Serum refuses to address differential pricing for Central and State governments

The differential pricing for central and State governments is the sticking point, which is not addressed by Serum in its statement that came after the Health Minister and Health Ministry clarified the price of Rs.150 per dose to the central government.

On April 24, Adar Poonawalla, CEO of Serum Institute, issued a statement to address the “ongoing public scepticism and confusion towards the pricing of Covishield”.

The statement tried to address the controversy over whether the price of the vaccines at Rs 600 (nearly $8) per dose for private hospitals was more than their costs when they were exported. But it did not refer to the issue of whether the vaccines will be priced differently for procurement by the Centre and the State governments.

Only a few hours before the statement, Union health minister Dr. Harsh Vardhan tweeted saying that the central government procurement price for both COVID-19 vaccines — Covishield and Covaxin — remains at Rs.150 per dose; the health ministry too tweeted a similar clarification.

These tweets contradicted what Mr Poonawalla had claimed in an interview to CNBC-TV18 on April 21 that the price of Rs.150 per dose was not applicable for any future procurement by the central government. He said the vaccine will be sold at Rs.400 both to the central and State government. He said: “It is not a different price [for State and central government supplies]. All government prices will henceforth be Rs.400 for new contract. The Rs.150 per dose for central government was for prior commitment and contracts. After that it ceases to exist after we supply 100 million doses to them. We will also charge Rs.400 to any government, let me clarify that.”

These remarks had come in after Serum’s statement of April 21 announcing the price of the vaccine for State governments (Rs.400 per dose) and private hospitals (Rs.600 per dose) but which did not mention the price the vaccine will be sold to the Centre. Soon after the April 21 release was issued, the differential pricing for central and State government was highlighted by the media, politicians belonging to the opposition parties and others.

The April 24 statement, by remaining silent on the health minister’s clarification, has kept the question over “differential pricing” alive.

How much profit already?   

As regards the higher pricing for private hospitals, the statement said, “The initial prices were kept very low globally as it was based on advance funding given by those countries for at-risk vaccine manufacturing”.

However, while Serum charged South Africa $5.25 per dose, AstraZeneca was supplying to European countries at $2.18 per dose. The price the European countries was charged was accidentally shared on Twitter by Belgium politician Eva De Bleeker. On November 23, 2020, Pascal Soriot, CEO of AstraZeneca said in a release that “…our no-profit pledge and commitment to broad, equitable and timely access means it will be affordable and globally available, supplying hundreds of millions of doses on approval.”

Compared to early 2020, there appears to be a change in position with regard to pricing of the vaccine. On April 22, 2020, before AstraZeneca came into the picture, Mr. Poonawalla told India Today TV that “this is not the time to make money from a vaccine against the novel coronavirus, which has caused a global pandemic”.

COVID-19 vaccination is the largest exercise 

In the April 24 statement, Mr. Poonawalla makes a point that vaccines used in the universal immunisation programme are sold at a far lower price as the volumes are large. He cites the example of pneumococcal vaccines that are sold at a higher price in the private market, while the government is charged only one-third the cost. But that does not explain why Serum Institute should charge the State governments Rs.400 per dose while charging the central government only Rs.150 when the COVID-19 vaccination programme is akin to the universal immunisation programme in its volume, scope and coverage. Nearly 595 million people in the 18-44 age group are now eligible for a vaccine, which together with more than 300 million above 45 years, makes COVID-19 vaccination the largest immunisation exercise ever undertaken in India. The private players will cater to a tiny fraction of the total number.

The differential pricing for central and State governments is the sticking point, which is not explained by comparing the higher price that private hospitals are charged or when the vaccine is made available in the retail market at a future date.  

Financial support already provided

Mr. Poonawalla then brings in the investment needed to scale up manufacturing capacity to fight the pandemic to justify the higher cost that State governments are charged. But what he left unsaid is that based on his demand for Rs.3,000 crore to meet the cost of ramping up production capacity, the government had already agreed to advance that amount to Serum and Rs.1,500 crore to Bharat Biotech. In a tweet on April 20, Mr. Poonawalla had also acknowledged and thanked Prime Minister Narendra Modi for the “swift financial aid which will help vaccine production and distribution in India”.

While he says that “only a limited portion of Serum’s volume will be sold to private hospitals at Rs.600 per dose”, India is the only country that is selling the vaccine to private players. But the point of contention is not the higher amount that private hospitals are charged but the higher price that the State governments have to pay while the central government is charged only Rs.150 per dose.

Finally, with the central government procuring 50% of the vaccines and supplying it to State governments for free for use in people above 45 years and when vaccinated in government facilities, the States will be competing with private hospitals and with one another to procure the remaining 50% vaccines. This will completely change the way vaccines are distributed in the country.   

Published in The Hindu on April 25, 2021