How India lost the vaccine war

Text from the-ken.com/the-nutgraf/how-india-lost-the-vaccine-war/

If you’ve been following the news, two really important events happened last week.

 

The President of the United States, Joe Biden, announced that all adults across the US would be eligible to receive the Covid-19 vaccine in the next two weeks. Earlier, the US had expected this to happen by 1 May. Things are going so well that they’ve decided to move it up by two weeks. 

 

Meanwhile, India is going in the opposite direction. The pace of vaccination, which was steadily picking up, now appears to be slowing down. Multiple states have reported shortages, while the number of coronavirus cases across the nation is accelerating. Adar Poonawalla, CEO of the Serum Institute of India (SII), the largest vaccine manufacturer in the world, has said that existing production capacity is "very stressed, to put it frankly" and that “we are still short of being able to supply to every Indian”. 

Public memory is short, but back then, we weren’t even sure if we’d even get a vaccine. Nobody had created a working vaccine for a coronavirus, and the fastest vaccine ever developed took us over four years. We had to achieve the impossible while the world was in a global lockdown, with supply chains paralysed. 

Even in the early days, any betting person would tell you this—if a vaccine was going to be developed, it would likely be developed by a pharmaceutical company in the US. The logic was obvious. The pharma industry in the US was one of the most advanced in the world. It had the know-how. It had a history of research and development. And it had the capital. 

 

However, if you asked the same betting person to guess where the vaccine was going to be manufactured on a mass scale, the most likely answer you were going to get was… India. 

 

Again, the reasoning was obvious. India is a vaccine manufacturing powerhouse—at that time nearly 60% of the world's vaccines were manufactured by a small group of manufacturers in the country.

 

For the global pandemic to quickly end, the US would have to develop and discover the vaccine, and India would have to manufacture it. 

 

The US was going to be the inventor. India was going to be the factory. 

 

And both of them had to work faster and smarter than they had ever done before to make it happen. 

 

Operation Warp Speed

 

Faced with this reality, in May 2020, the US federal government decided to act boldly and swiftly. It understood that the problem wasn’t whether we’d develop a vaccine but was to identify a vaccine sooner and to manufacture it faster when it was identified. With every additional month, people were dying, lockdowns became more severe, and the economy continued to plummet. This needed to be arrested quickly.

 

So the federal government made a plan. The plan was to support seven different vaccine candidates simultaneously to speed up trials and the approval process and to promote ways to manufacture them at scale.

 

This program was called Operation Warp Speed. And it was conceived as a partnership between the federal government and private companies. 

 

Pay attention to the last bit. It’s important.

 

The US government was smart enough to understand that the only way that a vaccine would emerge faster was if it just gave the pharma companies lots of money to fund their research and got out of the way. Not all companies needed the funding. Companies like Pfizer, which were well-capitalised, didn’t need it. However, others did. And once pharmaceutical companies realised that there was free money on the table and that they didn’t need to put in risk capital of their own, they jumped at the chance.

 

How much money? 

 

Oh, a little over $11 billion. Given out to eight of the biggest pharmaceutical companies in the world. 

 

All tasked with one mission — find a vaccine. 

 

All of them used different methods to get there.  

Here’s a list, from Wikipedia.

And that’s how the American pharmaceutical companies got to work. 

 

In India, on the other hand, something else was happening. 

 

Serum Institute of India

 

India had several vaccine manufacturers, but the biggest one was a company called the Serum Institute of India (SII). 

 

SII is an unusual company for many reasons. First, it’s entirely privately held by a billionaire family. It originally started off as a horse farm and soon graduated to vaccines. By 2020, it was the largest manufacturer of vaccines in the world, churning out nearly 1.5 billion doses every year. SII’s customers are mostly from other countries around the world; it’s an Indian private company with international customers. 

 

And when the pandemic hit, SII saw an opportunity and stepped up. One could argue that they had no other option. Others could argue that it would have been foolish to skip such a business opportunity. 

 

Nevertheless, SII was ready for the challenge. 

 

SII may be a private, family-run company, but it was still a company. Companies have a certain amount of risk appetite. And SII had a choice ahead of it—do they manufacture the vaccine or not? And by when? 

 

From SII’s standpoint, the sensible thing to do would have been to wait until it found out which vaccine would work and then scale up the production of that vaccine. 

 

Instead, SII decided to take a calculated bet. 

Last May, Poonawalla met the AstraZeneca chief executive, Pascal Soriot, on a video call, and negotiated a deal for SII to manufacture about 1bn doses over 12 months – almost half the overall total.

The same month a package arrived at SII’s vast campus in Pune, 150km south-east of Mumbai. Packed in dry ice was a vial containing the components needed to create the Oxford vaccine, cell substrate in which to grow it and detailed instructions. Not included were the results of any clinical trials or regulatory approvals that the vaccine was effective or even safe.

Nevertheless, Poonawalla ordered three of his factories – which were at the time making “some very lucrative [other] vaccines” – to immediately switch production to the Oxford/AstraZeneca coronavirus vaccine AZD1222.

“We produce 1.5bn vaccine doses each year. We never imagined the whole world being so dependent on us, but nobody else has our capacity to scale up,” he said. The decision to invest, he added, was easy because the firm is a private business “and not accountable to investors and bankers and shareholders”.

Instead, he says, “it was just a quick five-minute chat between myself and my father.” It was also, he admits, “a huge gamble – huge, huge, huge. People said I was crazy or stupid doing such a big bet at that time.

Now SII is a company in pursuit of profits, so this wasn’t exactly an altruistic move. Business decisions aren’t supposed to be altruistic. Despite this, it’s hard to deny that it was a risky business decision. 

