Modi on April 19 announced “liberalised vaccine pricing” policy. “Private vaccination providers shall transparently declare their self-set vaccination price.”
This is part-2 of a two-part article, dealing with Politics And Economics of the Vaccine policy.
Covid-19 Vaccines: Politics And Economics Of The IPR Waiver Ploy –Part 1
was published on May 11:
The Essence of Vaccine Policy Is ‘Socialise Risk, Privatise Profit”
Big pharma companies always say, ‘oh we spent a ton of money on research’, and breaking patents will be a huge disincentive for future research. How far is it true?
“When it comes to preparedness for public health emergencies like pandemics or neglected diseases, the pharmaceutical industry only arrives at the party when there is a market and all the risk is taken by public dollars. ‘Socialise the risk, privatise the profit’ which is what is happening now,” said Tahir Amin (Times of India Interview, May 8, 2021). He is an Intellectual property lawyer and co-founder of global non-profit I-MAK, who spent years campaigning for a more equitable health system,
“It’s been well documented that there are a lot of public dollars that have gone into accelerating the Covid-19 vaccines, especially the mRNA vaccines. Moderna has received over $2 billion from US Govt’s Operation Warp Speed. BioNtech received nearly half a billion euros from the German government. Oxford received funding from the UK government. The idea that breaking patents/IP will disincentivise research is one of the top fear-tactic plays…
“As I have pointed out in 2018, global funding for basic research and product development for neglected diseases was just $4 billion. Of this funding, only 17% – $ 650M , came from pharma. A drop in the ocean considering their revenues.”
Tahir is corroborated by Nobel Awardee Stiglitz who wrote:
“Hence, even with a WTO waiver, the vaccine makers stand to make heaps of money. COVID-19 vaccine revenue for Pfizer and Moderna just in 2021 is projected to reach $15 billion and $18.4 billion, respectively, even though governments financed much of the basic research and provided substantial upfront funds to bring the vaccines to market.”
Some peg Moderna’s potential market cap as high as $100 billion and the number of pharma executive ‘covillionaires’ that have emerged from this pandemic.
Given the available supply of vaccines for 2021 globally, over 50% of which have been gobbled up by the wealthy countries. And they bring in billions.
We shall see how it works in India for the two brands, Covishield and Covaxin.
Modi announced “liberalised vaccine pricing” policy
The Modi regime announced, on April 19, the new vaccination policy for third phase wef May1. Earlier phases were for frontline workers of Covid, seniors above age 60, and later those above 45. From May 1, youth above 18 are also eligible.
Curiously this announcement came at a time 90 percent of those above 60 were yet to get their second dose as prescribed. In fact, that task is far from being realized to this day. Given the poor supply position of vaccines, many states officially announced that they are not in a position to vaccinate youth.
The announcement came at a time Bengal was yet to finish three phases of its 8-phase polling. BJP and Modi wanted an electoral mileage from a promise they know is impossible to implement. The results are well known.
Given the worst situation – shortage of beds, oxygen, ventilators, ambulances, crematoria etc – and the panic built around it by the media, and its misinformation, the new policy invariably promotes speculation, black market, scams…all of which help push up the super profits of the vaccine makers, distributors, and dispensers.
It is a policy that admittedly provided for “liberalised vaccine pricing and scaling up of vaccine coverage”. Apart from helping in augmenting vaccine production and availability, the move will also “make pricing, procurement, eligibility and administration of vaccines open and flexible“, the government statement said. This at a time “vultures” are hovering over!
“Private vaccination providers shall transparently declare their self-set vaccination price,” the Govt statement said.
“Under the agreement with the central government, both Serum and Bharat Biotech are supplying vaccines at Rs 150 and Rs 206, respectively (excluding taxes). If previous statements of vaccine makers are any indication, the hiked prices of vaccines could be anywhere between Rs 1,000- Rs 2,000. Adar Poonawalla, chief executive of the world’s largest vaccine maker Serum Institute, has said in the past that the vaccine could be sold at Rs 1,000 per dose to private players, as against Rs 200 for the government.”
‘Socialise Risk, Privatise Profit”. It is the same story in India. “We sacrificed millions of dollars to support the nation,” the SII chief claimed. We shall see the reality below.
