COVID-19: Vaccine follies

The Indian COVID-19 vaccine story is a string of missteps based on the Modi government’s exaggerated claims of exceptionalism, grounded in voodoo notions of free markets and perpetuated with a stubborn unwillingness to learn from the world around it.

The second consignment of Sputnik V vaccine arrives at the Rajiv Gandhi International Airport in Hyderabad on May 16.

As the second wave of the COVID-19 pandemic begins to hint at an ebb, even if unevenly across the country, India’s woes on the vaccine front mount dangerously. The fact that supplies of vaccines, the only scientifically known defence against the SARS-CoV-2 virus, are dangerously low, points to a looming disaster. If the Narendra Modi government’s overall handling of the pandemic—in terms of organising and building hospital capacity, medical equipment, enhancing and equipping medical and paramedical personnel—have been grossly inadequate, its follies on the vaccine front demonstrated the monumental scale of the bungling.

With no credible sign of improvement on the horizon, despite the flurry of coordinated rebuttals by Union Ministers and top government officials, including those from the NITI Aayog and the Health Ministry, the reality of a grave vaccine shortage has been difficult to hide. Between April 3 and April 9, 24.75 million inoculations were delivered, that is, an average of 3.54 million doses a day. On April 5, a total of 5.04 million doses of Covishield and Covaxin were delivered, the second highest daily dose ever. (The highest being 6.26 million doses on March 16.)

In the context of India’s vaccination drive, this was the peak, from which the slide has been relentless, with just a faint hint of a marginal reversal towards the end of May, but that remains unconvincing. In the first week of May, the average number of vaccinations dropped to 1.80 million doses a day. By the end of May it had become apparent that despite the best efforts of the government to massage the message, the grim reality of shortages could not be hidden.

Confusion reigns as there is no credible plan on offer about which section of the people would be able to get vaccinated when. As supplies to States have dwindled, the problem has been compounded by the lack of transparency about how supplies are being directed amidst the shortage. This is reminiscent of the demonetisation disaster of 2016 when people desperately flocked to banks seeking access to funds from their own accounts. Amidst the severe shortage, it soon became clear that some private banks had better access to cash in those desperate days. A similar story is being played out today.

Although the Centre has declared that the 45+ age group will get priority, the squeeze on supplies has placed the States under tremendous pressure. The opening of vaccinations for the 18+ population without ensuring adequate supplies has added to the pressure. To complicate matters further, within the 45+ age group, many have overshot or are in danger of overshooting the medically prescribed time interval between the two shots. This is particularly so in the case of Covaxin, the vaccine produced by Bharat Biotech International Ltd (BBIL), which accounts for just about 10 per cent of the vaccination administered in India. Meanwhile, the vaccine “markets”, if they may be called so, appear to be having a field day. The lack of transparency about the three-way split between the Centre, the States and the private channels is reportedly facilitating rampant profit gouging across the country.

Thriving black market

Although the Centre said that those in the 45+ age group would be given priority, little has been done to actually deliver vaccines for this segment because doses are not available. Meanwhile, as there is no transparency in the process people do not know where and when they can get vaccinated.

As a result, there is now a thriving black market for vaccines in most Indian cities, mostly in private channels. In Bengaluru, vaccinations in the private sector in the health care chain—large corporate hospitals, smaller nursing homes and even pathology labs—were available for Rs.850 a dose in early May. By mid-May the cost increased to Rs.1,300 a dose; and, according to one source, vaccines were being sold for Rs.1,800 a dose. It is evident that private channels are adding their own mark-up to the prices set by the two main suppliers, Serum Institute of India (SII) and BBIL.

Andhra Pradesh Chief Minister Jagan Mohan Reddy wrote to Modi on May 22 pointing out that allowing private players to access supplies directly from vaccine manufacturers sent “wrong signals” to people. He said private clinics were charging Rs.2,000-2,500 a dose. He argued that it was “very unreasonable” to allow private hospitals to vaccinate people of all age groups at “such exorbitant rates” at a time when a significantly large proportion of the people above 45 years remained unvaccinated. He also pointed out that adding the burden of vaccinating those in the 18-44 bracket on the States was unfair. He expressed the fear that the poor would remain unvaccinated, leaving the field open for the “black marketing of the vaccine(s)”.

