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Wednesday, August 10, 2022

Short-supply Covid vaccines outliers in govt’s spirited price cap push

India currently has just two Covid-19 vaccines in what is clearly a market overwhelmingly dominated by just one player.

Written by Prabha Raghavan , Anil Sasi | New Delhi |
Updated: May 16, 2021 12:25:26 pm
The lack of pricing intervention runs counter to the government’s stance on other drugs, most of which are operating in a competitive market scenario.

An enduring feature of India’s pharmaceutical regulatory regime has been its intervention in regulating prices of essential medicines — something the NDA government has progressively expanded over the last six years to now include even medical devices. Paracetamol, ibuprofen, amoxicillin — all molecules with multiple Indian producers, near demand-supply equilibrium and a competitive market environment — are among the 950 plus drugs under price control at the moment.

When it comes to vaccines to protect the population amid surging cases in the midst of a pandemic, however, the scenario is diametrically opposite. India currently has just two Covid-19 vaccines in what is clearly a market overwhelmingly dominated by just one player. There is a proven supply constraint and demand is outstripping the availability of the jabs, with 30-odd states and multiple private hospitals chasing the two manufacturers. Here, however, the government has chosen a free market policy when it comes to price setting despite the evident shortage situation, in deviation with its stated policy for essential drugs and even devices.

Analysts, economists, lawyers and public health activists that The Indian Express reached out to maintain that the stances taken by the Centre are in contradiction, especially given the fact that the government has pushed the burden of payments for these vaccines down to consumers — something that no other country has done.

The lack of pricing intervention — other than a requirement that manufacturers publicly disclose the prices at which consumer categories would be served — runs counter to the government’s stance on other drugs, most of which are operating in a competitive market scenario.

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Take, for instance, paracetamol. All variations of this antipyretic have been under price control for years. Over 200 companies are involved in this market, which has given patients various brands like Calpol, Crocin, Dolo and Paracip. As of April 1, the ceiling price of a 650 mg tablet of paracetamol was less than Rs 2. Including the trade margins and taxes, the maximum retail price of this tablet would still only be a little over Rs 2.

Coronary stents, brought under price control in 2017 when their prices were slashed over 70 per cent, are offered by various multinational and Indian companies. These include Abbott, Medtronic, Boston Scientific, Sahajanand Medical Technologies, Meril Life Sciences and Translumina Therapeutics. Similarly, various vaccines essential to the government’s Universal Immunization Programme — including those for DPT, hepatitis B, polio and measles — are all under price control.

Most of these pricing interventions so far have been carried out by the National Pharmaceutical Pricing Authority (NPPA) through one of several processes. The most common has been the capping of ceiling prices of products taken by the Department of Pharmaceuticals (DoP) from the National List of Essential Medicines (NLEM) and notified as a scheduled drug.


In select cases where the products have not been notified for price capping, like with knee implants, the NPPA has acted on its own and slashed prices using extraordinary provisions of the Drugs (Prices Control) Order, 2013, or DPCO, “in public interest”.

However, as per a regulatory expert, the NPPA would have limited role to play in regulating the prices of Covid-19 vaccines, which means that it was up to the Centre to intervene in ensuring affordability and access here. “These vaccines were new vaccines. There was no earlier market data on pricing, so NPPA would not have been able to fix any prices for them. Secondly, since these vaccines were not mandated as essential, it would have been beyond its jurisdiction,” said the expert on condition of anonymity.

The ideal scenario, which the government did follow in the earlier phases of vaccination, was to negotiate with the vaccine makers to fix a price, according to the expert. “This is one of the universally adopted methods of price fixation,” the person added.


Queries sent to NPPA Chairperson Shubhra Singh, DoP Secretary S Aparna and Health Secretary Rajesh Bhushan remained unanswered by press time.

Yet, where Covid-19 vaccines are concerned, the Centre has allowed the manufacturers to call the shots on pricing. The earlier rates of Covishield and Covaxin — the only two vaccines available at the moment — have been increased 50 to 700 per cent for State and private hospital procurement. The Centre’s reasoning here, according to a recent affidavit it submitted to the Supreme Court, is to help scale up production and attract more players into the market and augment supply.

“Herein, differential pricing is based on the concept of creating an incentivised demand for the private vaccine manufacturers in order to instil a competitive market resulting in higher production of vaccines and market driven affordable prices for the same. This will also attract offshore vaccine manufacturers to enter the country. This will result in increased availability of vaccine,” stated the Centre in its affidavit dated May 9, which was in response to a suo moto writ petition on the distribution of essential supplies and services during the pandemic.