“Our private sector has set an exemplary example of innovation and enterprise in developing COVID-19 vaccines,” said PM Modi: “We are lucky to have such a robust pharma sector that smoothly carries out production,” he said in his address to the country on 20 April 2021, in which he announced the new vaccine policy:
Modi is known for good speeches, highlighted by a crony media that asks no questions; of course Modi never faces the media, beyond his Man ki baath, even when he calls for a meeting with CMs, as recently (May 6) protested by the CM of Jharkhand, Hemant Soren.
Earlier on April 23 in a similar meeting with CMs, Delhi’s Arvind Kejriwal was rebuked by Modi, and Kejriwal apologized, all this live, online!
That is our democracy, Modi brand. This is not China, we are told. Indeed true. (see cartoon of India-china war period, 1962, below.)
When Narendra Modi called for a tika utsav or vaccine festival between April 11 and April 14, the number of doses being administered during that period was actually lower than it had been on previous days in the month.
The ground reality of tika utsav: “Our vaccine policy is like temple darshan”
The tika utsav or vaccine festival was not felt by the people. It will take weeks and months to meet India’s needs. An estimate said it will take around two more years for India to vaccinate all those who need it, at the present pace and performance levels. It is a long road.
Those aged sixty-plus, estimated at around 110 million in India, are far from being covered though they were prioritized in phase-1, and needed to be given two doses. Union Govt data as of 7am of April 21, Times of India April 22 reported, showed only 8.4 percent population was given the first dose. And 1.4 percent were given the second dose too. But even as that was so, 45 plus began to be covered, and Modi announced 8 plus will be covered wef May1.
The High Court of Karnataka noted, latest:
“For 26 lakh people the second dose is overdue. You have not even covered one percent of the population.” The state said it has a stock of 12.32 lakh doses. (May 13).
That is tika utsav in a a BJP-ruled, advanced state, more than three weeks after Modi’s new policy that promised vax for youth above age 18. But it is a festival for the manufacturers.
K E Raghunathan, entrepreneur and convenor, Consortium of Indian Associations, in an interview , Rediff.com, May 12, 2021, titled ‘Our vaccine policy is like temple darshan‘, described the situation that resulted from Modi’s policy:
In this second wave, youngsters are getting affected and dying…If anyone in my family is affected today, I spend my time standing in various queues; right from testing, to availing a medical bed, to buying Remdesivir, to buying an oxygen cylinder, to cremating the body too…
And black market is working in full swing across the country. So, I am not able to concentrate on my business at all…When an entrepreneur dies, not just his family suffers, but the families of all the workers and employees also suffer. The livelihood of all those families will get affected…
Instead of giving vaccine free for all, the policy is similar to making the darshan available in some big temples:
If you pay Rs 1,000, you get a special queue. If you pay Rs 500, there will be another shorter queue. There will be a separate queue for Rs 300. And then, you have a dharma darshan too. Is this the way you give vaccine to the people?
The income of the two vax companies will be more than doubled from Rs 19,500 crore to Rs 42,000 crore, shows former Union Health secretary
K. Sujatha Rao, former Union Health secretary with vast experience (of polio vaccines involving 225 milllion doses given to 172 million children on a single day of immunization), brought out the economics of the new policy, in an article dated 30/04/2021:
If centre as a single procurer buys in bulk, at Rs.150 per dose, after accounting for a decent profit, it costs Rs 19,500 crore. When the market is fragmented, and states are asked to separately buy, say at an average cost of Rs 430 per dose, as now decided by Modi regime in its policy (of April 19) it costs Rs 42,000 crore.
“At Rs 200 per dose, the manufacturer makes a super profit and it will be the most expensive vaccine procured by governments under the Universal Immunisation Programme,” she wrote.
Even if purchased by Centre alone, it would still mean an outlay of Rs 26,000 crore against a provisioning of Rs 35,000 crore for vaccine procurement in the budget 2021-22.
Govt helped both companies to ramp up production: she mentioned financial assistance of Rs 4,200 crore from the Government of India and GAVI, to SII ( from 60 million doses a month to 100 million doses). Of this, it has contractual obligations to COVAX and other partners, leaving about 800 million for India.