The failure of the Indian vaccination drive for want of a plan to source vaccine supplies was significantly aggravated by the misnamed Liberalised and Accelerated Phase-3 Strategy of Covid-19 Vaccination policy announced in April. There were four main elements in the Modi government’s policy, announced ironically just when the second wave was taking off. The first was a three-tier procurement and distribution channel—the Centre, the States and private health care and other facilities. The second was that the Centre will keep half the supplies from the two manufacturers and split the remaining half between the States and the private channels. However, nobody knows how this is being done and what normative standards are followed. It added a free-market twist by prescribing that the States and the two companies were “free” to “directly” negotiate supplies. The third, and most controversial, element was the layered pricing regime, which in the name of “free” market was touted as a move that would draw entrepreneurial zeal and result in abundant vaccine supplies. Given that the modalities of the second element of the policy are mired in opacity, no entity other than the vaccine duopoly is in any sense “free”. The fourth element of this disastrous policy was the decision to extend the vaccination drive to the 18-44 age group from May 1.

Policy in shreds

Every single element of the policy is in tatters. This is because the Modi government failed to engage with vaccine producers in India and overseas early enough. It waited as long as January 2021 to place its first order, for a measly 16.5 million doses, just enough to last about 10 days. Its next order, in February, was lesser at 14.5 million doses. Of the 31 million doses, 10 million was with BBIL and 21 million with SII. Contrast this with how quickly governments around the world realised the importance of the vaccine as an insurance in deeply uncertain times: the United Kingdom placed its first order in May 2020, Japan and the United States in July 2020, the European Union and Brazil in August 2020, and Australia in September 2020. Many of these entities also placed successive rounds of orders over a diverse set of suppliers, spreading their bets across a wide set of vaccine technology platforms at a time when vaccines were nowhere in sight of regulatory clearance.

The Modi government placed its first significantly large order for 120 million doses, of which 100 million were to be from SII, in March, by when the second wave had already begun. It followed this with the largest order yet for 160 million doses on April 28. Thus, in all, the government has placed orders for the supply of just 311 million doses. It may appear like a lot of vaccines but considering that the country has close to one billion people in the 18 + age group, the picture is not as rosy. Also consider the fact that most vaccines are of the two-dose variety (the Janssen vaccine does the job with a single jab but with lower effectiveness, but that is marginal to the issue at hand), and you begin to realise that 311 million doses when two billion are needed is just about 15 per cent of the target. But, not ordering enough vaccines was just one aspect of the colossal scale of bungling. India, under Modi, also failed to spread its bets.

Countries across the world supported at-risk manufacturing by assuring purchases from these vaccine suppliers. To some extent, the accelerated clearances that were already on the radar at that time meant that the risk to vaccine producers was much lower than would have been the case in normal times. This is because vaccine suppliers knew that the risk of failing to clear regulatory hurdles was much lower because of the extraordinary pressure placed on governments in the pandemic. Of course, the risk was significantly reduced by the direct stakes governments in the U.S. and the U.K. had taken in the development of vaccines. In the U.S., for instance Operation Warp Speed, initiated by the Donald Trump administration, provided a war chest of over $18 billion, which supported the vaccine development projects of Moderna, AstraZeneca, Janssen Pharmaceuticals (a subsidiary of Johnson and Johnson), Novavax and several others. It is striking that the bets were spread across not just companies but across different vaccine platforms. The British government provided similar support. Of course, the prime beneficiary of this was Oxford, which lent the vaccine technology it had developed to AstraZeneca for profit.

Vaccine manufacturing is not a capital-intensive field. The costs of setting up a plant is not high. Capacity costs, a range of recent estimates suggest, is at the most about $1 per million doses of annual costs. Mind you, this is only the cost of establishing capacity. Significant costs arise from specialised raw materials that, even if in small quantities, need to be sourced from specialised suppliers, mostly in the West. Moreover, the cost of acquiring specialised scientific talent, skilled labour and the cost of meeting stringent quality standards as well as for clearing regulatory provisions can also be significant.

