Governments in the developing world have found it harder to procure COVID-19 vaccines, and have relied on COVAX or donations from the global North; even when the vaccine doses have been delivered they are far too less for the government to inoculate much of its population. In such a scenario much of the developing world has allowed the private sector to run its inoculation drives alongside the government.
In this model, the government vaccinates (for free or at a subsidised rate) the vulnerable demographics whereas the private sector is open to all customers who can afford to pay. This way not only are vulnerable demographics protected but others are inoculated to slow the spread of the virus and reach herd immunity sooner.
The Pakistani government had tried to procure vaccine doses from Johnsons and Johnsons (J&J) but the move was blocked by the US government citing reasons that producers need to meet local demand before exporting. Failing to make large procurements of the vaccine on a government level the state had allowed the private sector to import the vaccine.
Where others in the region are selling the vaccine at lower rates, Pakistani consumers are buying the vaccine for inflated prices. In neighbouring India, the vaccine is selling for INR600-1,200 ($8-16) and the vaccine is available in Bangladesh for 1,125 takas ($13.27) per dose, Reuters reported.
However, on average the Pakistani consumer has paid Rs12,000 ($80) for the two-shot Russian Sputnik V; 500-1000 percent more than what an average consumer is paying for the vaccine in India and nearly 300 percent more than a Bangladeshi consumer.
This is due to the way the government has allowed the import of vaccines which is entwined with a labyrinth of rules and taxes. Rather than fixing a smaller margin of markup, the government has allowed 40 percent markup to retailers/hospitals. This means that the service provider (mostly hospitals and healthcare service providers) can charge 40 percent of the cost of the vaccine (cost of buying, plus importing, plus air-freight any other charges) in addition to the cost incurred. This means a vaccine that cost the company Rs100 to procure can be sold up to Rs140.
“Cost of imported finished vaccine and bulk import shall be as per the letter of credit (LC) or bank contract established for import from the manufacturer of the respective vaccine. It shall be submitted by the importer along with a pro forma invoice issued by the manufacturer and affidavit by the importer to confirm that import price in LC and pro forma invoice is actual and estimated import levies and expenses are not overstated. In case of bulk import and local repacking, the cost of packaging shall be estimated and authorised agents shall submit an affidavit about the genuineness of cost and estimated import levies and expenses (advance income tax at 5.5 per cent, civil aviation charges, LC charges, insurance, etc) shall not exceed 10pc of the cost of freight (C&F) price by the importer,” the notification states.
The Federal Cabinet in Pakistan has approved the highly expensive prices recommended by the Drug Regulatory Authority of Pakistan (DRAP) for COVID-19 vaccines imported by private companies.
The first formula for imported vaccines, in finished form, states that the trade price will be equal to landed cost plus 40 percent mark-up. According to the second formula, which is for imported vaccines in bulk form and local repack, the trade price will be equal to landed cost plus packaging cost and 40 percent mark-up for companies.
Beyond the policy and the economic jargon, the government’s decision to levy 5.5 percent income tax on the vaccines, in addition to allowing for 40 percent markup means that government wants to tax something which is a life-saving drug right now and is allowing the private sector a huge margin for profit. The price of this is paid by the consumer who is buying the most expensive vaccine in the region.