 

But there was one problem. It was the same problem as in the United States.

 

Money. 

 

There was no Operation Warp Speed in India. In fact, for a long time, news about whether SII would receive funding to scale up and manufacture the vaccine was quite murky. In one interview back in April 2020, Poonawalla said that “(the government) are very happy to share some risk and fund something with us, but we haven’t really pencilled anything down yet”. Around the time, the Department of Biotechnology had helped fund a Phase-III clinical trial for the vaccine developed by SII. 

 

So in August, SII, for the first time in its history, went for external funding. It spoke to private equity investors, raised $150 million from the Bill and Melinda Gates Foundation and even invested $100 million of its own money. 

 

There are no news reports to be found about any funding for SII from the Indian government. 

 

Incentives 

 

It’s one thing to offer funding for research and development, but in July 2020, the US government went one step further. 

 

It placed an order with Pfizer for 100 million doses of the vaccine. It paid nearly $2 billion to Pfizer for this. And it did this even before it knew whether the vaccine was going to be a success or not. At that time, several critics pointed out that this was a small number, but the US government had another clause in the deal—it gave itself an option to purchase an additional 500 million doses from Pfizer.

 

It didn’t stop there. 

 

It went and signed another $1.5 billion contract with Moderna for another 100 million doses. 

 

It didn’t stop there. 

 

It also signed contracts with Johnson & Johnson, Novavax, and AstraZeneca for more than 500 million vaccine doses. 

 

The US was basically wearing two hats. In one hat, it acted as the State, pumping in taxpayer money to fund research of the vaccine because it was in public interest. In another hat, it was the vaccine companies’ first customer. It pumped in money to boost their cash flow and to be first in line to reap the rewards should the vaccine succeed. It was the ultimate illustration of skin in the game. 

 

Other countries followed suit. The UK decided to purchase 40 million doses of the Pfizer vaccine. In November, the European Union reached an agreement with Pfizer to buy up to 300 million doses. Canada decided to purchase up to 76 million.

 

The vaccine companies wanted capital. And they had gotten it. 

 

The only question was whether they’d be able to manufacture it at the scale that was needed. 

 

So the US government decided to create incentives not just for development but also for manufacturing. 

 

The missing purchase order 

 

Meanwhile, in India, SII was manufacturing the vaccine at full speed. Since it went ahead even before the vaccine was fully tested, SII had accumulated a stockpile of several million vaccines in its warehouses by the end of 2020. 

 

The company had stepped up, but there were a couple of problems. 

 

Problem 1 : Who gets the vaccines?

 

The deal that SII had struck with the Indian government was that India would purchase the first 100 million vaccines at a price of Rs. 200 ($2.66) each. This was one of the lowest prices in the world. And the only reason that SII signed on with the Indian government at this low rate was based on the understanding that it could sell subsequent doses on the private market at a higher price. 

 

However, SII was not unduly worried because it had already received purchase orders from several countries—including Saudi Arabia, Brazil and Morocco—for millions of doses. All of this would help fund SII and enable it to scale up. Morocco had signed a supply contract for 20 million doses back in August 2020.

 

But there was a problem: the Indian government hadn’t signed any purchase orders with SII. 

 

In January 2021, India’s largest vaccine manufacturer had no idea how many vaccines the Indian government would need and by when. 

The vaccines were ready. 

 

50 million of them. 

 

But the Indian government wasn’t. 

 

Problem 2 : More vaccines were needed

 

SII was manufacturing close to 60 million doses a month. It needed this number to be much higher to have any hope of meeting India’s requirement. Then the company had a fire in its factory, which Poonawalla later said cut short its plans to expand production. 

 

India had an entire year to scale up manufacturing capabilities across the nation, all to produce the vaccine at a war footing when it was ready. 

 

But it didn’t.

 

Then on 11th January 2021, the Indian government finally placed an order with SII. It was its first purchase order.

 

It ordered 11 million doses.

 

Two weeks later, the United States federal government exercised its second option with Pfizer and Moderna. 

 

It ordered 300 million doses, bringing the total order to 600 million doses. 

Meanwhile, in India, as the coronavirus cases rose, India quickly suspended exports on all vaccines. 

 

Countries that had booked vaccines with SII much earlier than everyone else were told to wait. India’s needs had to come first.

 

One of them was Brazil, where 3,000 people die from the coronavirus every day. 

 

Two days back, SII received a legal notice from AstraZeneca, the developer of the vaccine, over delays. 

 

Earlier this week, SII asked for financial help from the Indian government to the tune of Rs 3,000 crore (~$400 million). 

 

As of this morning, there has been no official response from the government to SII’s request.

There’s no real moral to this story, but it does reveal some interesting perspectives about the two nations. 

 

The story of India and the US’ contrasting methods of developing the vaccine is one of the oldest in political theory—it’s about the relationship between the state, capital, and the free market. All these entities are quite complex and often exist with a great deal of tension between them. Even more complicated is the fact these entities also operate together—and often have orthogonal goals. 

 

The US federal government understood the rules of the game and played by it. It understood that private players operate in a free market and acted as a buyer while also providing capital. 

 

If you look at the US, it appears as though everyone won—the pharma companies, the government and even the American citizens — every single person received the vaccine for free.

 

India, on the other hand, did everything else. It treated private companies like the SII with a mixture of disdain and ownership, and by the end, it’s clear that nobody is a winner. 

 

Not the Indian government.

 

Not SII. 

 

And certainly not India’s citizens. 

 

It’s going to be a rough few months ahead. 

 

Stay safe and take care.