Vaccine manufacturing

But the point about investments not being anywhere close to those in other industries appear valid for several reasons. First, the fact that for most of the Big Pharma companies, vaccines are not a major line of revenue indicates that investments in capacity is not a significant barrier to entry. Second, evidence from within India suggests that the “big” vaccine players are quite small relative to the world of pharmaceuticals. Consider SII, for instance. Its overall revenues are in the region of about Rs.6,000 crore. In comparison, Cipla and Dr. Reddy’s Laboratories (DRL) have revenues of about Rs.17,000 crore annually. Where SII scores is in the margins it makes. It makes a gross margin of 50 per cent and a net margin of about 38 per cent. It has the highest strike rate in terms of profitability—the highest among all Indian companies with a minimum turnover of Rs.5,000 crore. Several other biologicals companies that are now into COVID vaccine are much smaller. BBIL has an annual turnover of about Rs.500 crore, and one other contract producer for Sputnik has a turnover of just Rs.350 crore. But there is more direct evidence: the contract manufacturer of the Sputnik V vaccine told Frontline that his investments in the vaccine line, a completely new line of business for him, was about $11 million (about Rs.83 crore). “Most of this has come from bank credit,” he said.

All this seems to suggest that the constraints to scaling up capacity are less about capital and more about expertise and skills, the access to raw materials, the ability to organise production and the ability to negotiate regulatory pathways that are complex in this line of activity. The well-known immunologist Satyajit Rath, who is familiar with the different technology platforms, points out, there is a need for strategic thinking in terms of coordinating vaccine development and manufacturing. This requires that the country spread its bets across platforms to insure against the risks posed by the direction of the pandemic in the future.

It would be a mistake to assume that India’s vaccine woes arise from just the Modi regime’s folly on the vaccine front obsession with hubris. In fact, it is much worse. The Modi government had no Plan B. Perhaps it assumed that all it needed was 300 million vaccine doses. In doing so, it gave BBIL a sweetheart deal.

The Bharat Biotech puzzle

Here, too, the familiar chatter about crony capitalism—that the Modi regime favoured BBIL—borders on what can be termed conspiracy theory. It appears that the Modi government, obsessed with the fixation that a limited vaccine drive would be sufficient, virtually gave BBIL a blank cheque. It offered the intellectual property right (IPR) that it owned on exclusive terms to this company without understanding the difficulties it may have in scaling up capacity, especially on an inactivated virus platform. As the recent report by the science writer Priyanka Pulla reveals, BBIL was allowed a free ride through the regulatory hoops, dodging due processes, which can potentially have damaging public health consequences. The fact that the Modi government has stayed so invested in a small company like BBIL is not so much a reflection of “crony capitalism” but of a government that is desperate to save face, no matter at what cost.

Satyajit Rath explains that unlike the adenoviral vector platform (Covishield, for instance), the risks from growing an infectious virus in a manufacturing process are far greater. Growing large amounts of the infectious virus pose risks that can only be minimised by either spreading the units geographically or by making more companies produce it. The stubborn insistence on relying only on BBIL to deliver on the scale that the country needs is not just perplexing, it is positively scandalous given the arc of the pandemic.

The government and BBIL have been hand in glove in spreading the unsubstantiated fairy tale of its production capacity. In the first of its three affidavits to the Supreme Court in April the government, obviously relying on what BBIL had told it, mentioned two different figures. In one instance it said 20 million does a month and in another, a few pages down, 10 million doses/month. It said it expected BBIL’s capacity to increase to 55 million doses a month by July. The fact that by May 26 only 21 million doses of Covaxin had been administered, out of a total of about 200 million doses, points to one of two serious issues: either the scaling up of output at its Hyderabad plant (BBIL is also establishing another plant near Kolar, about 65 kilometres from Bengaluru) is proving to be slow and difficult, or the company, and by inference the Modi government, has been less than frank with its current output levels.

As the scramble for the elusive second dose of Covaxin reached desperate levels, the company tried to clear its name through a press release on May 28. It explained, in rather long-winded fashion, how vaccine manufacturing was a “complex and multifactorial process with hundreds of steps”. It also explained how clearing the regulatory process was complicated and time-consuming. Further, it painstakingly explained the process of seeking clearances from the Central Drugs Standard Control Organisation (CDSCO). In effect, BBIL was trying to place the burden of the delays on the regulators. But then came the punch line about how vaccine production is a “step-by-step” process. “There is a four-month lag time for COVAXIN to translate into actual vaccination,” it stated revealingly. Significantly, BBIL also confirmed that the batches initiated in March “will be ready for supply only during the month of June”.

A vaccine industry source who prefers anonymity told Frontline that if batches were churned out in this fashion, “it would take forever” to produce vaccines. In reality, he said batches went through different stages of the manufacturing process sequentially. “If a batch moves from Stage 1 to Stage 2, another batch moves into Stage 1, and so on. It may take some time to produce the first batch, but subsequent batches do not have to wait that long if the process runs smoothly,” he explained. The gap between batches would be a couple of weeks, maybe a little longer, but not more, if all went well, he pointed out.

