When there is shortage of vaccine supply, tiered pricing with many buyers means either quantity rationing by the producer or price rationing by the market that favors deep pockets. Centralized procurement implies rationing by the single buyer. It is rationing in all scenarios.1/5
Centralized procurement has the advantage of allowing coordinated allocations guided by evolving public health concerns. This is assuming no biases in central allocation. There is no evidence of bias in allocation of vaccines in India. 2/5
The issue of the price at which the vaccine should be sold to the consumers is distinct from issues of pricing by the seller. The consumer price chosen by the central or state government determines the subsidy that they want to provide. 3/5
Even at $7 per dose, the total cost of vaccinating 1 billion adults with 2 doses is $14bill or 0.5% of Indian GDP. The central vista project is $3bil while the vaccine budget for this year is $5bil. At the contracted $2/dose, the budgeted $5bill is enough to cover everyone. 4/5
No reason for the central govt to not provide free vaccines to everyone who wants it. No reason for anyone other than the central govt to procure vaccines now when there are massive supply shortages. And, invest in vaccine making capacity. 200 mil doses/month not enough. 5/5
The crucial bit here is that there are public health externalities from vaccines which creates a role for the government to subsidize its roll-out.