The new pricing policy of the COVID-19 vaccine has come under much scrutiny. The major bone of contention here is the different procurement prices set for the central and state governments.
While the central government can continue to buy the Covishield vaccine at Rs 150 per dose, the price is fixed at Rs 400 per dose for the state governments. The price is Rs 600 per dose for Covaxin. For private enterprises/hospitals, the prices of Covishield and Covaxine are set at Rs 600 and Rs 1200 per dose, respectively.
Even the Supreme Court has asked the centre to explain the basis of the pricing of COVID-19 vaccines. Amid the rising opposition, the government is forced to ask the vaccine makers to work on reducing the prices.
Lower Supply Drives The Prices Higher
The major reason behind the high vaccine prices is the supply constraint that India is facing at the moment.
Global investment banker, Credit Suisse highlighted this issue in its latest report. They expect the shortage of supply to continue for May as well. Yet, the situation is likely to ease from June 2021.
Dr Reddy's has guided about the availability of Russia's Sputnik V by the end of May'21. The Serum is also expected to ramp up its capacity from 65mn/month to 100-110mn/month. It is expected to come into effect by June'21.
Credit Suisse has projected the vaccine availability to increase from 28 lakh doses in April 2021 to 57 lakh doses (a 2x jump) in June'21. It is set to go up further in July as Bharat Biotech's expanded capacity is expected to start manufacturing. J&J's single-dose vaccine is also likely to be available by then.
As a result, vaccine availability is set to increase to around 90 lakh doses in July'21 (a 3x jump from April). The further prediction suggests that supply is expected to jump up to 1 crore doses/month by October 2021.
Price Pressure to Ease With Improving Supply
Improving the supply of vaccines is also likely to bring the pricing down. Yet, asking the manufacturers to cut the prices may not be a viable option as it could restrict their cash flow and hamper their production activities.
In this situation, the onus once again falls on the central government to increase the budget of its vaccination program and share the burden with the states. Rs 35,000 crore was allocated by the central government for spends relating to COVID-19 vaccination. But, with pricing at Rs 400 per dose, India Ratings estimates that it could go up to Rs 67,200 crore at Rs 400 per dose.