COVID & Costs: Modi Govt Must Cut Tariffs on Medical Imports

Rising cost of healthcare, lack of medical insurance, and loss of livelihood, merit lowering tariffs on imports.

The news about Oxford COVID-19 vaccine trials moving to the third phase of a clinical trial is making everyone ecstatic. The stock market in particular is rewarding the shareholders of all the major pharmaceutical companies conducting the clinical trials. Price data from the US stock market show in a matter of four months, starting mid- March, stock prices of these companies went up between 27% and 400%.

• Moderna Inc. up by 400%,
• BioNTech by 228%,
• Emergent Biosolutions Inc. by 100%,
• Astra Zeneca by 46%,
• Johnson & Johnson by 37%, and
• Pfizer by 27%.

However, vaccines are not going to be available for the general public anytime before next year.

At the opposite extreme, a recent U.N. report suggests COVID-19 could push up to 132 million people into hunger, and if there is a reoccurrence during winter, it may further lead to starvation. IMF is suggesting because of the closure of business and lockdown, it is likely that the global growth will contract by -4.5%.

Health Not Affordable Anymore

When it comes to the right to health, governments are committed to safeguarding the health of their citizens. Yet, at the time of Covid-19 things have gone for a toss. Healthcare infrastructure and professionals are far from being universally accessible. An inadequate number of hospital beds has forced many governments to convert stadiums, sports centers, and railway coaches, into makeshift hospitals.

Additionally, supply-chain disruption is making things worse. Unprecedented demand caused by hospitals stockpiling basic medicines such as antibiotics, painkillers, sedatives, and corticosteroids has caused global shortages and surging prices. India’s drug regulator’s temporary green light for a 50% increase in the price of the blood thinner heparin is one example. Meanwhile, COVID-related pressures have seen Pakistan’s regulator approve a 7% increase for essential drugs. In the UK, the price of basic painkillers has leaped 30% since the start of the pandemic.

Needless Import Tariffs on Medicines

Some governments are adding to the problem by levying needless import tariffs on medicines. At 20%, Pakistan boasts the highest tariff rates on medicines globally. More, the South Asian trio of Nepal, Pakistan and India have the top three tariff rates on medicines. Latin America is another medicines tariff hotspot, with Argentina and Brazil levying average tariffs of close to 10%.

For vaccines, India again tops the list globally, with vaccine tariffs at 10%.

Pakistan and Bolivia are among a clutch of countries that impose vaccine tariffs of 5%.

Even low tariffs have a cumulative impact on a product’s end price, ultimately paid by patients. A 2017 study by the European Centre for International Political Economy found that tariffs add a cumulative burden of up to USD 6.2 billion per year in China. In Brazil and India, patients may pay up to 80% more than the ex-factory sales price due to tariffs. Abolishing these tariffs would deliver to patients aggregate savings of up to

• USD 6.2 billion in China,
• USD 2.8 billion in Russia,
• USD 2.6 billion in Brazil and
• USD 737 million in India.

Beyond medicines, COVID essentials from hand soap to ventilators are more expensive thanks to tariffs. According to the WTO, the average applied tariff for hand soap is 17% and some WTO members apply tariffs as high as 65%. Five Latin American countries (Ecuador, Bolivia, Venezuela, Brazil, and Argentina) have the highest tariffs on facemasks, from 17% to 55%. Brazil, Argentina, and Venezuela levy a 14% import tariff on ventilators; in India it is 10%.

Government Must Bring Down Prices

Indian government should intervene in order to bring down price of medicines and vaccines. With the rising cost of healthcare, lack of medical insurance among the commoner, and loss of livelihood, lowering tariffs will be far more beneficial and effective. Some governments—Pakistan, Brazil, Columbia and Norway among them—have shown leadership by temporarily exempting COVID-19 related medicines, vaccines and medical supplies from import duties and taxes. Meanwhile, APEC governments are discussing proposals to eliminate for at least one year taxes and tariffs on COVID-19 medical products.

Governments should commit to permanent tariff reductions on medicines, vaccines, and medical supplies through legally binding WTO commitments.

Also needed is greater coordination effort in international research to allow the cross-border flow of epidemiological and clinical data.

Data is often stranded in its country of origin, due to widespread laws requiring data storage in local servers, coupled with de facto bans of cross-border data flows. Often, such laws are presented as privacy safeguarding; in reality, they are an attempt to boost local ICT industries such as data centers. China, India, and Russia are the highest-profile offenders, but far from the only ones.

(Nilanjan Banik is Professor of Economics at Bennett University, India; Philip Stevens is Executive Director of Geneva Network, United Kingdom. This is a blog and the views expressed above are the authors’ own. The Quint neither endorses nor is responsible for them.)