Ever since pharmaceutical companies across the world started developing vaccines against the Novel Coronavirus, the Congress party in India has been running a sinister campaign against Indian vaccine makers, while campaigning for much more costly vaccines made by foreign companies. Initially, much of the Congress propaganda was against Bharat Biotech, which had developed the vaccine Covaxin indigenously in India. But ever since the central govt allowed the companies to sell the vaccines to state governments and private companies, the Congress campaign against both the companies has intensified.
SII has announced the price for Covishield at ₹400 per dose for state govts and ₹600 for private hospitals, while the prices set by BB for Covaxin are ₹600 for state govts and ₹1200 for private hospitals. At present, both the companies are supplying their vaccine to the union govt at ₹150 per dose, which are supplied to all the state govts. Using this difference in rate for union govt and state govts, left-liberal media and the Congress and other opposition parties have alleged that Modi govt has allowed the private companies to make unprecedented profits. it may be noted that the ₹150 price for the centre is a discounted price offered by the companies for the initial contract, and any subsequent sale to the centre will be under new contracts at the prices same as the price set for the state governments.
The Congress party today made some calculations of the ‘profit’ made by the two companies, and came up with the conclusion that they will be earning a profit of ₹1,11,100 crore.
“Is Modi Govt complicit in vaccine profiteering of ₹1,11,100 Cr”? Asked Congress leader Randeep Singh Surjewala on Twitter, while posting an official press release by the party making the claim.
Party supporters have also published the detail calculation on Twitter, which shows how the party arrived at the figure of more than one lakh crores.
According to them, Serum Institute will make a profit of ₹35,350 crore, while Bharat Biotech will earn ₹75,750 crore in profits. They have estimated that as Indian population below 45 years is 101 crores, 202 crore doses will be required. These will either be purchased by state govts or by individuals as the central govt will continue to vaccinate people above 45 years of age for free. Assuming that both the companies supply 50% each of the required doses, the Congress further assumed that state govts will purchase 50% and the private sector will purchase 50% in each state.
The Congress party has assumed that cost of production for both the vaccines is ₹150, and based on that, they have estimated profit of ₹250 and ₹450 for SII and ₹450 and ₹1050 for BB from states and private sector respectively.
Based on such “detailed” number crunching that will surely impress Kaushik Basu, the Congress party has declared that there is a vaccine profiteering to the tune of ₹1,11,100 crore. This number is almost four times the profit of Reliance Industries for 2019-20, and more than the earnings of the India’s largest corporate house. The profit of RIL was ₹30 thousand crores in 2019-20, which means both Bharat Biotech and Serum Institute will earn more profits than RIL by selling only one vaccine each.
Although only the two vaccine makers are best placed to respond to this absurd claim with actual numbers, it can easily be said that there are several inaccuracies in the calculation made by Congress.
First, Congress has assumed the market size wrong. At present the Covid-19 vaccines are approved only for adults, those who are 18 years of age or above. The Congress party has included the entire population below 45 years, which is completely wrong. According to estimates, more than 50 crore people in India are below the age of 18 years. This means Congress needs to reduce the estimated demand by more than half. Apart from that, frontline workers of all age groups are already covered under free vaccination by centre, so the number of eligible people in the 18-45 age group goes down further.
Even after that, there are several other factors. The party has estimated that 50% population in each state will opt for vaccination at private hospitals. This assumption is completely baseless and far from reality. Several states, including large states like Uttar Pradesh, Maharashtra, Rajasthan, Madhya Pradesh, Bihar etc have announced that they will vaccinate their 18-45 population for free. So far more than a dozen states have made such announcements, and it is expected that most states and UTs will announce free vaccine in the coming days.
When same vaccines will be available for free in most if not all states, it is illogical to estimate that only 50% of the eligible population will avail the service. Only a minuscule number of wealthy people who prefer the convenience and luxury of private hospitals will go there. This means that the share of purchases by states will be much more than 50%, and the purchase by private hospitals will go down by that extent. This will upset the calculation by Congress party badly, as they have assumed ₹75,750 crore profit by both the companies from sale to private hospitals itself.
As most vaccines are covered under public vaccination programs in India, and as the centre is already vaccinating 45+ group for free and most states vaccinating 18-45 group for free against Coronavirus, there is no basis to assume that private hospitals will purchase Covid-19 vaccines worth ₹90,900 crore, as the Congress party is calculating.
The third wrong assumption made by the Congress party is the cost of the production. SII CEO Adar Poonawalla has already said that they are making a loss by selling the vaccine at ₹150 to the centre, as they need to pay 50% royalty to AstraZeneca on the revenue. This means the company is getting only ₹75 dose, a very low amount. Similarly, Bharat Biotech is also making losses by selling their doses at ₹150.
Both the companies made huge investments to scale up capacities to produce the vaccines. While SII is making a vaccine developed by Oxford University-AstraZeneca, Bharat Biotech developed the vaccine, which incurred substantial investment. The company spent around ₹350 crore in the clinical trial alone, an amount that needs to be recovered by selling the vaccine at a suitable price. Both the companies plan to further expand their capacities, which needs investment.
The fact is, there is absolutely no basis to claim that the cost of production of both the vaccines is ₹150 for both the vaccines. Moreover, the cost of both the companies won’t be the same. Because while SII is making a vaccine developed by Oxford-AstraZeneca, Bharat Biotech developed the Covaxin itself. This means the company has made huge investments in developing the vaccine, apart from expanding its capacity to produce a higher number of doses. The company also had to run an extensive clinical trial program in India to get the vaccine approved. The Covishield main trial was conducted by AstraZeneca, while SII conducted only a small bridge trial in India as required by law.
Along with that, Serum Institute of India enjoys a vast economy of scale, as it is the world’s largest vaccine manufacturer. The company also has a much large order book for Covishield, not only from the Indian government, but also from several foreign nations, and the COVAX, the Covid-19 vaccine initiative by Gavi, the Vaccine Alliance, the Coalition for Epidemic Preparedness Innovations, and the World Health Organization. As a result, it is expected that production cost and therefore the price of Covaxin will be more than Covishield.
The criticism over the pricing started due to the difference in price charged from the centre and the new prices. But as SII has already clarified, they had promised to deliver the first 100 million doses at discounted rate, after that they will charge ₹1000 per dose. Now the company is actually is charging less than that. Moreover, the companies will sell to centre at discounted price of ₹150 only for the current contracts. After that, they will charge the same amount from the centre as they are charging from the state governments.
This allegation by the Congress party brings back the memories of Nehruvian philosophy the party used to follow, according to which making profits by businesses were seen as a grave sin. The party prevented the corporates and individuals from earning profit for decades, which stifled any kind of innovation in the Indian corporate sector. Now, they are making illogical calculations to claim that Indian vaccine makers are making astronomical amounts in profits.