‘Unilateral decision’: States are unhappy with Modi’s decision to pass buck on vaccine costs

On Monday, the Centre announced its strategy for the phase three of India’s Covid-19 vaccination campaign.

Coming into force on May 1, phase three opens up vaccinations to all adults above the age of 18. But it also shifts the burden of procuring vaccines for the 18-45 age band entirely on state governments, earning angry responses from chief ministers and policymakers in various state capitals.

The Ministry of Health and Family Welfare issued a statement on April 19 saying vaccine manufacturers will have to allot 50% of the doses produced to the Centre. These vaccines will be allocated to the states on the basis of a set formula and will only be used for those who are currently eligible for the vaccines: Health care workers, front line workers and all adults over the age of 45.

The statement says that manufacturers will be allowed to sell the other 50% to state governments and in the open market. Unlike the 50% acquired by the Centre, at prices negotiated by the government of India, the manufacturers will be permitted to set “a pre-determined rate in a transparent manner” for the vaccines being sold to states and private entities.

In other words, state governments that choose to vaccinate adults in the age group of 18 to 45 will have to purchase vaccines directly from the manufacturers, rather than relying on the bargaining power of the Centre.

The policy has not gone down well with states.

While two Bharatiya Janata Party ruled states, Uttar Pradesh and Assam, have announced that they will vaccinate all adults over 18 for free, without giving details, other state officials Scroll.in spoke to said the policy of deregulating prices of vaccines would add a “heavy burden” on the finances of the states already reeling under the stress of the pandemic. Officials also added that the policy could lead to delay in the vaccination process itself as it is not clear whether supply of vaccines could match the demand.

States unhappy

Speaking to Scroll.in, Chhattisgarh Health Minister TS Singh Deo said the decision to leave the pricing of vaccines to manufacturers would have two worrisome side effects.

First, it would increase the prices of the vaccines manifold, putting heavy burden on the finances of state governments. Second, he said, states will have to compete with each other in the market to procure the vaccines and this will lead to the wealthier and enterprising states cornering doses.

“It does not seem to be a thought-out strategy,” Deo added. “This is the Centre reneging on the responsibility of providing vaccines, for which a budget allocation of Rs 30,000 crore was made.”

Crucially, Deo added that the states were not consulted before the announcement of this policy. “This was an unilateral decision that we think would completely undermine the vaccination drive.”

Kerala Chief Minister Pinarayi Vijayan also echoed these views. In a letter to the prime minister, Vijayan said that the states need a “reassurance that they will not be left to compete with open market players” and called for the Centre to provide vaccines to the states as a public good, free of cost.

Officials of other state governments had similar responses.

A senior Tamil Nadu official, on condition of anonymity, said while matters relating to expanding the coverage of vaccines to all adults were discussed, the “procurement-related specifics were entirely the decision of the Centre.”

The official said the policy of making state government purchase directly from the market would stress state finances and would also pose serious logistical problems. “Of the 2.2 crore people eligible till now for vaccination [above 45 years and frontline workers], we have managed to vaccinate only 48 lakh,” the official said.

From May 1, another 4 crore people in the state would become eligible for vaccination. And this was at a time when doses for those above 45 years of age are hard to come by. “We do not know how we could find a manufacturer and procure doses by May 1,” the official added. “Surely, people above 18 will start approaching the vaccination centres on May 1.”

The official also added that a meeting of all state officials and the Union health ministry was taking place on Tuesday in which several of these matters were being discussed.

Odisha Additional Chief Secretary (Health) Pradipta Kumar Mohapatra said the state government wants prices of doses available to the states determined by the Centre and not the manufacturers since the cost in the open market would be “very high”.

Adding to inequality

Former Union Health Secretary K Sujatha Rao said not only will the policy of allowing the manufacturers set the prices lead to inequality between states as their purchasing power varies, it will also lead to inequality of access within states.

She said the Pfizer vaccine, for example, is priced at around $20 per dose, which when sold in India may amount to around Rs 1500. Given that a person requires two doses, the total price would be around Rs 3000 for an individual. “How many in India can afford this vaccine at this rate? This would only benefit a very narrow market of the rich,” the former official noted.

Rao said wealthy pharmaceutical companies are known to be ruthless negotiators. Only the Centre has the wherewithal to bargain at scale for the entire country.

In fact, she pointed out that by putting together a policy that explicitly allows manufacturers to pre-determine prices, the negotiating powers of the states have been seriously dented even before the process of purchase could start.

Further, given the financial burden this places on the states, Rao said they could be forced to pass on some of the costs to the people. “The Centre has not said it would reimburse the cost of the vaccines to the states.”