not expected to be ramped up for a few months.
Rijo John calls it a political tactic and will push the blame onto state governments, given the Centre was not able to ensure sufficient supply of the vaccine even at a lower cost.
Kerala’s Finance Minister Thomas Isaac has said that the Union government has “abdicated its responsibility” of ensuring universal vaccination. “The new policy will create serious strain on state finances, chaos in vax procurement, escalation of prices and exclusion of the poor. Net result would be prolongation of the calamity,” he tweeted, and termed the policy “penny wise, pound foolish.”
Kerala is one of the states which has announced that it will cover the cost of vaccination for its people. Despite finances being hit due to an uptick in expenses and fall in revenues due to the pandemic as well as delay in GST compensation, many states have promised to cover the cost of vaccinating their population after the phase 3 announcement.
Dr Srinath Reddy says another concern that crops up if states are paying for the vaccine is what happens to seasonal or long term migrants who are in a state which is not their domicile state.
“If every state says that I will only give it to people who are domiciled in my place, then what will happen to people both from the point of view of equity and also from the point of view of public health? Everybody who is residing anywhere even temporarily has to be given the vaccine. The virus doesn't look at your domicile certificate,” he says.
Further, with states having to now individually negotiate (although the prices have been pre-declared), states like Maharashtra and Telangana, where Serum Institute of India and Bharat Biotech respectively are located, may be able to get a better deal.
States had earlier asked the Union government permission to purchase vaccines with state resources, as well as had asked to open up to different population groups depending on demographic, but were denied. What they possibly didn’t expect was the differential pricing for different groups, or having to jostle with other states as well as private hospitals and corporates for the vaccine with barely any time to prepare.
The Serum Institute of India, the producer of Covishield (the vaccine by AstraZeneca), said it would be priced at Rs 400 for state governments per dose, and Rs 600 for private markets. While the first procurement of the vaccines by the Union government was done through the PM-CARES fund at Rs 200 per dose, the second time it was done through the Union Budget for 110 million doses at Rs 150 per dose. On April 24, Bharat Biotech announced that the vaccine would be priced at Rs 600 for state governments and at Rs 1,200 for private hospitals (it was selling to the Union government at effectively Rs 206 per dose). Whenever Sputnik will be imported, it is expected to be priced around Rs 750 per dose, same as its global price. Pfizer has reportedly offered a ‘not-for-profit price’ for the vaccine to the government.
Problems with private sector getting into vaccine procurement
Another concern from the policy is it reduces the bargaining power of the state for a deal. In an interview to The Wire, former Secretary of Health and Family Welfare Sujatha Rao said, “This is the very first time that I’m seeing a central government saying to the states you go to the market and procure the vaccines. What is the negotiating power of the state to be able to do that?”
With the manufacturers setting a higher price for private companies, it will incentivise them to sell to the private market more than state governments, experts argue. Ramakumar says that since the vaccine shortage will continue in the short term, vaccines will have to be rationed while supplying to states and hospitals, which is when the price consideration will kick in. “At that time, a bidder paying the higher price may get the priority. That's not socially desirable,” he says.
“What is the economic incentive for the companies to supply to when the private hospitals are paying more per dose?” asks Rijo John, a health economist. “Even if there is simultaneous demand for both the private sector hospitals and the state government, obviously the incentive would be to supply to the ones who pay the most. That's just the simple way business works,” he says.
When Serum Institute CEO Adar Poonawala was asked about states raising questions about the price of the vaccine that they were being charged versus what the Centre had been charged so far, he told CNBC TV-10 that this was just an option and not a compulsion for states, and they can spend their money if they wish to do so.
"There are enough private hospitals to take care of each state... no state really needs to spend any of their money,” he had said.
Experts disagree. “The bottomline is that vaccines will reach more of the rich in the country and more of the poor in the country will be deprived either by not being able to buy it or afford it,” says Rijo John.
Srinath Reddy says that we cannot suddenly leave everything to the private sector and be unsure about how many people really require the vaccine and in what period of time it will be administered to them.
“For people who cannot afford it, if there are states providing vaccines through state government facilities, then it will succeed in providing that level of equity at least,” he says. However, he questions where the private sector is present across the country.
“There are a number of states where the private sector is only confined to some big cities, not in small towns, not close to villages. How are you going to manage when the private sector is not uniformly distributed very well across the length and breadth of India? Mr Poonawalla may very well say that leave it to the private sector, he can go and map out the private sector presence in every single district of the country and give an assurance that the private sector is there to give equitable and affordable access. It [Vaccinating] is the responsibility of the public sector. This is a responsibility that cannot be passed on to the private sector alone under any circumstances”.
Many corporates have also said they will be covering the cost of vaccination for employees and their families. “But there are employers who can outbid the states for vaccines. What happens to the poorer states? How are they going to access it? They will be competing with private hospitals, with employers, and among the states,” he adds.
“The vaccine market should be systematically regulated. The best way in which it is regulated is when the central government deals with the companies in a centralised form and provides vaccines to states through a dedicated channel based on a socially desirable formula of vaccine sharing,” says Ramakumar.
As things currently stand, India has only inoculated only roughly 8% of the population. Of the 13.81 crore COVID-19 vaccinations that have been administered up until April 24, 12.54 crore are of Covishield and 1.27 crore are Covaxin, according to the CO-WIN portal. A majority of the 13.81 crore vaccinations are just the first dose, at 11.71 crore. Only 2.10 crore people have been administered the second dose so far.