Centre raises hopes of free COVID-19 vaccine, but benevolence can’t be at the cost of the economy

Representational image of vaccines in mass production. Getty/File Image

COVID-19 has assaulted the health of people and economies. The impact on the economy has led to further stress on people’s livelihoods. This unprecedented threat to public health has not been constrained by measures taken by national and state governments. All humankind is waiting with bated breath for a COVID-19 vaccine that can set us on a course to normalcy. The human and economic cost of COVID-19 has been immense and governments are stepping up to expedite vaccine availability.

Given the vaccine’s huge impact on public health, it is reasonable to expect that the government makes it available free for all. The cost of undertaking this exercise would depend on a variety of factors – cost of manufacturing, cost of supply chain and cost of administration of the vaccine. For example, nucleic acid-based vaccines have to be stored at sub-zero temperatures and are costly to make and transport. The estimated cost for the Moderna vaccine is $15/dose, and sourcing all necessary doses from Moderna would cost over INR 2,50,000 crore. On the other hand, Serum Institute of India has promised a certain quantity of the Oxford vaccine at $3/dose. If India were to buy all vaccines at this cost, we will have to spend roughly INR 50,000 crore. Both costs include a distribution cost assumed at 20 percent of the vaccine price. However, these estimates do not include the cost of ramping up vaccine supply, a step essential if India aims to vaccinate its population in a reasonable amount of time.

India currently makes one billion vaccine doses for use in the country. However, this capacity also caters to other vaccines and cannot be completely diverted to manufacturing the COVID-19 vaccine. Additionally, we should expect vaccine prices to reduce as more scientific advances are made in the field. Let’s assume given all the variables, the cost for vaccinating India is about INR 1,50,000 crore. This is higher than the cost estimated by Serum Institute’s Adar Poonawalla and accounts for additional manufacturing setups being put in at government’s cost.

On the face of it, this looks like a huge amount. But really, it’s around 1 percent of India’s economy and is equivalent to the amount being spent on the recently-announced food security welfare scheme Gareeb Kalyan Anna Yojana in FY21. On paper, the government footing the entire vaccination bill is entirely doable. If the vaccines do offer a path to normalcy, then this one-time cost is an essential investment with increasing returns. It definitely fits with the aspirations of the political economy, since promising an eagerly awaited elixir at free of cost is an attractive strategy to gain votes. It is therefore not surprising that various state governments and even the Union government has announced that the vaccine will be made available free of cost to Indian citizens.

Vaccination drives have been the mainstay of epidemic prevention in the past few decades. AFP

While a free vaccine sounds appealing and should indeed be a government’s prerogative in a pandemic, there are other responsibilities that also need to be taken care of. India is staring at a zero or even negative growth rate through 2020. Lockdowns and slew of social distancing measures have also accelerated job losses, with CMIE reporting a loss of over 6 million jobs. Another fiscal stimulus is warranted and even recommended by IMF, with a focus on support for vulnerable groups, and support for businesses. Further, India also needs to invest in capacity-building for long-term healthcare measures, improving public health coverage. The fight against COVID-19 cannot stop with the vaccination, but has to be bolstered by extensive disease surveillance capacity and preparation for the next potential outbreak. Hence, while it makes sense that the government offers the vaccine free to all, there is also an opportunity cost attached to that funding. That funding could be utilized effectively to provide food, medical care or support businesses as India looks to revive its economy. In fact, if even half of India’s population pays for the vaccine, the roughly INR 75,000 crore saved would be more than India’s current overall healthcare allocation of INR 67,000 crore. This infusion of funds could double India’s health budget for a year, and could be used for capacity building, resulting in improved healthcare and saving lives.

Hence, it may be prudent to keep the vaccine at market price and put in a subsidy for those who are unable to afford the vaccine. The vaccine subsidy can operate on lines similar to the LPG subsidy. This approach would make the vaccine accessible to all, with the government and richer households splitting the vaccine cost. Keeping the vaccine at market price will also incentivize more vaccine researchers into innovating and manufacturing newer vaccines. The resulting competition will also reduce vaccine cost over time. On the other hand, a free vaccine – with the government as the bulk buyer – may lead to compromising on vaccine quality.

Finally, while the option of doling out a free vaccine remains with the government, this promise cannot be made in a silo. Enough doses of any vaccine will not be immediately available and vaccination would require prioritization of recipients. Last mile delivery of vaccines has to be assured and will require investment. Post-market monitoring of vaccine performance has to be designed to quickly respond to any adverse events. Vaccine manufacturers have to be incentivized to ramp up vaccine supply to stay apace with vaccine demand. A free vaccine promise by itself is futile, unless accompanied by a transparent and evidence-based vaccine deployment plan. Therefore, instead of playing on people’s fears, we need a transparent vaccination strategy, continued insistence on social distancing measures and monetary support for those vulnerable.