Reducing the cost of Covid-19 vaccines is desirable and possible

There was finally light at the end of the Covid-19 tunnel in November 2020 when the world saw the emergence of the first vaccines. With India home to a vibrant vaccine industry, major vaccine developers contracted Indian vaccine players.

Based on the interim results on safety and efficacy, Indian health authorities gave emergency use approvals even before large-scale trials were completed. The government embarked on the vaccination programme in a calibrated manner, and even roped in the private health care providers. By taking upon itself the task of supplying vaccines, black marketing, which would otherwise have happened in a grossly supply-deficient situation, has been avoided.

India now has to vaccinate a large percentage of the population, even as the next wave of infection is looming large. The country needs about 2 billion doses to achieve herd immunity by vaccinating at least 70% of its 1.39 billion people. But current prices will pose a huge burden of over ₹30,000 crore just for procurement of vaccines — any reduction will not only help the budget of health authorities, but also be a stimulus to encourage vaccination further.

With only two brands approved for emergency use to date, the government had to negotiate prices. Starting at ₹200 per dose for Covishield and ₹295 for Covaxin, the prices for both have now been fixed at ₹150 per dose. An additional ₹100 is compensated to private service providers. The price of ₹250 per dose is indeed affordable for those who wish to avail of private facilities, even as the jab continues to be given free at public hospitals and dispensaries.

But any reduction in the vaccine cost will further boost the vaccination drive.

For the Covishield vaccine, the research and development (R&D) costs have mostly been incurred by the developers, Oxford University/AstraZeneca, and technology has been transferred with the intent of securing large quantities for the Covax facility. Clinical trial costs have not been significant as it has been only phase 3 bridging studies with a smaller number of participants, based on phase 1/2 results of AstraZeneca. On the other hand, Covaxin has had to bear the full cost of their Phase 1, 2 and 3 studies by including the required number of participants. Incidentally, the clinical trial costs in India are much lower than in Western countries.

The manufacturing process of the live adeno virus vectored vaccine, Covishield, is relatively simple and the virus grows well in cell culture giving good yields. The process for the inactivated vaccine, Covaxin, is a bit longer since there are several downstream unit operations. The vaccine business is largely a fixed cost business with higher volumes driving costs down. For Covid-19 vaccines, the high requirement is both an incentive for the industry and a major factor for cost reduction.

The vaccine presentation is in 10-dose and 20-dose vials which, when compared to single-dose vials, further reduces costs, both in manufacturing and distribution. The expenditure is only till the first leg — from the company to the warehouses. Thereafter, the costs are mostly incurred by states. There are also no major marketing costs since the supplies are made directly to the government.

The prices of vaccines supplied by the Indian industry to Unicef for quantities far lower than Covid-19 requirements are in the sub half-a-US dollar range. Therefore, why must the cost for the government be in the $2-3 range? It is reasonable for the vaccine industry to price the vaccine at ₹60-70 per dose as against the existing ₹150 per dose. This would cover all costs, including capital loading for additional investments made for ramping up the manufacturing capacities.

The vaccine industry must rise to this challenge. As a trade-off, companies could be allowed exports after meeting in-country commitments, and this would fetch them much higher prices. That will be a win-win.