Rs 1,500 crore is given by the Government of India to The Bharat Biotech ( capacity is currently 10 million, to ramp up availability of 700 million doses by July 22).
Sujata Rao calculated at an average of Rs 430 per dose for the states. She did not reckon with private sales: 50 percent doses to the centre, and the rest to the states and for private sales. That was the actual policy announced. Private sales are priced still higher at Rs. 1000-1200 per dose. Thus super profits are ensured to the makers. That is Modi’s Swadeshi, meant to benefit the comprador capitalists!
Veil of secrecy : One example
There are things beyond public knowledge, despite claims of transparency.
The Indian Council of Medical Research (ICMR) has refused to share a copy of its MoU with Bharat Biotech, and the amount spent on the development of Covaxin sought by a Right to Information application filed by the Software Freedom Law Centre, India (SFLC.in), reported The Hindu, May 08, 2021. ICMR said the copy of the MoU and the amount spent on the development of the vaccine is “third party confidential information” under Section 8(1)(j). SFLC went to First Appellate Authority at the ICMR.
ICMR has, however, disclosed that the royalty received by it from the sale of Covaxin would be 5% on its net sales.
The manufacturers had the benefit of public funding, and a captive, monopoly market, apart from the freedom to sell at exorbitant price – they decide – to states and private sector. That is the essence of liberalization!
Sacrifice? No, Super Profits, more than expected, and so soon!
“ We sacrificed millions of dollars to support the nation,” the SII chief said (PTI 6 April 2021) . Sacrifice or super profits? We have seen above the income is more than doubled.
The details given above are not speculation. Let us see what SII (Covishield) expected and got. Adar Poonawalla, CEO of SII himself , in an interview some months ago, acknowledged that they would get a profit even at Rs.150 per dose. He wished to have “super profits”, but that would be at a later stage, he said. Modi did not keep him waiting.
The vax campain in India was launched on 16 Jan 2021. That later stage came so soon, on April 19, promising “super profits” to both companies, acknowledged by SII.
It should be noted that even the subsidised price of Covishield and Covaxin provided a normal profit per dose to both firms. Serum Institute CEO Adar Poonawalla confirmed this in an interview to NDTV on April 6:
“Is it still profitable today, on a per dose basis? Yes, absolutely,” he said.
“…I would not say we are not making any profits, but we have sacrificed what we call super profits.”
He added that the Serum Institute would be content with normal profits only for “a temporary period”. On super profits, he said, “We can always make those profits after a few months.”
Modi praised their enterprise: “Our private sector has set an exemplary example of innovation and enterprise.”
Poonawalla himself gave information of investment and pricing:
In an interview to Business Standard last year (July 29,2020), he said they “invested close to $ 200 million in the current phase of producing Oxford- AstraZeneca vaccine,” Covishield .They plan to produce 3 to 5 million doses per month, and ramp up to 350 to 400 m per year. “Initially, we would like to keep the price under Rs. 1000.” Of this, we will get Rs. 600-700, and the rest would go to distributors.
They “tied up with five candidates so far”, and are working on “two of our own.”
In a later interview (BS, 11 Jan 2021) he said “the special price of Rs.200 per dose is for the first 100 m doses supplied to the Govt… We have a stockpile of 50 m doses. “I can give it only to the govt under the restricted license and not the private market or export it.” He added hey have a commitment to supply to Covax group (Africa), GAVI etc…the Govt has “to relax this norm.”
But actually the SII exported, presumably also for private use. At one stage, exports exceeded India sales. Later balanced, amid strong protests on shortages.
“We would need Rs 3000 cr to ramp up production capacity …He hopes to increase to 110 m doses per month from June 2021. SII delivered 100 m doses to India and exported 60 m doses…and “agreed to sacrifice profits.”
SII needed Rs 3000 cr, but got financial assistance of Rs 4,200 crore from the Govt to ramp up, we have seen.
