Issues in Vaccine Procurement Policy

Synopsis:

The recent decision of the Centre to solely procure the vaccines for the states has been welcomed by experts and healthcare professionals. However, retaining a 25% quota towards the private sector seems inappropriate and should be reconsidered.  

Background:

• The union government has again taken the responsibility for procuring vaccines for the states under the liberalised vaccine policy.
• Nonetheless, experts have objected to retaining the 25% procurement quota for the private sector.

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Issues associated with 25% quota:

• First, the private sector possesses fewer vaccination centres than its approved procurement quota. This may create a demand-supply mismatch and result in inequitable distribution.
• Second, the quota is based on a mistaken assumption of an inflated ‘middle class’. The assumption is that 25% of the population is willing and able to pay for a commodity for which social benefits exceed private benefits. 
  • However, in reality, the affluent form only a small fraction of the uppermost 25% of our population.
• Third, markets tend to under-produce commodities having significant positive externalities. This is true for preventive measures like vaccines which have lower private demand than curative services. 
  • Hence, it would be very difficult to generate demand for vaccinating in private hospitals.
• Fourth, the top 25% have better access to government vaccination centres. They may choose to get free vaccination, which may have a ‘crowding out’ effect for the poorer sections.
• Fifth, it would not be possible to attain herd immunity even if 60-80% of the population gets vaccinated. As there would be the existence of grave disparities along geographic and socioeconomic lines. 

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Way Forward:

• The government should increase its share of procurement by reducing the 25% quota for the private sector.
  • The loss of revenue to vaccine producers from differential pricing of the private sector can be compensated by increased support through Government subsidies.
• The government should refrain from an ‘all or none approach’ towards the private sector. Where some governments often impose unreasonable and unfavorable pricing restrictions and other governments give too much freedom. There is a need for a balanced approach.
• The focus must be on creating a strategic purchasing framework that could utilize the strengths of the private sector which includes innovative processes and efficiency. 
• It must engage with both small and big private players, and create a more decentralized and accountable procurement system.

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