Vaccine makers had sought funding help, market access opens up revenue source

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The change in rules would effectively enable the Health Ministry to make advance payments of Rs 3,000 crore to Serum Institute of India (SII) and Rs 1,500 crore to Bharat Biotech for procuring vaccines.

The Finance Ministry has relaxed rules to make “advance payment” to Covid-19 vaccine manufacturers in order to speed up vaccine procurement processes.

The change in rules would effectively enable the Health Ministry to make advance payments of Rs 3,000 crore to Serum Institute of India (SII) and Rs 1,500 crore to Bharat Biotech for procuring vaccines.

The government had decided to open up vaccinations to those above the age of 18 years, and to allow manufacturers to release around 50 per cent of doses to the open market. This would allow vaccine makers to charge a higher price than the Rs 150 per dose that they would get under the government’s immunisation programme, which is seen as a point of contention among global vaccine manufacturers.

The decisions follow reports of shortage of vaccines for priority groups in states like Maharashtra at a time when there is a push for faster vaccinations amid a surge in daily cases. SII and Bharat Biotech have been unable to cope with the rise in demand for Covishield and Covaxin, and have been seeking additional grants to scale up production.

Sources said central government rules do not permit advance payment without vendors providing a bank guarantee. This key hurdle has been lifted for vaccine procurement.

“Normally, under the government’s payment rules, no advance payment is allowed. An advance payment can only be done against a bank guarantee. In this case, we have made this relaxation, that advance payment can be made for procuring vaccines without any bank guarantee,” government sources told.

“This is for an amount of about Rs 3,000 crore to SII and about Rs 1,500 crore to Bharat Biotech. Basically, this speeds up the vaccine procurement process. We have communicated this to the Health Ministry, which will operationalise it,” the sources said.

The Union Budget for 2021-22 has allocated Rs 73,931.77 crore to the Ministry of Health and Family Welfare, much of which is expected to go towards the Covid-19 vaccination programme.

The government also said on Monday that vaccine makers would be allowed to provide 50 per cent of their supplies to state governments and the open market after “transparently mak[ing] an advance declaration” of the price before May 1. While the remaining 50 per cent is expected to go to the Centre, the announcement potentially gives vaccine makers freedom to demand a higher price in state bids and private procurement.

Private hospitals would have to procure “exclusively” from the 50 per cent supply earmarked for those other than the government. “Private vaccination providers shall transparently declare their self-set vaccination price,” the Health Ministry said.

SII CEO Adar Poonawalla had suggested earlier this month that the government’s increased demand for Covishield had added to struggles to ramp up supplies, and he was, therefore, seeking around Rs 3,000 crore from the government to expand the company’s “very stressed” capacity.

Bharat Biotech, too, had reportedly sought additional funds in order to rapidly scale up production capacity to around 700 million doses annually from the 200 million doses at present. Last week, it received around Rs 65 crore as grant from the government towards this end.

Poonawalla has also been vocal about the firm’s inability to make enough from the government’s price for Covishield to invest in producing more doses. This is expected to be a potential concern at a time when India is trying to increase its vaccine supply by opening up to foreign vaccines like Russia’s Sputnik V, Pfizer’s vaccine with BioNTech, and Johnson & Johnson’s single-dose vaccine.

For instance, the Russian Direct Investment Fund (RDIF) had announced that the price of a single dose of Sputnik V would be “less than” $10 (around Rs 750). Executives at Dr Reddy’s Laboratories, which will distribute Sputnik V in India, said last week that they were in discussions with the government over price and the number of doses that would be required.

DRL has said that it plans to begin importing doses of the vaccine from Russia this financial quarter, between April and June.

J&J said this month that it planned to conduct bridging studies of its vaccine in India in order to seek Emergency Use Authorisation (EUA). There are indications that discussions could take place with Pfizer, which was the first company to approach India for EUA, but withdrew its application in February after the regulator insisted on local trials.

In the US, J&J has agreements to provide 100 million doses at $10 each, while Pfizer has priced its two-dose vaccine at $19.50 (around Rs 1,460) a dose. In the EU, it is reportedly renegotiating the price to charge €19.50 (around Rs 1,757) a dose in 2022.

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