As covid cases rise with increasing economic activity, the only way forward for India is to formulate a sensible acquisition and pricing policy for a coronavirus vaccine, when it becomes available. The goal is simple: a policy that ensures the fastest delivery of a vaccine for the largest number of people. The only way to achieve it is to rely on and work with the private sector to acquire and allocate the vaccine across India, and shun price and quantity controls. The country needs dual acquisition and pricing strategies. First, vaccines for the poor should be paid for by the government at cost; and second, a free market for the vaccine should operate for those who can afford it. The private testing market was crippled by slow approvals and court-mandated pricing. This must not happen with a vaccine.
The good news first. Unlike other illnesses, where the chance of vaccine development, production and availability for the poor is low, the pandemic has created a very large market for the vaccine, and the incentives of vaccine developers are well-aligned with society at large. Second, Indian manufacturers, frontrunners at mass producing vaccines, have struck deals with most vaccine developers and global pharmaceutical companies. This places India in a unique position to get early access to a vaccine—one it must not squander.
The next step would be vaccine delivery across India. The government is already working with pharmaceutical companies like Serum Institute of India. Ideally, it must acquire about 500 million doses in the first year and ensure delivery to the poor. Here, the government must resist India’s past impulses of nationalizing private firms, or imposing price and quantity controls, or strong-arming manufacturers on pricing. Instead, the government must pay for vaccine doses at cost, the only way to ensure India doesn’t destroy its own long-term private vaccine production capacity. Currently, Indian vaccine companies can produce at a scale that brings costs down to ₹150-225 per dose; 500 million doses would cost the government just over ₹110 billion to acquire at cost. In comparison, India spent almost a quarter of that on the Statue of Unity, and the 2014-19 NDA government spent half of that on publicity and advertising.
Paying ₹110 billion to acquire vaccines for half a billion Indians is a steal. The economic loss because of 2020-21’s first quarter contraction was ₹8.45 trillion. So a small and sensible investment by the government will be worth every rupee in jumpstarting economic activity and helping the poorest Indians who have suffered acutely in this crisis. There are many delivery strategies—reimbursing the poor for getting vaccinated, reimbursing private vendors for each patient administered, setting up a government-provisioned free vaccination drive, etc. But getting the pricing and quantities right with the private sector is crucial, and paying private firms for doses will not only pay for itself and more in increased economic activity, but also help develop India as a pharmaceutical hub. – Livemint