The Vaccination Equilibrium for India
Covid-19 virus is raging across the world bringing even the largest economies to a grinding halt frequently whereas scientists and pharma companies are striving hard to develop a vaccine that can act as a speed breaker in its course. While the scientists are doing their job, governments across the world are preparing their strategy that ensures the best possible ‘vaccine equilibrium’ for the nation and our government is also doing the same.
One immediate question that comes up at this point is why should this vaccine equilibrium be designed by the government and not let the free market dynamics play out itself and arrive at the market equilibrium with no State intervention at all. To answer this, let us first try to layout the ideal vaccine equilibrium India should aim for. The ultimate aim of the vaccination programme is to quickly and safely achieve herd immunity to halt the virus’s spread rather than act as a personal prophylactic against Covid-19. Scientists tell that at least 60–70% of the population must be inoculated to achieve this and that translates to vaccinating around 900 million people in India with a plan to spread the vaccine much faster than the virus can. The free market equilibrium lies way before this desired equilibrium as the free market never seeks eradication or removal of an entire category.
A primary reason for this equilibrium mismatch is the huge positive externality of vaccination. Every person getting vaccinated not only avoids getting the virus himself/herself but also helps to limit the spread of the virus, benefiting countless others. But when deciding whether to get vaccinated, individuals consider only their own personal benefits, risks and costs into account and do not consider the associated social benefits. Producers also do not consider this social benefit as they are only maximizing their own economic benefits. Such a good is often under produced and under consumed leading the free market to arrive at an equilibrium way ahead of the desired one.
Given that we have established the need for State intervention, we can now move on to identifying the nature and extent of that intervention. This would be the biggest optimization problem faced by any governments in the recent past and any strategy should be designed considering all constraints and resources. Since different countries and governments have different resources and constraints, strategies emerging out of them would also be different and unique to each country. Indian government should plan the intervention around 3 main areas of the vaccination program: — procurement, distribution and monitoring.
Government can act as a bulk buyer to counter the immense market power of the few vaccine producers and can act as a supplier to the private entities who want to participate in the vaccine distribution market. At the same time, there should not be any restrictions on direct buying from vaccine producers as long as the vaccine is part of the approved vaccine list which will be published by the Indian government or FDA or WHO.
The vaccine distribution plan must be a collaboration between the State and private players with the private players handling the market coverage and the State ensuring coverage even beyond the market coverage to ensure the ideal equilibrium. The free market should be allowed to play out without any price caps with government laying down the basic SOPs. In the distribution strategy of the government, the existing state capacity on vaccination drives like polio vaccination developed for Universal Immunization Program (UIP) should be utilized augmenting only additional needs like cold storage which are specific to the Covid-19 vaccines. Minimal pricing must be ensured through the government channel of distribution. Government should also conduct large scale awareness campaigns to inform and educate the population about the vaccination drive.
Since this vaccine will be of very limited supply during the initial stages, prioritization is an important aspect of vaccine distribution. A standard set of prioritization rules applicable to both public and private vaccine distributors wouldn’t be the best possible choice as this will not allow the free market to reach its desired equilibrium. Prioritization that maximizes individual benefits shall play out in the free market distribution and prioritization that maximizes social benefit should play out in the public distribution strategy.
Another important aspect is the effective monitoring of the vaccine distribution. This is very important for the government to gather the necessary data to measure coverage and track stock, adverse reactions, re-vaccination needs etc. This will help the government identify whether the desired vaccine equilibrium has been achieved or not. This technology platform should cover the private vaccine distributors also and it should be part of the SOP laid out.
This proposed strategy can ensure that we are working within the constraints we face and deliver the best possible outcome that can help us tackle this virus and get ahead of it. The government does not have the necessary financial, administrative and implementation capacity to single-handedly handle the vaccine distribution without private players. Also, there are multiple willing and feasible transactions that the free market can handle and all those transactions should be allowed to happen so that the government can focus on bridging the gap rather than building the whole bridge by itself!