In the same affidavit, however, the government has also submitted that it intervened to bring down prices of remdesivir — an antiviral that has been widely prescribed by several doctors treating hospitalised Covid-19 patients.

After “repeated consultations” and “other methods”, the government was able to ensure that manufacturers of this drug voluntarily reduced their prices by 25-50 per cent, the Centre submitted in its affidavit.


The Central government also stated that it had already exercised its powers “under the relevant provisions” of the DPCO to fix the ceiling prices of enoxaparin, methylprednisolone, paracetamol and hydroxychloroquine — all used in Covid-19 treatment.

When the price reductions for remdesivir were announced on April 17, Minister for Health and Family Welfare Dr Harsh Vardhan had tweeted, “To meet the increasing demand of remdesivir and to enhance its availability and affordability, the Govt has capped its price.” Even while the prices had been capped, the government in April repeatedly submitted that production of remdesivir was being scaled up.


“There is a real contradiction and a lack of a coherent economic policy. In its affidavit to the Supreme Court, the government justifies price caps for paracetamol and other medicines where there are multiple producers and there is no scarcity, and then quickly flips to state the exact opposite — that price control on vaccines will disincentivize supply. There is no economic basis for this argument,” said Murali Neelakantan, principal lawyer at Amicus and former global general counsel for Cipla and Glenmark Pharmaceuticals.

The clear lack of competition, which is beginning to reflect in the prices set for these vaccines, has also led to distortion of supplies across the country. While the government submitted in its affidavit that “all” states have agreed to provide the vaccines free of cost to those between the ages of 18-44, cracks are already beginning to appear as a result of its decision to allow States and private hospitals access to 25 per cent each of the jabs produced directly from the vaccine makers.


The vaccine manufacturers — Serum Institute of India and Bharat Biotech — have announced prices of Rs 300 and 400 respectively for State procurement, while prices for private hospitals have been fixed much higher, at Rs 600 for Covishield and Rs 1,200 for Covaxin. The remaining 50 per cent goes to the Centre at a lower rate that was last announced by the health ministry to be Rs 150 per dose. While private hospitals, especially large chains, have managed to secure doses of these vaccines for paid vaccinations, some States have been struggling to receive their orders.

For instance, Delhi’s Deputy Chief Minister Manish Sisodia on May 12 tweeted that Bharat Biotech “refuses” to supply Covaxin to the Union Territory “citing directives of Gov. and limited availability.” He added, “We are forced to shut down 100 Covaxin-vaccination sites in 17 schools due to no supply.” This means that those between 18-44 years of age seeking the vaccine, earlier provided for free at these centres, would have to approach the private hospitals that have these doses in stock.

The vaccines, at the rate they are currently priced, would cost “more than 60 per cent” of the monthly income of a three-person household living below poverty line, as per calculations by R Ramakumar, a professor at Tata Institute of Social Science’s Centre for Study of Developing Economies.

“This is clearly unaffordable,” he said. “In addition to this, if state governments are giving these vaccines for free to those between 18-44 years, then a considerable proportion of their health budget will have to be set aside for vaccines. This is a substantial economic burden on State governments which, ultimately, will be diverted from their other expenses on health. They might end up having to reduce investment into hospitals or oxygen cylinders, for instance,” he added.

Experts and health activists have been calling for the Centre to revert back to its previous procurement and distribution strategy, which allows for the procurement of these doses at much lower rates. It also used a system where prices charged by hospitals, including their service charges, were fixed by the government.

“It is pertinent to note that the Central Government by nature of its large vaccination programme, places large purchase orders for vaccines as opposed to the State Governments and/or Private Hospitals and therefore, this reality has some reflection in the prices negotiated,” the Centre stated in its affidavit.

It is precisely for these reasons that experts have been calling for the Centre to continue buying vaccines in bulk since they have the purchasing power to negotiate better with suppliers, rather than abdicating this responsibility to states. Also, even if the prices were to be now market-determined, a recourse that no other nation has resorted to other than India, there is little visibility on incremental supplies of vaccines coming in, at least in the near term.

In the affidavit, the Centre has argued that both manufacturers have taken a “financial risk” in developing and manufacturing these jabs. It is “prudent” to take decisions on pricing through negotiations conducted in a transparent, consultative process “keeping statutory provisions as a last resort under the present circumstances,” it added. “If the government is claiming, as in its affidavit, that it wants to exercise statutory powers only as a last resort, they seem to have forgotten that they had already done this — they already put a prescribed rate of Rs 250 for vaccination and everyone abided by it,” said Malini Aisola, co-convenor of the All India Drug Action Network.

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First published on: 16-05-2021 at 01:06:07 am
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