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Private hospitals look to renegotiate deals with vaccine companies

With limits on purchases and the prices they can charge, private hospitals are assessing the impact on their COVID-19 vaccination drives

June 10, 2021 / 11:10 AM IST

Private hospitals in India won’t place new COVID-19 vaccine orders after August and plan to renegotiate their existing deals with Bharat Biotech and Serum Institute of India after the Central government limited their direct purchases from manufacturers and capped the prices they can charge per shot.

Some hospitals that procured upward of 20,000 doses at a time plan not to place any new orders after August, when their stocks will run out. Others said they may seek credit from the vaccine companies instead of paying in advance.

“We will be asking for a credit line from vaccine manufacturers if we have to do a direct procurement from companies,” said Gautam Hinduja, CEO of Mumbai-based Hinduja Hospitals. “We will stop mass vaccination camps at workplaces and procure a small batch of doses instead of bulk purchases.”

Also Read: Private hospitals divided on Rs 150 cap on COVID-19 vaccine administration charges

The government changed its vaccination strategy and guidelines on June 7, saying it would procure 75 percent of the vaccines produced in India and would supply them to the states to be administered free of cost. It asked the states to aggregate demand for vaccines for their drives as well as those by private hospitals.


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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The revised COVID-19 vaccination guidelines say that “in order to incentivize production by vaccine manufacturers and encourage new vaccines, domestic vaccine manufacturers are given the option to also provide vaccines directly to a private hospital. This would be restricted to 25% of their monthly production.”

However, the next line of the order says that the states and Union Territories will aggregate the demand from private hospitals keeping in view “equitable distribution between large and small private hospitals and regional balance.”

It says if vaccine makers reduce prices, the state government should be notified.

“We are now waiting for clarity on how and to whom the hospitals will make the payment,” said Harsh Mahajan, president of the Healthcare Federation of India.

Hospital officials pointed out that the revised policy has added confusion to the procurement process and this could delay the vaccination drive.

“It appears that we don’t have to pay or procure from vaccine manufacturers but the government, so we are back to square one,” said an official who did not want to be identified.

Also Read: COVID-19: Covishield, Covaxin and Sputnik will be sold at these prices at private hospitals

“Vaccination will continue in all private hospitals but it will depend on how many doses are released for the private hospitals,” said Sujit Chatterjee, CEO of Dr LH Hiranandani Hospital in Mumbai.

Serum Institute and Bharat Biotech did not respond to queries seeking comment on the matter.

The Indian government said on June 8 private hospitals won’t be allowed to charge more than Rs 780 for a shot of Covishield made by Serum Institute, Rs 1,410 for Bharat Biotech’s Covaxin, and Rs 1,145 for the Russian Sputnik V vaccines. The cap on pricing came a day after Prime Minister Narendra Modi told the nation that the Central government will procure 75 percent of the vaccine doses produced by Indian companies (instead of 50 percent previously) to expand the vaccination drive of those aged 18 and above.

Since May, private hospitals have procured vaccines directly from companies at Rs 600 for Covishield and Rs 1,200 for Covaxin. The markup on these vaccines ranged from Rs 300 to Rs 600. Funding for vaccine purchases came from working capital loans of hospitals, which made advance payments and waited at least 15 days to get their supplies.

Additionally, there were ancillary costs such as purchases of syringes and salaries paid to the vaccination staff.

Reserving 25 percent of the vaccines for private hospitals when there is a shortage and government facilities are crowded only helps to prioritise the convenience of those who can pay over those who can’t or will be forced to pay, according to Bhupindra Singh, the former chairman of the National Pharmaceutical Pricing Authority. During his tenure, Singh introduced price regulation in private hospitals and set caps for medical devices such as stents and knee implants.

“If private facilities are allowed to help, the vaccine cost should be the same,” Singh said. “The government should allow only remunerative service charges, which could be increased from Rs 150, but certainly should be less than Rs 500. This can be negotiated with private hospitals… This is the only way to ensure free vaccines ASAP to whoever is willing.”

The policy changes make vaccination drives by private hospitals unviable because it limits their ability to recover costs, officials said.

Mid- to large-size hospitals had locked up 25,000 to 1.5 million doses by making upfront payments of Rs 4 crore to Rs 50 crore. The interest on working capital – about 12 percent – was what these hospitals recovered through their vaccination drive.

Hiren Ambegaokar, Group CEO of Surya Hospitals in Mumbai, said it had been placing orders for more than 25,000 doses and will reduce the number now.

“We will have to figure out the working capital involved and buy small quantities at a time that we can consume in a fortnight or in a month’s time,” said Ambegaokar.

Most hospitals have procured stocks till August and the impact of the latest changes will be seen from September.

State governments were allowed to procure doses directly from manufacturers from May 1, when those above 18 were included in the vaccination drive. However, the vaccination drive slowed for want of adequate supplies as the number of new cases reached a peak.

India will have to vaccinate about 10 million people every day to cover 40% of its adult population by the end of this year. The current vaccination numbers have been erratic, according to data on the Co-WIN website. India has been administering roughly 2 million doses on average every day since May.

The distribution of vaccines has been lopsided. Large private hospital chains are said to have cornered the bulk of doses in the private quota, leaving little for smaller hospitals.

These few hospitals jacked up the prices in their vaccination drives, leading the government to make this move, said an official from a mid-sized hospital.
Divya Rajagopal is a freelance journalist

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