In the global vaccine drive against Covid-19, which began around the world in late 2020, developing countries came to find themselves at a considerable disadvantage in the procurement and distribution of dosages to their populations. This was attributable to several factors, including: the resource constraints in outbidding major economies’ health-budget endowments, the over-accumulation of vaccines by developed countries (in excess of their population ratios), high per-unit procurement costs, limited dosage inventories, and difficulties in storage alongside logistical challenges.
Because of these difficulties, the Government of Pakistan has expressed its amenability towards private-sector procurement of the vaccine. This was announced in early February, after the National Health Services, Regulations and Coordination Division had sought a special cabinet exemption to allow for imports without the typical price cap stipulation that is normally applied to drugs in Pakistan. This would alleviate the pressure of relying on donations (such as the 5 lakh dosages from China) or on the international GAVI/COVAX initiative, which would have brought Pakistan 17 million doses but has not delivered them thus far.
Relying on private sector participation to create market mechanisms often reflects a belief that the state does not have the means to achieve a task in a manner that is cost-effective, efficient, or comprehensive. Statements from several ministers suggest that the government recognizes the resource constraints involved in attempting to vaccinate 220 million people, in addition to the questions of doing so effectively or efficiently. Conversely, putting large programs in the hands of the state often suggests that there is a public interest involved, such as the need for regulatory oversight, provision of basic human rights, natural monopolies, or remedies for market failures.
In Pakistan, although the challenges that confront the government appear to be common knowledge, not enough attention is being paid to the concerns of private involvement, and that too across three key dimensions: quality, quantity, and price. A litany of cases of private sector malfeasance, not least in the pharmaceutical and medicinal sectors, should raise alarm bells about leaving unfettered market activities in the domain of vaccination (and public health more broadly). On the first dimension of quality, there is a risk that unethical practices might materialize as false, substandard, or inconsistent dosages administered to the public, especially without some strict and proactive government oversight.
On the second dimension of quantity, there is a risk that an ad-hoc cartel may emerge between a select group of large vaccine importers that may hold dosages back from the public (in deep-cold storage, for example), to keep the price artificially high, at least for the period that the government does not secure large enough dosage volumes. Cartel behavior is a common phenomenon in many economic sectors in Pakistan, and although it does not necessarily need to emerge in the domain of Covid-19 vaccines, it cannot be ruled out entirely.
On the third dimension, and perhaps the most natural one for private power, there is the risk of excessive pricing of the vaccines to maximize short-term profits at the expense of the consumer. This risk persists because of the absence of price caps in the initially approved proposal for Covid-19 vaccine importation for the private sector. In fact, there has been a recent case pursued by the National Accountability Bureau (NAB) in Lahore, where the agency has decided to seek the record from a well-known private laboratory about procuring vaccines from Russia and charging a $125 (Rs. 20,000) price tag for two doses/person that would cost the company only $20 per import. Such profiteering is but a natural outcome of private interest in a high-demand product with supply inelasticity. It is positive to note that our accountability agencies are taking note of such intent by private players, but is not altogether surprising that the private sector would exhibit such tendencies.
There is still time to construct a strategy that draws upon the strengths of both the public and private sectors to work in partnership towards the provision of the vaccine to the general public. One formulation would be that of a public-private partnership (PPP) in the coronavirus vaccine domain. This PPP could involve the issuance of licenses to select private companies to import dosages, with price caps, and an agreement to be regularly checked (oversight) for the processes of administrating the vaccine along quality, quantity, and pricing dimensions; and may also involve a partial subsidization of the imports. This would alleviate the funding burden on the government, while also create a profit-motive within reason.
This model could also receive the support of external donors and supporters. For example, given that the World Bank and its sister organizations (e.g. ADB) are ideologically inclined (read: neoliberal) towards PPPs, they could participate in funding a part of the PPPs requirements, and then claim it as a successful example of their interventions in the third world during a pandemic. Large foundations such as the Bill & Melinda Gates would likely be amenable to such initiatives as well, especially if it generates substantial social impact (and publicity).
What is different about the contours of the PPP-proposal briefly sketched above, compared with the government’s current strategy, is that instead of taking a two-track approach with slow public procurement for the poor and eye-gouging privatized supplies for the rich, a PPP approach would seek synergies between public interest requirements and private power under a more actively-regulated mechanism, while also inviting external partners to contribute. In other words, it adds additional layers of oversight, regulation, and external participation, without creating a socioeconomic bifurcation of a basic human right. In such a way, Pakistan may set an excellent example of “a social partnership for the cure.”
The writer is the Director for Economics and National Affairs at the Centre for Aerospace and Security Studies (CASS). The article was first published in THE NATION. He can be reached at [email protected].
