Why Bharat Biotech's Covaxin remains expensive in private markets - Moneycontrol

The NASDAQ-listed Ocugen has rights to commercialise Covaxin in the US.

Bharat Biotech International's Chairman and Managing Director Krishna Ella famously said at a panel discussion in Hyderabad last year that Indian vaccine makers were supplying shots at a price that’s less than the cost of water, gesturing with a 200 ml litre bottle. His remarks, against the backdrop of the COVID-19 pandemic, were seen as a hint that vaccines for the viral disease would be as inexpensive.

People who have followed Ella know that he frequently uses the water bottle analogy to explain how affordable made-in-India vaccines are. That's partly true. A single dose of the pentavalent vaccine that saves infants and children from five diseases--diphtheria, pertussis, tetanus, hepatitis B and Haemophilus influenza type B--costs  Rs 15 per dose to the government, well below the price of a bottle of water.

But things are different with COVID-19 vaccines. Ella's own company has priced its Covaxin for supply to the government at Rs 150 per dose and Rs 1,200 to the market. The company was selling the vaccine to states at Rs 400 per dose before the central government undertook to procure and supply it to the states. Bharat Biotech sells its vaccine at double the price of its competitor Covishield, manufactured by Serum Institute of India,  in the market.

Questions emailed to Bharat Biotech on what makes it so expensive went unanswered before press time. Here is a ready reckoner from Moneycontrol that seeks to explain why.

Market dynamics

The government’s liberalised policy allows differential pricing, allowing manufacturers like Bharat Biotech freedom to set the price of COVID-19 vaccines for the market, with the condition that they have to make an advance declaration of the price. The government says this was done to incentivise private vaccine manufacturers to recoup their investments and to encourage more pharmaceutical companies to enter the market and scale up production.

The government believes that competition and increased availability of vaccines will lead to an eventual decline in prices. But at the moment, amid a supply-demand mismatch, there is no possibility of prices coming down in the market at least in the next couple of months. Bharat Biotech too would like to take advantage of the window before the competition heats up.

Global benchmarking

Covaxin is similar to China's Sinopharm vaccine. Both are based on the vero cell inactivated platform. Sinopharm's COVID-19 vaccine is approved by the World Health Organisation and several governments. The price of the vaccine per dose ranges between $15 and $45, depending on the country.

Platform challenges

Compared to Covishield, Covaxin is priced higher because the technology platform that the latter employs doesn’t give it quick manufacturing scale. Covaxin is produced using an inactivated platform that requires handling of a live SARS-CoV-2 virus. Handling of respiratory viruses like SARS-CoV-2 requires a higher biosafety or a BSL-3 facility, which has stringent contamination protocols.
In addition, inactivated vaccines are typically associated with a lower degree of immunogenicity, which requires an adjuvant addition that consequently raises the cost and vaccine pricing.

It is also a time-consuming process. Bharat Biotech said that it takes around four months for manufacturing, testing and releasing a batch of Covaxin. The company noted that the entire process is complex and multifactorial and requires coordinated efforts by several agencies.

Does it justify the price?

There is no data on the ex-factory price of Covaxin. Experts say the vaccine is probably priced higher. Dr KV Balasubramaniam, a vaccine industry veteran and life science industry consultant, who worked out the approximate cost of manufacturing the vaccine, told Moneycontrol that the prices quoted by the vaccine companies are far above what the actual prices should be.

In case of Covaxin, Balasubramaniam estimates that the production cost should not exceed Rs 40 per dose.

"Covaxin might not get the same kind of volumes like Covishield, but the pricing doesn’t justify the cost. They too have got a lot of help from ICMR {Indian Council of Medical Research}," Balasubramaniam says.

Balasubramaniam, who headed public sector company Indian Immunologicals Ltd (IIL) for a long period and was instrumental in its profitable growth, said that the Foot and Mouth Disease (FMD) vaccine made by IIL, which is an inactivated vaccine, and with three virus strains, not just one, is being presently sold to the government for around Rs 12 per dose in 50 dose packs.

Will Covaxin ever cost less than a water bottle?

An executive of a vaccine company who knows Ella told Moneycontrol on condition of anonymity that the latter may have been carried away by the moment in making that remark.

"Ella loves to talk extempore, that sometimes puts you in a spot," the executive said.

"Eventually Covid-19 vaccines including Covaxin will become less than the price of a water bottle, as capacities expand and new competition comes in, but that’s going to take time,” the executive said.

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Why Bharat Biotech's Covaxin remains expensive in private markets - Moneycontrol
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