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“The nation’s goal must be to ensure that everyone over the age of 18 years is given the vaccine, regardless of their economic circumstances,” Congress Parliamentary Party chairperson Sonia Gandhi wrote to prime minister Narendra Modi. How could it be right, she asked, for the same vaccine to be supplied “at three different prices”? She was referring to the new pricing and procurement policy for Phase 3 of India’s Covid vaccination programme that the health ministry announced on April 10 and some of whose contentious aspects Modi alluded to when he addressed the nation on April 20.

Depending on your political persuasion you may welcome or dismiss Gandhi’s criticism. The Modi government will no doubt respond strongly but Dr Harsh Vardhan, whose health ministry is most closely involved, would be well advised to consider the implications of the new vaccination policy.

How did we get to this point?

I reviewed the progress of India’s vaccination programme in my last column some three weeks ago. It started on January 16 with a target set by the prime minister of vaccinating 30 million people in the highest priority groups – frontline workers in healthcare, sanitation and security sectors. On March 1, in Phase 2, the programme was rolled out to people over 50 and anyone with a health condition that made them vulnerable to Covid. The target then was to protect 300 million citizens “in the next few months”. On April 1, Indians 45 and over became eligible.

Not long after, the health minister got into an unseemly war of words with former prime Minister Manmohan Singh over absolute numbers versus population coverage. I argued in this tweet thread that it was right to focus on absolute numbers when dealing with adverse events and on proportions when dealing with processes that needed to be applied universally. Be that as it may, the minister would have done better to focus on the slow progress of the vaccination programme.

The India Task Force of the Lancet Covid-19 Commission last week published a report titled “Managing India’s Second COVID-19 Wave: Urgent Steps” which, among many other suggestions, recommended that the country aim for administering at least 5 million doses a day. Lest anyone rushes to dismiss the report as foreign interference, as the present government is wont to do, all members of the Task Force are eminent Indian or India-origin experts, including senior civil servants from central and state governments.

Against this target, India’s progress, notwithstanding repeated claims in press releases from the health ministry trumpeting the “world’s largest vaccination programme”, has been disappointingly lacklustre. The Tika Utsav that the prime minister suggested in his virtual conference with chief ministers on April 8 to review the Covid situation appears to have had little or no effect.

As of April 22, according to official sources in the health ministry, India’s vaccination programme has delivered 135 million doses; 20 million people have had two doses, including 12 million healthcare and other frontline workers and 8 million people over 45.

New policy for Phase 3

So far all we know about the new Phase 3 policy is contained in this press release from the health ministry. Broadly, it has the following elements:

• Vaccine manufacturers will supply 50 percent of their production to the central government. They will be free to offer the rest to states and private healthcare providers.

• The central government will use its share of the procurement to help states continue vaccinating existing priority groups – healthcare workers and people 45 years and over – for free at the point of use.

• Manufacturers will be required to announce their price for states and private providers by May 1. States will be free to buy from manufacturers at this price and offer it to everyone over 18. Private hospitals will be free to buy vaccines so long as their share comes out of the non-central government half of the procurement.

• Import of vaccines will be allowed freely but these will only be used by states and private providers, the central government will not be involved.

The new policy immediately became the subject of controversy and criticism, online and offline. I myself posted two tweet threads here and here.

The Serum Institute of India, which manufactures the Covishield vaccine, was the first to respond to the new policy when it announced prices of Rs 400 per dose for state governments and Rs 600 for private providers. Though it did not explicitly say so, the presumption was that the price charged to the central government for its 50 percent share will remain at Rs 150 per dose. The company’s CEO, Adar Poonawalla, compared these prices to global market rates that range from Rs 750 for Russian and Chinese vaccines to Rs 1,500 for American vaccines.

Bharat Biotech, which makes Covaxin, has yet to announce its prices, but an earlier press release indicated that it intends to charge $15-20 US dollars, or Rs 1,125-1,500 per dose for its international sales.

The policy of having different channels of procurement and varying prices – one for the central government and another for states and private providers – runs counter to the most basic good practice in procurement of a public health good such as a vaccine. Here’s why.

Firstly, it breaches the principle of universality. 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 cases on normal life and economic activity. The disastrous second wave that India is currently reeling under affects younger adults too and it is the young, especially those in manual occupations who can least afford to work from home, who are most exposed to the risk of infection. Protecting them is no longer a matter of choice but of necessity.

Secondly, the artificial distinction between central and state governments makes no sense economically or fiscally. Once you accept that a public good such as a vaccine should be paid for out of public funds, then whoever does the procurement, central or state government, the money comes out of the same taxpayer-funded pot. If state governments are forced to do their own procurement at additional cost they may well be pushed into charging people for the service. That would create a new disincentive for people already impoverished by the economic slump and loss of livelihoods. The poorest would suffer the most.

Thirdly, by allowing manufacturers to set their own prices, we lose the ability of bulk procurement and price negotiations to get the most cost-effective deal. The policy does not require manufacturers to sell 50 percent of their production exclusively through the non-central government channel. Read it again: it gives them the freedom to sell the remaining 50 percent to states. It is like a put option where the seller has the right but not the obligation to sell at a predetermined (and in this case non-negotiated) price. A global player like Serum Institute has international contractual obligations that it may already have breached. Don’t forget that Serum Institute is a contract bulk manufacturer of the Oxford AstraZeneca vaccine under a licence that requires it to supply Covax and other international buyers with whom it has entered into advance contracts. There is no guarantee how much vaccine will be available for states to buy, even assuming they have the means to pay.

Fourthly, the new procurement policy subtly glosses over the cash injection that the Indian taxpayer has made into the two main vaccine manufacturers. According to an April 20 report by Reuters, finance minister Nirmala Sitharaman announced that the Indian government would fund capacity expansion to the tune of Rs 3,000 crore to the Serum Institute and Rs 1,575 crores to Bharat Biotech. While this is absolutely to be welcomed, one should remember that this cash injection was on behalf of the Indian taxpayer. It is justified therefore to expect that the Indian government (it makes no difference whether it is the centre or the states) gets a preferential price for the vaccines that the extra capacity will produce.

Interestingly, the National Expert Group on Vaccination Administration for Covid-19, or NEGVAC, at its first meeting in August 2020, was all in favour of a single point of procurement for vaccines. According to a report in the Hindu Business Line, the committee, “more or less decided that vaccines required for the entire country would be procured through a high-powered committee in a centralised manner and asked the states to desist from setting aside resources for the same”. That is how most governments around the world have gone about vaccine procurement.

The full membership of NEGVAC is unclear but we do know it is chaired by Niti Aayog member Vinod K Paul and that other members include senior bureaucrats from various central ministries and departments as well as representatives of five state governments.

In a written reply to a question in the Rajya Sabha, the junior health minister Ashwini Kumar Choubey stated that NEGVAC was a high-level committee that “provides guidance on all aspects of Covid19 vaccination including…procurement and inventory management”.

In August 2020, the government’s own expert committee was pushing for single agency procurement of vaccines. Now the policy is multiple channels and differential pricing. What has changed? What led NEGVAC to reverse its advice to ministers? Indeed, did the committee change its mind? Or was this another perverse politically-motivated decision foisted on the nation and driven by crass party political considerations?