September 8, 2021

The Science Behind COVAXIN Pricing Explained

Bharat Biotech made an announcement today explaining the pricing of COVAXIN® for Central Government, State Governments, and Private Hospitals. Bharat Biotech stated, "We believe it is pertinent to place facts on record for the media and the public at large, so that they can understand and appreciate our efforts.

"Vaccine pricing depends on numerous factors: At the outset, one must remember that the pricing of vaccines and other pharmaceutical products heavily relies on a series of factors; the cost of goods and raw materials, product failures, at risk product development outlays, product overages, the entire capital expenditure for setting up sufficient manufacturing facilities, sales and distribution expenses, procurement volumes and commitments besides other regular business expenditures."

COVAXIN Pricing and Procurement Explained

In this context, let us look at the specifics. The whole-virion Inactivated Vero Cell vaccines (COVAXIN® derives from this technology platform) are highly complex to manufacture since the critical ingredient is based on live viruses which require highly sophisticated, multi-level containment and purification methods. Such high standards of purification automatically leads to significant process losses and low yields, but the outcome is a highly purified and safe vaccine. This is evident from the excellent safety contours of COVAXIN® with an impressive supply of more than 40 million doses to date. It is emblematic that Bharat Biotech has not sought Indemnity from the Govt. of India for any adverse events from COVAXIN®.

Complex Manufacturing Process

In fact, the sheer complexity of the COVAXIN® manufacturing process is manifested by the fact that it requires about 10,000 sq. meters of area to manufacture around 200 million doses of the vaccine annually. In comparison, the same quantity of live-virus vaccines can be manufactured from mere 1,500 sq. meters. Due to the highly contagious nature of the live SARS CoV2 virus, more stringent Biosafety Level-3 (BSL-3) containment facilities are required for the manufacturing of COVAXIN®.

Every batch of manufactured product is subjected to more than 200 quality control tests prior to its release. It is exactly this complexity that has kept away other companies from developing vaccines, especially whole virion inactivated vaccines. The SARS CoV2 virus provided by ICMR-NIV is also equally available to other manufacturers who wish to develop and manufacture such a vaccine. Companies would need access to cell lines, BSL3 manufacturing and quality control facilities, and several well-trained technical teams to manufacture COVAXIN®.

Why is COVAXIN® More Expensive for the Private Sector?

Another key point of discussion has been about pricing our vaccines for private sector players, which is significantly higher than that given to governments and large procurement agencies. This is purely due to fundamental business reasons, ranging from low procurement volumes, high distribution costs and retail margins among few others as explained above.

As directed by the Govt. of India, less than 10% of our total production of COVAXIN® to date has been supplied to private hospitals, while most of the remaining quantity was supplied to the State and Central Governments. In such a scenario, the weighted average price of COVAXIN® for all supplies realized by Bharat Biotech is less than ₹250 per dose. Going forward, ~75% of the capacity will be supplied to the State and Central Governments with only 25% going to private hospitals.

The supply price of COVAXIN® to the government of India at ₹150 per dose is a non-competitive price and clearly not sustainable in the long run. A higher price in private markets is required to offset part of the costs. There are live examples of such pricing policies, where the Human Papillomavirus Vaccine priced for GAVI supplies at ~ $4.5 per dose (~ ₹320) is also available in the private market at ~ ₹3500 per dose. Rotavirus vaccines are supplied to the Govt. of India at ~₹60 per dose, but is also available in the private market at ~ ₹1700 per dose. The prices for COVID-19 vaccines internationally have varied between ~ $10 to ~ $37 per dose, (~ ₹730 – ~ ₹2700 per dose).

Private Procurement is Only Discretionary

Unlike most medicines and therapeutics, vaccines are provided free of cost by the Govt. of India to all eligible Indian citizens. The procurement of vaccines by private hospitals is optional and not mandatory. It serves to give a choice to citizens who are willing to pay for better convenience. The question of product pricing is only of extraneous interest to all concerned, especially when the same vaccine is made available free of cost.

Bharat Biotech has so far invested over ₹500 crores at risk from its own resources for product development, clinical trials and setting up of manufacturing facilities for COVAXIN®. The support from The Indian Council of Medical Research (ICMR) was with respect to provision of the SARS CoV2 virus, animal studies, virus characterization, test kits and partial funding for clinical trial sites. In return for this valuable support, Bharat Biotech will pay royalties to ICMR and the National Institute of Virology (NIV) based on product sales. Royalties are also payable to Virovax towards the licensure of IMDG agonist molecules.

Bharat Biotech is investing in new facilities and repurposing existing ones across several states in India for enhancing the production of COVAXIN®. It is pertinent to mention here that there is an urgent need to set up a significant number of manufacturing facilities, and to divert existing facilities for COVAXIN®. This has resulted in a reduced production of other vaccines at our facilities, leading to a loss in revenues. We have been extremely diligent in selecting manufacturing facilities and partners with the required levels of containment, capabilities and expertise. Product development activities towards the development of vaccines against newer variants is also underway at our facilities.

Low Product Price Realization Dispirits Domestic R&D

It should be noted that companies such as Bharat Biotech are innovators with specialized expertise in product development and large scale manufacturing. As such, Bharat Biotech should be allowed to maintain a differential pricing strategy for governments and private hospitals. It is distressing to see a large country like India with only the very basic level of innovation in vaccines and pharmaceutical products, to begin with. It may very well be argued that the low-price realization for home-grown innovators constraint innovation and product development in India.

In the absence of a dual pricing system, Indian vaccine and pharmaceutical companies risk being reduced to mere contract manufacturers with intellectual property being licensed from other nations.

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