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Wrongheaded: Private import of vaccines ‘at will’

“I ordered Secretary Galvez to sign any and all documents that would allow the private sector to import at will.”

President Rodrigo Duterte delivered said statement on March 29, 2021 to accommodate the lobby of some corporations to procure and import their own vaccines.  Soon after, an organization called Act As One issued a position paper as follows:

“We humbly call on Congress to revisit Section 5 of Republic Act No. 11525, otherwise known as the ‘COVID-19 Vaccination Program Act of 2021.’ The requirement in said law for a multiparty agreement with the Philippine government before private entities may procure COVID-19 vaccine is just another bureaucratic layer that prevents the urgent influx of authorized vaccines here in the Philippines.

“Government regulations and monitoring should still be in place but there should be minimal government intervention in the procurement stage. Allowing the private sector to import vaccine without burdensome restrictions will also be in consonance with the President’s directive that the private sector should be allowed to import vaccines ‘at will.’”

One thing is clear:  For the private sector to “import at will,” the law will first have to be amended.  But this is a wrong policy, which this article will try to show.

Immunization against COVID-19 of the whole population is a public good. To be accurate, it is not just a public good; it is a global public good. The vaccination of all peoples in all countries is necessary for the realization of herd immunity.

Two basic characteristics define a public good. First, a public good is non-excludable. Second, it is non-rivalrous.

Towards achieving herd immunity, no adult person can be excluded from the benefits of vaccination. The governments must ensure that everyone, including those who are poor or who cannot afford vaccines, will get inoculated. The risk of a person getting COVID-19 is vastly diminished when almost everyone is immunized.

Further, one person’s immunization neither rivals nor prevents the immunization of others. Further, the vaccination of many even enhances the benefits for one individual (the gains from herd immunity). Thus, immunization is non-rivalrous or even anti-rivalrous.

Another way to look at immunization as a public good is that it addresses what is called an externality. A communicable disease like COVID-19 is harmful and costly not only to the infected individual but to the rest of society. The infection exponentially spreads.  The cost to the many others is the negative externality.

Immunization on the other hand is a positive externality. That is, it protects not only the health of an infected individual but also gives benefits to other members of society by stemming the further spread of the disease.

That immunization is a public good makes a strong case for governments to freely provide the population the vaccines.

It is most unfortunate though that the early failure of the Philippine National Government to immediately procure the vaccines compelled the private sector and the local government units (LGUs) to act on their own.  They took the initiative of trying to get the vaccines for their workers and constituents.

As a result, a second-best solution emerged in which the National Government allowed the private sector and the LGUs to procure vaccines by way of a tripartite agreement. Through this agreement, the National Government, the LGUs, and the private corporations will pool their resources to procure the vaccines. Certainly, the negotiations and procurement will be done by the National Government.

But President Duterte’s statement that the private sector can “import at will” undermines the tripartite agreement. It likewise contradicts the underlying principle that treats immunization as a public good.

We can cite many reasons why “import at will” is misguided and injurious.

First, all vaccines are for emergency use authority (EUA). The vaccines are still undergoing trials and therefore cannot be deemed commercial.

Second, precisely because vaccines are all subject to EUA, vaccine manufacturers will only deal with the government. They want legal guarantees. They require indemnification clauses. Which government, not the private sector, can provide.

Third, some argue that the government is not doing a good job in the vaccination rollout, but this needs a more nuanced treatment. It assumes that the private sector can do better.

But the rollout itself faces objective constraints, regardless of who is involved.  To wit:

The majority of the people, including many health workers, do not want to be vaccinated.

Global supply is limited, and the rich countries have taken a disproportionately big share of the scarce supply.

The health system is currently overwhelmed by the new virus wave, which further impedes the vaccination implementation.

Private sector procurement of vaccines will not solve the major constraints cited above.

Fourth, having a “free market” for the vaccines undermines the prioritization program for vaccination. Some think that the prioritization is meant to satisfy equity. Yes, equity matters.  But that’s not all to it.

Giving priority to the health workers, the elderly, those with comorbidities, and the poor will also result in efficient outcomes. Those being prioritized are the most vulnerable to infection. They, too, are a main source of spreading infection.

Fifth, still in line with the argument for efficiency, the government can negotiate lower prices. The government has the monopsony power to bring down vaccine prices. Letting the private sector do its own procurement will result in variable prices that cannot approximate what the government can get. The tripartite agreement that enables the pooling of resources for procurement is thus sensible.

Sixth, in pricing the vaccines, the parties need to internalize the myriad costs. The price in doing immunization is not limited to the vaccines. Take into account the transaction costs. Take into account the other costs for the immunization pathway.

Other costs include the hiring of workers who will administer the vaccines, the training of these workers, the transportation and communications expenses, the storage costs, etc. In a word, private sector procurement will be costlier, and probably less efficient because this kind of process is not its specialization.

Seventh, precisely because the cost consideration is not just limited to buying the vaccines, the substantial costs should compel the private sector to think about the opportunity costs.

Given that the government will anyway spend for a public good (that is, the vaccines), wouldn’t it be much better for the private sector to allocate their additional funds to interventions that will put in place the health and safety standards in the offices and factories toward containing the pandemic? Shouldn’t the private sector be spending on benefits for sick workers (thus giving incentives to symptomatic workers to stay at home), installing filtration or ventilation systems, and redesigning workplaces to deal with airborne virus transmission?

As one young smart health professional told me: “Can’t the private sector think of funding instead the vaccination itself rather than the purchase of the vaccines? We need more hands (literally and figuratively) injecting doses as we receive the bulk of vaccines in the coming months.” And if resources are still available, the private sector could help fund the minimum public health standards.

Vaccination, too, is not a one-off activity. That the vaccines are all undergoing trial signifies activities beyond administering the jabs. Immunization entails a pathway for a longer-term program.

In this regard, the vaccination strategy has to be done in conjunction with building primary healthcare. The vaccination program is an opportunity to put Universal Health Care (UHC) into action by way of strengthening primary care.

This, of course, necessitates cooperation and partnership with LGUs and the private sector.

The government and the private sector must know what their respective comparative advantages are. Immunization is a public good. The private sector cannot supplant the government in providing a public good.

Allowing the private sector to import vaccines “at will” does not lead to efficient and equitable outcomes. Instead, it results in less bang for the buck.

 

Filomeno S. Sta. Ana III coordinates the Action for Economic Reforms.

www.aer.ph

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