Similar is the case with Bharat Biotech (of Covaxin) , the smaller of the two: Its CEO Krishna Ella is on record that he might have spent about Rs 350 crore for development of the vaccine that includes Phase 3 trials. With the Rs 1,500 crore grant support from the Centre, BB hopes to expand production to 700 million doses per year from the current level of 60 million. With the new policy, super profits are sure to arrive.
Thus the essence of the new Vaccine Policy is ‘Socialise Risk, Privatise Profit”.
Modi’s political economy that creates monopolies, who set the price and indulge in profiteering
K. Sujata Rao questioned the claims of “sacrifice” by vax makers. Analysing the flawed policy she mentioned a mistaken notion that SII and BB would be adequate for India’s needs. But truth is the shortages were staring in the eye. No mistaken notion.
“Permitting companies to set the price,” was deliberate policy, which she analysed:
“ Government has announced three important decisions: One, earmarking 50 per cent of the capacity for GoI, the rest for the open market; two, waiving bridging studies for market entry of foreign players; and three, astonishingly, permitting companies to set the price.”
“ Recently, the SII and BB announced their pricing policy — Rs 400 and Rs 600 per dose for the state government and Rs 600 and Rs 1200 for private parties respectively. The SII vaccine is available in European markets for Rs 161 per dose, Rs 210 ($3) per dose for GAVI and will be provided at Rs 150 to the Central government. The third entrant is Sputnik that proposes to start production in June and is considering charging Rs 750 per dose.”
The reality is, it is a deliberate policy to benefit the big capitalists, compradors and naive. She wrote:
“The CEO of SII also made three interesting admissions in interviews — that though the Rs 150 per dose gives normal profits, the intention is making super profits; that his (not the nation’s) first priority will be to supply vaccines to Maharashtra; and third, most worryingly, the private sector will emerge as the main provider of vaccinations in the country, not the state governments.” (indianexpress.com, April 27, 2021)
Pricing is dependent on actual cost of inputs, expenditure incurred on clinical trials, sales promotion and small profit. For SII, investment has been minimal since the development costs have been borne by Oxford University and AstraZeneca.
Indian Government has also extended emergency authorisation, besides Rs 3,000 crore as grant/advance purchase amount, in addition to the USD 300 million already received from GAVI to expand vaccine production.
Though the GAVI grant was given six months ago, SII does not seem to have expanded its production.
It has now promised to manufacture 100 m doses per month by July end. How much of this will be available for India is unclear.
What is interesting about the current political economy discourse is the tendency to treat central grants as belonging to “the GoI” as separate from “them” the states, even though the money spent is from the direct and indirect taxes paid by the people.
This is strange thinking as the Central government is legally obligated to control the “interstate spread of infectious diseases” (Entry 29 of the Concurrent List under Schedule VII of the Constitution).
Assistance to states to combat such diseases is its fundamental duty.
It is under such an understanding and because of the wide externalities that infectious diseases entail, that the Centre has always procured vaccines and other consumables for states under all National Infectious Disease Control Programmes.
Besides, such an arrangement also makes economic sense. In centralising procurement and being the sole buyer, government gets the market power to obtain highly competitive rates and ensure robust quality assurance processes and coordinate supplies based on transparent objective criteria.
Secondly, government also has the power to cap prices of all essential drugs, based on the costing carried out by the NPPA.
With the incentives offered to foreign players, there is now a more competitive environment. In the event of attempts at cartelisation, government can invoke compulsory licensing and expand production through the 18 manufacturing companies in India, boosting availability at an administered price.
Simultaneously, GoI should aggressively take up with the US to support its demand for waiver of the IPR on vaccines and help expand its availability at affordable prices.
In other words, an intelligent use of authority by the GoI can halve the estimated expenditure of about Rs 60,000 crore and ensure a more efficient utilisation of the saved funds to strengthen health systems.
The next two years will be difficult. This is not the time to create monopolies and allow profiteering.
Instead, this is the CIPLA moment when it took on the MNCs and crashed the market of HIV/AIDS drugs from USD12,000 to USD300 per person saving millions of lives round the world. Needed is a commitment to peoples’ welfare.
