Opening up the vaccine market

The elements of a free market — competition, choice, and prices — will help advance social welfare

Updated - February 15, 2021 01:19 am IST

Published - February 15, 2021 12:15 am IST

A beneficiary gets herself clicked at a photo booth after receiving a COVID-19 vaccination shot at the BMC’s jumbo facility at Bandra-Kurla Complex.

A beneficiary gets herself clicked at a photo booth after receiving a COVID-19 vaccination shot at the BMC’s jumbo facility at Bandra-Kurla Complex.

Today, India completes nearly four weeks since it began administering the two COVID-19 vaccines — Covishield and Covaxin . During this period, the country has managed to give the first dose of the vaccine to only about eight million people, which is about 0.6% of the population.

Seroprevalence surveys suggest that some 400 million people already have antibodies against SARS-CoV-2 in India. Assuming true herd immunity is reached when 60% of the population develops antibodies against the virus, for a population of 1.3 billion, that would require over 780 million people to develop antibodies either naturally or through vaccines. If we assume that 400 million have already developed antibodies, how will the additional 380 million develop antibodies quickly, without contracting the virus, especially given the high level of vaccine hesitancy and lack of trust in both vaccines and the government? In fact, at the current rate of vaccination, which is about eight million over four weeks, the country would require about 47 months (or about four years) to reach herd immunity. It simply cannot afford to wait that long.

Editorial | Boosting confidence: On need for efficient use of COVID-19 vaccine stocks

Constricted market

In this context, it is surprising that the Indian government has stayed away from a free market system for COVID-19 vaccines, especially given that several vaccine options are now knocking at its door. Instead, there are only governmental channels, which can work only to a certain extent. The rules and elements of a free market, such as competition, choice, and prices, will go a long way in advancing social welfare.

On this count, the drug regulator of India has not inspired confidence. Pfizer recently withdrew its application for emergency use of its COVID-19 vaccine in India. There is no transparency on the Moderna-Tata discussions. Gamaleya Sputnik V has positive results and has advanced in its work with Dr. Reddy’s Laboratories. This vaccine should soon be ready to hit the market, but here too it seems like the regulator is slowing it down by distorting incentives. Meanwhile, Johnson & Johnson has its one-dose vaccine ready; Novavax’s vaccine is also in the offing; and Gennova might also speed up its clinical trials for its mRNA vaccines if incentives start making more sense through free markets.

Not opening up the market for these options suggest that there may be other considerations at play here, which are beyond the health and welfare of citizens. Many households in India are waiting to pay privately for the vaccines, in addition to socially bearing the cost of the vaccine for extended families.

Also read | Private hospitals keen on taking up COVID-19 vaccination

A constricted vaccine market does nothing to help the government’s aspiration of a $5 trillion economy. In fact, the sooner the country reaches herd immunity, the more likely the chance that the economy will recover faster. Stimulating the economy would also be an incentive for the government given that its international image has taken a beating recently following the farmers’ protests.

Private motivations

Economists point out that since vaccines boost health and immunity, creating additional private motivations with a free market makes rational sense in India’s context. India is not really a place where one can expect private subsidies to take vaccines to socially optimal levels, such as in the U.S., because that may be socially unaffordable for the government. If this is not done, the country’s rich will find a way to engage in vaccine tourism. This would mean that events that can show celebrities taking the vaccines and reducing the stigma surrounding vaccines would be few and far between in India unlike in the U.S., the U.K., or other Western economies. Also, several Indian pharmaceutical firms must be waiting to respond with their manufacturing capacities should the tap of private channels be opened.

Also read | India exports COVID-19 vaccines worth about ₹338 crore

Will the government listen? We will have to wait and hope that good sense prevails before mutating virus strains minimise our chances of efficient social and policy responses.

Chirantan Chatterjee is a faculty member at IIM Ahmedabad and Visiting Fellow at Hoover Institution, Stanford University

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