Why is Govt Allowing Bharat Biotech to Make Rs 200 Extra Per Covaxin Dose?

Private hospitals bought Covaxin at Rs 1000 per dose in May, but govt capped it at Rs 1200 in June. We find out why.

Why has the government capped price of COVID-19 vaccine Covaxin on a higher side when private hospitals were purchasing it at a lower price per dose? Why is government allowing Bharat Biotech to make extra profit?

(Image: Erum Gour/The Quint)

Despite being an indigenous COVID-19 vaccine, Covaxin is one of the most expensive vaccines in the country. It is sold at Rs 1410 per dose in private hospitals (1200 + 5 percent GST + 150 service charge), although the government is procuring it at Rs 150 + 5 percent GST per dose.

There has been a lot of debate around the price of Covaxin being capped at Rs 1200 by the government for private hospitals, which in simple words means Covaxin cannot be sold below Rs 1200 by the manufacturers.

The price cap is a ceiling on the price that aims to protect consumers' interest and at the same time ensure that the business can remain profitable.

But is the government ensuring consumers' interest in capping Covaxin's price?

An investigation by The Quint revealed that private hospitals were procuring Covaxin at a lower price from the manufacturer before the price was capped by the government. As a result, people are now compelled to shell out more money to purchase Covaxin at a private hospital.

The Covaxin purchase invoices accessed by The Quint reveal that in May 2021, a few private hospitals were purchasing Covaxin vaccine at Rs 1050 per dose – Rs 1000 per dose from Bharat Biotech plus Rs 50 GST.

This shows the price was much lower before the Ministry of Health and Family Welfare (MoHF) on 8 June capped the price at Rs 1200 plus Rs 60 GST, pushing the total to Rs 1260 per dose.

As a result of the price cap, Bharat Biotech refused to sell Covaxin at Rs 1000 to private companies post 8 June, and started pocketing Rs 200 extra on each vaccine dose.

The question is:

Why did the government cap the price at a higher rate when private hospitals were already getting it at Rs 1000 per dose?

“We placed our first order with Bharat Biotech in the third week of May after the government allowed all private hospitals to inoculate people with COVID-19 vaccines. The company agreed to provide us 600 doses at Rs 1000 per dose after a brief negotiation. But after the government capped the price at Rs 1200, they refused to supply the vaccine at Rs 1000 per dose, even though they had supplied it at the same rate in May,” said the owner of a private company on the condition of anonymity.

Health experts say that the government caps prices of essential commodities after carrying out due diligence, taking into consideration various aspects like manufacturing cost, demand, supply, profit margin etc, to protect the interest of both consumers and manufacturers.

The Quint spoke to Dr Anant Bhan, a researcher in the fields of Global Health, Health Policy and Bioethics, to understand his views on this.

“It is surprising to learn of the price cap at a higher limit. The government is dealing with a much larger picture. We all know that the demand for vaccine is going to be there for months. Government should have checked first at what price private hospitals are procuring and should have used that as a base price and negotiated further to make it even more cheaper.”

Dr Anant Bhan, Researcher, Global Health and Bioethics

Because of the price cap being set at Rs 1200 per dose, the consumer has to pay Rs 1410 per Covaxin dose at a private hospital, which earlier cost Rs 1200 per dose.

One set of people may argue that capping at a higher price is sometimes needed to assist the company to enhance its manufacturing capacity. But can this argument stand in case of a lifesaving drug like COVID-19 vaccine?

Experts said no.

“If at all the government wants to assist Bharat Biotech in enhancing their manufacturing capacity then the government should provide them financial aid or loan. Why should common people pay for this?”

Dr Anant Bhan, Researcher, Global Health and Bioethics

Another important factor is – when the government is procuring Covaxin at Rs 150 plus 5 percent GST per dose, then why is it capping it at Rs 1200 plus 5 percent GST per dose?

What is the rationale behind capping Covaxin’s price almost 10 times higher for common people?

In an RTI reply to Commodore Lokesh Batra (Retd), the MoHF has mentioned that the first order for 1 crores doses of Covaxin was procured at Rs 295 plus 5 percent GST per dose from Bharat Biotech. But from the second dose onwards, Bharat Biotech has been supplying Covaxin at Rs 150 plus 5 percent GST per dose – which means that the government did negotiate with the manufacturer to supply the vaccine at a cheaper price.

One cannot really explain why the government is procuring Covaxin at Rs 150 per dose for itself but capping it at Rs 1200 per dose for private hospitals. But one thing is certain that even at Rs 150, Bharat Biotech is able to cover the vaccine’s cost. Manufacturer cannot supply it at loss. Considering that Rs 150 covers at least the cost of the vaccine, Rs 1200 is indeed a huge margin, especially when the demand for vaccine exponential.”

Dr Anant Bhan, Researcher, Global Health and Bioethics

The other two vaccines available in India is capped at a much lower price compared to Covaxin.

Covishield, manufactured by Serum Institute of India, is capped at Rs 600 per dose, excluding 5 percent GST. It is 50 percent cheaper than Covaxin, although both are manufactured in India.

Sputnik V, manufactured by Dr Reddy’s Laboratories, is capped at Rs 948 per dose, excluding 5 percent GST.

Therefore, it remains unclear why the government is allowing Bharat Biotech to make more profit by capping the price on higher limit at Rs 1200 per dose.

Did the government fail to carry out due diligence before capping the price?

The Quint has written to the Ministry of Health and Family Welfare and Bharat Biotech for their response. We will update the report if and when we get their statement.