If the COVID-19 vaccine prices are too high for some, then why not use direct benefit transfer

If the COVID-19 vaccine prices are too high for some, then why not use direct benefit transfer
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  • Instead of allowing vaccine makers to charge customers different prices for the same vaccine, the government could offer subsidy for those who need it the most via direct cash transfer.
  • Allowing different prices offers an incentive to move the stock of vaccines to the buyers who pay more i.e. private hospitals.
  • That may leave a lot of poorer Indians waiting in queues for a long time to get their share of the jabs.
  • Even with direct cash transfer, there may be a need to cap prices and to declare hoarding as a criminal act to ensure that the kind of leakage seen in ration shops is not replicated in vaccines as well.
  • There are arguments against direct benefit transfer as well.
The new prices for COVID-19 vaccine, Covishield, has triggered a debate in India. Some argue that the prices are too high for everyone to be able to afford, and some say that it should be free for all and the government should bear the cost.

The government already has a lot of expenses piling up as it manages the pandemic, and hence, there are also those who see merit in arguing that those who can pay for the vaccine, must pay for it. However, there is a problem with letting private and for-profit companies charge different prices from different customers.

These are the prices fixed by Serum Institute of India (SII) for the Covishield vaccine:
If the vaccine is sold to… Price per dose
Central government₹150
State government₹400
Private hospitals₹600

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India is a developing country with millions of poor people with poor access to, and little money to spare for, healthcare. By allowing vaccine makers to choose the pricing based on who is buying the vaccine, the government may give the producer an incentive to direct more vaccines to the more expensive private hospitals, whereas a majority of the country still depends on state-run facilities.

“Pricing should be uniform. Both the central and state governments should pay the same price for the vaccine. The government should also cap the price of the vaccine sold at private hospitals. Even the administrative charges should be capped. Otherwise a family of four may end up paying a lot for vaccination,” Doctor Sanjeev Bagai, Chairman and Managing Director of the New Delhi-based Nephron clinic told Business Insider.

“Direct benefit transfer is also an option. And the cost of vaccination should be covered by all insurance companies,” Bagai added.

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If the COVID-19 vaccine prices are too high for some, then why not use direct benefit transfer
Beneficiaries stands in a queue outside a health centre to receive a dose of Covid-19 vaccine, amid surge in coronavirus cases, in Kolkata.Photo/Swapan Mahapatra)(

The case for direct reimbursement for the cost of vaccine

One may argue that there are covenants in place to ensure that the company sends an agreed amount of supply to government facilities. However, decades of similar policy experiments have taught us that such agreements are inefficient and provide a fertile ground for corrupt practices.

The failure of such mechanisms gave birth to the idea of Direct Benefit Transfer (DBT). It could be deployed here as well, given that patients coming in for vaccination are already being asked to submit their Aadhaar (unique identity number) details.

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Vaccine makers should charge the same price from all customers. Those who access it via government agencies, or any other filter as may be applicable, should be allowed to get the subsidy reimbursed to their bank account.

This has been effectively used in transferring other subsidies like the ones for cooking gas and fertilisers. The government’s own estimate is that it has saved over ₹1.78 lakh crore ($25 billion) in subsidy leakage because of DBT.

The argument against direct benefit transfer

There are two arguments here against direct benefit transfer. One from R Ramakumar, Professor at Tata Institute of Social Sciences, who wants vaccines to be free for all as it is in countries like US, UK and China.
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The other argument is from Dr Arvind Virmani, an economist and the former Chief Economic Advisor to the government of India, who wants drug prices to be decontrolled totally and do a direct cash transfer on a larger scale and not limit it to vaccines alone.

“Supply chain has to be developed. It can’t be done overnight. The data on production and sale of vaccines is transparently available from the producers, for the government, Astrazeneca and others to see. To introduce DBT now, it would mean taking out funding from other budgeted activities like infrastructure construction. Right now, vaccination is working smoothly. Don’t disrupt it,” he told Business Insider.

Aside from the fact this may add a bureaucratic layer, Ramakumar’s contention is that by allowing state-run facilities to charge less, and private hospitals to charge more, there is an incentive of corruption in distribution.
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India already has decades of bad experience. from the public distribution system a.k.a the ration shops, where the subsidised stock is moved out to be sold at a higher price. A cap on prices, and a crackdown on hoarders by making it a criminal act, may be necessary to counter this, even with reimbursement of the vaccine cost via direct transfer to bank accounts.

Virmani’s take is that there is a case to be made for both deregulating drug prices, as well as direct cash transfer for a variety of reasons, in India but that can’t be debated in the middle of a pandemic. “All drugs are controlled. We should be discussing decontrol of drugs. That’s not the problem right now. For the last 12 months, I have been saying you can create a direct cash transfer in 4 months. It should still be considered,” he added.

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