EAG urges govt to allow effective private sector participation in import of vaccines

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Setting the Scene

Setting the Scene

Pakistan is being hit hard by the 3rd wave of COVID, leading to partial and smart lockdowns across the country. The positivity rate of the COVID test has exceeded 11%. Commercial activity has been constrained once again, costing Pakistan’s economy immensely. The only long-term and sustainable way out is vaccinating the entire eligible population, yet the government’s vaccine drive has to pick up the requisite pace.

Considering this context, the Economic Advisory Group (EAG) is of the opinion that the government will best serve the urgent objective of vaccinating the greatest number of people expeditiously by allowing the private sector to import vaccines which meet the regulatory standards of approval at agreed upon prices, in parallel with the ongoing government process of free vaccination.

EAG has clarified that the logic behind the commercial import of the COVID vaccine is economically and morally sound, as allowing the private sector to sell vaccines will lower the government’s expenditure and share the burden of inoculating the entire eligible population. The private sector will be bound to set a price reflecting the demand for vaccines among the populous.

Further, EAG was of the view that the price determination of the COVID vaccine should be left to the market forces as much as is permitted within the ambit of DRAP regulations. Even if an abnormal price is set in the short run, it will trigger market correction mechanisms, resulting in a long run optimal price. Thus, the government should focus on increasing competitive pressure rather than setting price caps.

Responding to the apprehension that higher mark-up power by a few importers has the potential to defeat the purpose of said decision, EAG suggested to keep the competition open. The government should monitor the agreed prices with private sector as well, to ensure that it sufficiently fosters competition and reasonable pricing. EAG also heeded the government to be mindful of the exclusivity arrangements common in the pharmaceutical sector.

If the private sector is left to cater to the demand of the upper quantiles of income, the government will have spare resources to focus its efforts on effectively immunizing the rest of the population. The state should redirect its sources towards vaccinating the vulnerable and deserving segments of the population and let the private sector operate in the remaining segments. The private and public sectors will be functioning in two different markets, classified by purchasing power, no crowding out and interference will occur in either market.

EAG pointed out that the decision to allow the private sector will increase consumer welfare and consumer choice rather than exploitation of the general masses. As individuals currently far from eligibility in government vaccine drive will have a choice to bear the higher cost and vaccinate themselves. On the other hand, unwilling individuals will be free to opt-out of the private vaccination drive and wait for the government’s vaccination drive. Simultaneous public and private provision of vaccination facilities will speed up the COVID recovery process.

Economic Advisory Group is an independent network of individuals drawn from economics, policy and business which deliberates on economic policies regularly and shares its views with the public and the government.

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Policy Research Institute of Market Economy

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