Saturday, 24 Oct 2020

Once vaccines hit the market, what then?: Jakarta Post contributor

JAKARTA (THE JAKARTA POST/ASIA NEWS NETWORK) – As governments, research organisations and pharmaceutical companies race to find vaccines for the novel coronavirus, a recent survey published in The Lancet found that only 67 per cent of the United States population would accept a vaccine for Covid-19 if it were recommended for them.

Within weeks of the survey, a major vaccine trial at Oxford University was paused after a participant fell ill.

This may confirm the suspicions of those afraid of vaccinations, but the pause in the development of the vaccine after one participant out of 30,000 fell ill shows that the researchers are following strict safety protocols.

The question is: Once vaccines hit the market, what then?

From the perspective of maximum social welfare, everyone should be vaccinated. Globally, as of Sept 10, there have been more than 27 million confirmed cases of Covid-19.

Southeast Asia contributes about 5.1 million cases, exceeding Europe at 4.6 million cases. More than 900,000 people have died, and the number is still climbing.

The estimates of the cost to the global economy range from US$5.5 trillion ($7.57 trillion) to $8.8 trillion, according to Asian Development Bank.

When a vaccine is ready to produce, the world needs more than 7.5 billion doses. And if each person needs two doses, that figure doubles.

It is a massive demand that producers cannot fulfil by 2021, even if the vaccines obtain approval by the end of 2020.

An equitable allocation of vaccines will be the most challenging task due to short supplies. Two critical questions emerge: Should the government make it mandatory? How should vaccines for Covid-19 be allocated?

For the first question, we can apply the economic theory of “merit goods”. A merit good is characterised by its meritorious impact, and despite the fact that it is not typically a public good, pubic funds may be used to provide it for mass consumption (Musgrave, 1959, 1998).

Economic discourse may contest the position of merit goods, but public policy applies it in practice.

Primary education and health care are among the most common merit goods recognised in many countries, especially in countries with substantial welfare states. How does the Covid-19 vaccine fit within this analysis?

The arguments for coercion to consume merit goods include the potential for people to act irrationally, increasing consumption of important goods for the beneficiaries, and maximizing social welfare.

Social welfare is the most critical argument for the Covid-19 vaccine viewed as a merit good.

Culyer (1971), a prominent British health economist, argued that externalities in merit goods could serve as a justification for the government to intervene in the market.

The global loss from the Covid-19 pandemic is huge and still counting if the world fails to control it.

There are both positive and negative externalities in imposing the Covid-19 vaccine. Positive externalities include additional protection for large populations, which can reduce virus transmission, thus reducing health workers’ burden and freeing up space in hospitals for non-Covid-19 patients.

It also reduces both private and public costs for Covid-19 patients’ treatment and prevents productivity losses from infected people.

The treatment costs for one Covid-19 patient could reach tens of thousands of dollars, far higher than the deemed maximum price of the vaccine at US$40 per dose (GAVI Alliance).

On the other hand, negative externalities of not being vaccinated mainly come from negative impacts.

A nonvaccinated person potentially becomes a virus spreader and infect others who are not yet vaccinated, and those who have been vaccinated but have yet to develop the antibodies.

Economic costs include: high treatment costs, productivity loss, overwhelmed health workers and crowding out non-Covid-19 patients.

Mandatory vaccination deals with social welfare maximisation. It is not about the government overruling the individual preference for the risk of isolated impacts.

There is no place for selfish behaviour in this pandemic. Each country also has a responsibility to control the virus.

Especially as global connectivity is essential for economies, while the period of immunity is still unknown, failures to contain this virus in one country means a higher risk of triggering the next pandemic wave across other countries.

On Sept 2, Erick Thohir, the Executive Director of the Indonesian government’s Covid-19 Response and Economic Recovery Committee, said the government planned to provide free vaccines for only 93 million Indonesians and let the rest pay for themselves.

That means the government aims to cover the immunity of 35 per cent of the country’s total population.

However, to reach herd immunity, the portion of the population with immunity should be at least 70 per cent to 90 per cent (D’Souza and Dowdy, John Hopkins School of Public Health).

The vaccine price is a big obstacle for many Indonesians, many of whom already struggle during the prolonged crisis.

Another challenge comes from the people who are unwilling to take the vaccine shot because of their beliefs.

Both challenges combined pretty much close the door to herd immunity. If Indonesia still experiences waves of infections in the coming years, economic recovery will be just a fantasy.

Neither tourists nor businesses or investors will come to a country with a high rate of Covid-19 infections.

Would you build your plant in a country if you think that many of your workers could get sick there? If the authority is willing to consider the Covid-19 vaccine as a merit good and provide mass vaccination, how should it be done?

It is highly unlikely that the vaccine doses will be ready quickly for all the population. There will be incremental phases of provision based on the production capacity of pharma companies.

If the capacity of Bio Farma as a sole Covid-19 vaccine producer in Indonesia is not enough to supply doses covering 90 percent of the population by 2021, the government can secure other procurement agreements.

Since the vaccine shots will be available only incrementally, it requires an effective way to allocate scarce goods to maximise the transmission control and minimise fatalities and treatment costs.

Emmanuel et al. (New England Journal of Medicine, 2020) proposed four criteria of ethical values used for rationing scarce health resources, namely: (1) maximising the benefits produced by scarce resources, (2) treating people equally, (3) promoting and rewarding instrumental value, and (4) giving priority to the worst-off.

The authors come up with six specific recommendations for allocating medical resources in the Covid-19 pandemic: maximise benefits; prioritise health workers; do not give on a first-come, first-served basis; be responsive to evidence; recognise research participation; and apply the same principles to all Covid-19 and non-Covid-19 patients.

As a country with challenging connectivity, Indonesia should pay close attention to distribution and storage.

Transporting and storing vaccines typically requires a specific controlled environment, which the responsible stakeholders can prepare from now on.

Governments may think of the best way to set up the vaccines’ logistics system.

The clock is ticking, and amid health emergencies, the government should keep its focus on protecting the public’s health to protect the public’s socioeconomic well being.

The writer is a senior economist at the Economic Research Institute for Asean and East Asia (ERIA). The Jakarta Post is a member of The Straits Times media partner Asia News Network, an alliance of 24 news media organisations.

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