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Central govt's large order may compensate SII, Bharat Biotech for loss of high-priced states orders

A total of 440 million doses of COVID-19 vaccines from the two Indian manufacturers has already been placed; 30 percent advance for procurement of both the COVID vaccines has been released to the companies; from June 21, all citizens above the age of 18 years will get free vaccines

June 09, 2021 / 07:04 PM IST
Cumulatively, 2,58,45,901 people in the age group across 36 states and union territories have received their first dose and 1,18,299 their second dose since the vaccination drive began for them from May 1.

Cumulatively, 2,58,45,901 people in the age group across 36 states and union territories have received their first dose and 1,18,299 their second dose since the vaccination drive began for them from May 1.

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The large fresh order placed by the central government to buy 440 million doses of COVID-19 vaccines from Serum Institute of India (SII) and Bharat Biotech, India's two principal producers, may help them to partly compensate for the potential loss of orders from states where they were quoting a higher price, industry insiders told Moneycontrol.

The Union Ministry of Health and Family Welfare on June 8 announced that it has placed orders for 250 million doses of Covishield and 190 million doses of Covaxin, made by SII and Bharat Biotech, respectively.

The supplies from these orders will be available till December 2021, beginning now.

The government didn't disclose the price at which the vaccine had been acquired. It said a 30 percent advance for procurement of both the COVID vaccines has been released to Serum Institute of India and Bharat Biotech.

"The large order from the Central government will definitely help; also, the government gave a much-needed clarity on the 25 percent private sales," said a person with knowledge of developments, who didn't want to be named.


COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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So far, India has bought 250 million doses of COVID-19 vaccine both through the Government of India (free of cost channel) and via the direct state procurement category.

Details on the exact share of states' direct procurement is not known, but the Central government procured the lion share of the doses.

It is buying Covishield and Covaxin at Rs 150 per dose, while it has allowed Serum Institute of India (SII) to set a higher price for Covishield at Rs 300 per dose to states.

That is double the Centre’s price of Rs 150 and will cost Rs 600 in the private market.

Bharat Biotech has set its price at Rs 400 per dose to states, more than double at what the Centre is procuring, while its rate for the private market stands at Rs 1,200.

On June 7, Prime Minister Narendra Modi announced that the Centre will handle the 25 percent COVID-19 vaccines that were supposed to be procured by states to vaccinate the 18-44 age group.

Modi said that from June 21, all citizens above the age of 18 years will get free vaccines. He also added that vaccine supply would be increased significantly in the country in the coming days.

Ramping up procurement

For the current orders the Central government is paying Rs 150 per dose. If the government is buying at the same price for the latest order, the total procurement order size would be of Rs 6,600 crore.

As per back-of-the-envelope calculation, SII would receive Rs 3,762 crore and Bharat Biotech about Rs 2,838 crore for supplying the doses.

The latest order is in addition to the government entering into purchase commitment with Hyderabad- based vaccine manufacturer Biological-E to reserve 300 million COVID-19 vaccine doses, by paying an advance of Rs 1,500 crore.

These vaccine doses will be manufactured and stockpiled by Biological-E from August-December 2021.

In two weeks, the government has managed to secure 74 million doses, enough to fully vaccinate about 37 crore people.

It may announce more such orders in coming weeks as it targets 1 crore inoculations from mid-July, with a plan to cover the entire Indian population of 1.3 billion.

The government is also banking on Bharat Biotech's nasal vaccine, Sputnik V, Zydus Cadila's DNA vaccine, Novavax, and Johnson & Johnson single dose vaccine to meet the target.


Private market

As per the latest announcement, the Centre will procure 75 percent output of vaccine companies, and companies can sell 25 percent of output to private entities.

But analysts say that there is a short window of 1-2 months available for manufacturers to make the best use of the private market before the competition starts building up.

In such a situation, private entities will negotiate for lower prices.

Says Vishal Manchanda, Pharma Analyst at Nirmal Bang Institutional Equities: ``Beyond August, we would see the prices of COVID-19 vaccines cooling-off, there will be huge capacity addition in India and globally, prices in the private market may not be the same as on today."

Serum Institute of India and Dr Reddy's declined to comment. Bharat Biotech is yet to respond to the questions at the time of publishing the story.
Viswanath Pilla is a business journalist with 14 years of reporting experience. Based in Mumbai, Pilla covers pharma, healthcare and infrastructure sectors for Moneycontrol.
first published: Jun 9, 2021 07:04 pm

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