Vaccine Pricing and COVID-19

Vaccine Pricing and COVID-19

The Drugs Controller General of India (DCGI) on 13th April 2021 cleared authorisation for emergency use of Sputnik-V, a Russsian vaccine. Sputnik V is the third vaccine to get approval for rollout against the coronavirus infections in India after Covishield, the Oxford-Astrazeneca vaccine manufactured by the Serum Institute of India, and the home-grown Covaxin. Pfizer which had previously applied for emergency clearance with the DCGI in India is now on hold as the office of the DCGI has asked that bridge trials be conducted to verify data from international trial of the vaccine. Currently in India, vaccines are being administered in Government Hospitals free of cost, while private hospitals are allowed to charge upto Rs. 250 for the 2 shot dose of the vaccine. The focus right now is to vaccinate as large a percentage of the population as possible and not let monetary barriers restrict access to healthcare. This, however, has to balance the interests of the vaccine makers in terms of monetary incentive to innovate and produce further. Hence, vaccine pricing is an important facet of the healthcare system. Vaccine pricing is becoming increasingly complex and multidimensional at a global level and in certain country contexts. Contracts now include elements such as assured volumes, upfront payment, multiyear contracts, bundling of products, discounts and rebates, etc. These conditions make it more difficult to identify the actual price of a vaccine and to disaggregate all price components.

It must be remembered that the present price which is arguably affordable by a large population is the result of several rounds of negotiation. Restrictions placed by the government on the manufacturing companies in the form of export caps, pricing, licencing, etc are important issues that affect healthcare, economy, and intellectual property rights. For example, Pfizer which had previously applied for approval by the DCGI is now on hold after the demand for a bridge trial. Meanwhile, Pfizer has expressed that freedom to trade is crucial for its presence in the Indian vaccine market. Price caps and export controls will discourage private sector participation in India’s vaccination efforts. While regulatory requirements in the form of compulsory bridge trials as in this case may be upheld in view of safety concerns, however pricing and export freedom is a must. The government’s decision to cap vaccination costs at private hospitals at Rs. 250 per dose—Rs. 100 for the hospitals to recover their costs and Rs 150 to be passed on to the vaccine-makers casts a shadow on the virtues of the private sector which have been eulogized by many. The SII had talked of providing 10 crore doses to the government at Rs 200 and then selling in the open market at Rs. 1,000 per dose. The Economic Times has reported that the government has renegotiated the cost of Covishield further downwards, to Rs 150 plus GST. This, when the Covax initiative of the WHO and Gavi is paying Rs 220-230 per dose and, elsewhere in the world, the vaccine is selling at Rs 290-380 per dose. Assuming that the Rs 160-200 pricing is meant to serve the poor, it is hard to understand why vaccine-makers should be forced to make this pricing available to even those who can afford higher charges. Making the have’s pay an appropriate price for the vaccine will help ensure that the have not’s can access the medicine more equitably. As pointed out before, against a target of 30 crore—the government’s estimate of the priority population—the cost of a single dose is Rs 500-600. In such a situation, it seems justified that companies such as Pfizer are rightly worried about pricing issues, since the government mandate of 150-200 rupees does not reach even the halfway mark.

In a recent Forbes article it was noted that manufacturers of vaccines have been candid about the intention to raise prices in the endemic phase. A Pfizer CEO was reported to have stated that since the current situation is not “normal” and the primary focus is to battle with a global pandemic, pricing has been formulated based on public policy and not “market forces” as is the norm. Pfizer has proclaimed that they are following a tier pricing policy. It is one price for the developed world based on their GDP, another price, lower for the middle-income countries and in the low-income countries, like countries in Africa etc, a not on profit based price is being charged. In the United States of America, Pfizer/BioNTech, Moderna, and Johnson & Johnson have all claimed to their investors that they will increase prices as soon as the pandemic phase is over. The vaccine manufacturers are acutely aware of the real possibility that people will need annual booster shots, and see this as an opportunity for increased revenue.

This raises ethical questions regarding whether such price hikes are justifiable. Monetarily regarding a company’s successful launch of life saving drugs seems reasonable especially since it would also lead to further incentivizing innovation and research aimed at medical advancement in general. However, patenting and granting monopoly rights over lifesaving drugs and raising their prices to seize “economic opportunities” may smack of greed.

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