The Sputnik model

In hindsight, there is little difference between what entities such as AstraZeneca and Pfizer are doing with their IPRs and what the Modi government has done with its hold over Covaxin by virtue of its stake in the IPR. Vaccine makers as well as experts like Satyajith Rath have pointed out that it makes little sense for the government to not diversify the production of Covaxin. By diversifying production geographically as well as by roping in more public sector companies as well as smaller biologicals manufacturers, the dependence on Covaxin could have been avoided. Moreover, this would have given the government greater leverage in its dealings with not just SII but with its principal, AstraZeneca.

The model adopted by the Russia Direct Investment Fund (RDIF), the owner of the Sputnik V vaccine, is exactly the opposite of what the Modi government has done. According to a Sputnik V contractor the production base is to be spread over nearly 10 different companies in India, most of them small and medium-sized biologicals manufacturers. Moreover, RDIF has facilitated easy transfer of technology, primarily the vaccine “recipe”, says Dr Hemanth Nandigala, managing director of Virchow Biotech, one of the contractors of Sputnik V in India. Also, by roping in DRL, a company with a wider marketing reach, the deliveries are likely to be smoother. Industry sources told Frontline that DRL is playing a “facilitatory role” by coordinating production among the companies producing the vaccine in India. This is in keeping with Sputnik’s overall strategy of entering markets largely untouched by the Western multinationals. It has located manufacturing bases in Germany, Turkey and Italy, but it has diversified into developing countries by locating production bases in China, India, Brazil, Egypt and Algeria.

Although the first batches of India-made Sputnik V vaccines are likely to roll out by July, sources say it will take a few months for production to reach 100 million doses a month. They also said it would be about a year for all production sites to operate at full tilt with a combined total of about 1.5 billion doses. This was because different sites would reach mature capacity at different times and because of the problems involved in scaling up, the sources explained. Manufacturing of Sputnik V is complicated by the fact that the first and second dose of the vaccine use a different vector, effectively implying that the two are different vaccines. Industry sources explained that the perceived disadvantage of the production logistics was compensated by the higher effectiveness of the vaccine, considerably higher than the Janssen single-jab vaccine.

Indeed, Sputnik offers the only ray of hope for India now. The inference from the accompanying table is that Chinese companies account for not just the largest number of COVID vaccine candidates (7 out of 19) but are present across all vaccine technology platforms, barring the mRNA platform. In fact, Chinese companies with inactivated virus vaccines have widened their production bases, unlike what has happened with Covaxin. In effect, China while reducing the excessive risk of depending on what is considered to be the oldest technology platform, has not abandoned it because of the possibility of its immediate availability in the pandemic. But meanwhile it has widened its search for novel pandemic vaccines. The cooperation between China and Cuba is illustrative of the possibilities for developing countries. It is particularly interesting because it marries the strengths of the two partners. While Cuba brings to the table significant and long-standing technical capabilities in biotechnology, China offers its manufacturing expertise honed over the years.

Satyajit Rath and others have argued that the government ought to have revived the long-neglected public sector vaccine units much earlier. Over the last decade and more, these companies have been driven aground ( Frontline , April 11, 2008). But even this will not be enough. These companies require significant infusion of money and talent and logistical support. In fact, an ecosystem, including the participation of biologics companies, needs to emerge urgently, with significant support from the Union government. Only this kind of coordinated approach will ensure the availability of ancillary industries, raw materials, equipment and guidance through regulatory pathways. Such an approach is incompatible with a free-wheeling “market” approach that the merchants of crass commerce have been peddling in the past few months.

The lifecycle of the effectiveness of the current vaccines is going to be tested, Sathyajit Rath says. He points out that humanity’s one effective reaction to the virus—physical distancing—has been countered by more efficiently transmissible variants. However, he warns that as time goes by, as more and more people are vaccinated, while leaving a significant population unvaccinated (for whatever reason—it does not matter whether it is by exclusion, hesitancy or because of vaccine deniers—two significantly large sets of population will co-exist cheek by jowl). “I would be astonished if within a year or so the virus does not emerge with vaccine-escape variants. And, at that point, we will need second generation vaccines,” he said.

While this sounds ominous, all is not lost. The government still has the chance to jettison hubris and its ill-thought-out vaccine policy and give India a fighting chance. It requires a U-turn. Urgently, for humanity’s sake.