(See Indian Express, April 27, 2021, article under the title ‘The vaccine responsibility’)
The former Health secretary, while endorsing their use, candidly mentioned elsewhere the dubious and limited value of these vaccines as of now: They do not prevent, nor cure the infection. They are supposed to provide protection by reducing severity, and almost eliminating mortality. When does the protection kick in? Not sure. How long does the protection last? An year, or more, or six months only? Not yet established, as permissions were given under emergency conditions. But with all that, they could dictate their price and profits, with deleterious effects on the people and the country, more so in months to come.
It is not a solitary view. Many experts made similar observations.
Express News Service, 23rd April 2021 reported:
For instance, Epidemiologist Jammi N Rao dubbed the policy of having two or even 3 different prices for different purchasers as “mad”. He reasoned:
“From a fiscal point of view state or central government makes no difference, it is ultimately the same taxpayer funded pot of money,” he said and made four points to argue against a system of multiple channels of procurement and differential pricing.
Firstly, it breaches the principle of universality, Rao said.
“There is now almost unanimous agreement that a quick and efficient programme of vaccinating the majority of the population offers the best, perhaps the only, means of escaping the chokehold exerted by waves of Covid-19 cases on normal life and economic activity,” he reckoned.
Secondly, if states are forced to do their own procurement at an additional cost they may well be pushed into charging people for the service, Rao argued saying that it will create a new disincentive for people already impoverished by the economic slump and loss of livelihoods according to him.
Also, said Rao, by allowing manufacturers to set their own prices, the country loses the ability of bulk procurement and price negotiations to get the most cost-effective deal.
The fourth argument put forth by him is that the new procurement policy subtly glosses over the cash injection that the Indian taxpayer has made into the two main vaccine manufacturers—the other one being Bharat Biotech.
Super profits: “Union government has succumbed to the pressure” of corporates
R Ramakumar, a Professor at the Tata Institute of Social Sciences in Mumbai commented, in an article, in scroll.in Apr 20,2021 :
“The Union government’s decision to deregulate vaccine prices in the midst of the pandemic is a generous gift to private vaccine companies. This gift is in addition to the Union government’s decision to provide new credit lines of Rs 3,000 crore to the Serum Instute of India and Rs 1,500 crore to the Bharat Biotech to help them expand capacities. Both companies are also likely to be among the recipients of the Union government’s research and development grants worth Rs 900 crore under the Covid Suraksha Mission.
“Regardless of such generosity, the vaccine producers insisted on their right to make super profits, and the Union government has succumbed to the pressure.”
However, more importantly, the Union government also announced a series of new measures that would essentially liberalise vaccine sales and deregulate vaccine prices.
There is genuine fear that these new guidelines will make vaccines unaffordable and exclude millions of India’s poor from access to vaccines.
Modi’s Swadehi India is outwitted by its old master, UK
Modi’s Swadehi India is outwitted by its old master, UK, and its Indian comprador SII, that is yet to fulfill its promised doses to India but decided to shift to greener pastures. Former diplomat M. K. Bhadrakumar wrote an article (May 4, 2021) aptly titled Boris Johnson walks away laughing with India’s Serum Institute in tow. See extract :
The big question is: Are Indian laws so toothless to protect national interests?
India, the “world pharmacy”, is entering shark-infested waters, as vaccine supply is getting intertwined with the country’s opaque decision-making, its powerful corporate culture and episodic diplomacy.
The report that the Serum Institute of India (SII) is making a whopping investment of GBP 240 million and shifting the main focus of its R&D and vaccine production to the United Kingdom underline that the Indian company is moving into greener pastures.
The Downing Street has bragged that the SII will set up a sales office also in the UK, which “is expected to generate new business worth over USD 1 billion, GBP 200 million of which will be invested into the UK.” It added,..
Serum has already started phase one trials in the UK of a one-dose nasal vaccine for coronavirus, in partnership with Codagenix INC.
Without doubt, Johnson has stolen a march over PM Modi just when the Indian foreign policy establishment is daydreaming about the possible induction of the UK into the Quad to contain China. Clearly, Johnson’s priorities are different — transfuse lifeblood from the former colony, the jewel in the Crown, into his “Global Britain” project.
See a related earlier article, in CC , April 24, 2021:
Ramakrishnan was a media person and frequently contributed to countercurrents.org.