State should form a joint committee to negotiate COVID vaccine price

Synopsis- Vaccine Price, availability and affordability [for 18-44 age group] would require a coordinated effort from state governments.

Introduction-

• The central government has pulled out from the third phase of the vaccination drive. The center has provided state governments’ the full responsibility for vaccinating [a group that constitutes about 40 per cent of the population].
• Now state governments have to procure vaccines directly. Further, they also need to compete with private players at the same time for a better price. As there is only a limited number of capacity and vaccine suppliers.

How can the state bring down vaccine prices?

In contrast to a market with multiple buyers, a single buyer can always negotiate a lower price for a product with one or more sellers. Thus, to bring down vaccine price, the State governments should form a consortium. There are some factors related to this. Such as,

• Involvement of Pre-purchase agreements- This would tackle any uncertainties from the point of view of vaccine manufacturers. It will also allow for faster expansion of production capacity.
• Delay in the formation of the consortium will impact the procurement – Any delays will strengthen the potential private buyers’ position. It will automatically weaken the position of the consortium to negotiate a lower price. This will result in,
  • Further, widening of vaccination gap between the rich and the poor – The price difference between the consortium’s agreed prices and private sellers is likely to encourage inequity and black marketing

Thus, the formation of a consortium provides a mechanism to achieve affordable prices in India. Further, there is also a survey conducted on willingness to pay (WTP) for Covid-19 vaccines. 

Key highlights of a survey on willingness to pay (WTP) for Covid-19 vaccines

• The survey is conducted for WTP for two possible vaccine choice [one is 100 percent effective and the other is 70 percent effective]
  • The maximum WTP on average stood at Rs 140 for a 100 % effective vaccine, and at about Rs 109 for one with 70 % effectiveness.
  • Only 2 % were willing to pay Rs 600 or more to 100 % effective vaccine and 1.5 % were willing to pay the same amount for the other vaccine.

• Nearly 66 % of the respondents experienced an income reduction of more than 50 percent as compared to the last year’s income levels. WTP also declined uniformly with the level of economic shock experienced.
• So, the economic ability of these households to afford vaccination is severely restricted.
• Apart from that, leaving sections of the eligible population out of vaccine coverage poses further risks of mutations in the virus.

Suggestions to reduce Vaccine price and provide universal vaccination

Shortage of the vaccine, poor administration and vaccine hesitancy is the reason for low rate of vaccination, therefore-

• State governments must take immediate action to form a consortium and make provisions for further subsidization of the vaccine.
• Implementing budgetary solutions like public health bonds will help to improve public finances.
• Further, the government must focus on Universal vaccination. To achieve this, the center can allow State governments to exceed budget deficit targets.

Source- The Indian Express