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Why is India, the world’s largest vaccine producer, running short of vaccines?

Health workers attach a notice on the shortage of COVID-19 vaccine supplies at a vaccination centre in Mumbai
Francis Mascarenhas/Reuters
Vaccine supplies have dried up in India.
  • Samanth Subramanian
By Samanth Subramanian

Looking into the Future of Capitalism

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For years, India has made and exported more vaccines than any other country. Yet its vaccination drive against Covid-19, which began in early January, is stumbling and faltering.

To this observation, the most obvious response is that India’s population is huge and scattered—that reaching 1.39 billion people is a complicated, time-consuming task. True enough, though the government’s mode of vaccine delivery—its maze of crashing apps, differential pricing, unclear messaging, and patchy record-keeping—is still cause for worry. But the real problem is the alarming shortage of vaccines. This week, India opened up vaccinations to over-18s, but most states didn’t have enough stock to offer shots. Adar Poonawalla, the CEO of the Serum Institute of India (SII), the world’s biggest vaccine manufacturer, has warned that the supply crunch will continue for another three months.

On the ground, people are being turned away from vaccination centers because the shots are out of stock. In Mumbai, the city corporation suspended vaccinations altogether for three days. Other states postponed their plans to vaccinate citizens aged 18-45. As of this week, only 28.9 million Indians had received both their doses. Around 200 million are awaiting their second shot, and 600 million are eligible for their first one.

Why is India, the vaccine factory to the world, unable to find enough vaccines for its own people? There is no single answer, but tracking events over the past year reveals a timeline of dysfunction: a period in which government negligence, corporate profiteering, opaque contracting, and the inequities of the global pharma market combined to bring India to this moment of vaccine crisis.

April 2020

The coronavirus pandemic is raging across the UK and other parts of Europe, and the US has declared a national emergency. Much of the world is in lockdown, India included. But teams around the world have been working feverishly on vaccine candidates, believing that immunization offers the surest exit out of Covid-19.

In an interview, Adrian Hill, the director of the Jenner Institute at Oxford, describes his team’s progress on a vaccine. He doesn’t believe in exclusive licenses, he says: “Nobody is going to make a lot of money off this.” An open licensing regime is a potential boon for India, which has dozens of vaccine plants across the country. The scientists at these plants are experienced, and the production costs are low. If the Oxford vaccine succeeds in trials and its license is opened up—events that are potentially months away—India can find a way to put all these plants to work manufacturing it.

Days later, though, AstraZeneca announces that it has secured the exclusive license to the Oxford vaccine. Why the plan changed never becomes fully clear, but the Gates Foundation may have had a lot to do with it. “We went to Oxford and said, you are doing brilliant work,” Bill Gates tells reporters a few months later. “You really need to team up, and we told them a list of people to go and talk to.”

In an email to Quartz, Hill denied at first that his plan for the vaccine’s licensing had changed. When his quote from April 2020 was read back to him, he didn’t respond.

Francis Mascarenhas / Reuters
Adar Poonawalla

May 2020

AstraZeneca will make its vaccine at its own plants, but that won’t be enough, so it signs manufacturing agreements with a handful of companies around the world. One of these is SII, in the Indian city of Pune. SII has been making vaccines for nearly half a century; before the pandemic, it manufactured 1.5 billion doses of human and animal vaccines a year, and it supplies many of the programs run by the World Health Organization (WHO), the UN and UNICEF.

In May, AstraZeneca sends the first vials of “seed” to culture the vaccine to SII. The terms of the agreement between SII and AstraZeneca remain unknown. SII expects to supply India with its doses, naturally. The company also goes on to negotiate commercial deals with other countries, but it’s unclear if it is contractually allowed to pursue its own deals in the West, where AstraZeneca is more active.

Additionally, no one knows how much money AstraZeneca makes off the deals that SII strikes. Poonawalla, whose statements to the press have always been confusing and contradictory, once told a television channel that SII pays 50% of the price as royalty to AstraZeneca. (Poonawalla did not respond to repeated requests for comment.) KV Balasubramaniam, who formerly led Indian Immunologicals, another vaccine manufacturer, began to laugh while discussing the question of SII’s royalty. “Generally royalties vary from 5% to 10% of net sales,” he said. “I can’t think of a situation where anyone pays 50%.”

June 2020

Around the time SII begins to produce its first batches of vaccine, the market for vaccine supplies is in turmoil. There are, for instance, backlogged orders of several months for bioreactor bags, the sealed, single-use containers in which vaccines are brewed. At this point, “the fastest you could have built a new manufacturing facility from scratch was around 12 months,” said Murali Neelakantan, a lawyer with extensive experience in the pharmaceutical industry. “But Serum wasn’t doing it from scratch.” It already had land and staff and equipment. Some of its production lines could be prepped to start working on the AstraZeneca vaccine while it bought more equipment and ramped up its production capacity.

Estimates for the investment needed to produce these vaccines vary, but not by very much. Neelakantan cited a Norwegian project that cost $45 million to set up a production line turning out 45 million doses a month. “And it will be cheaper in India, especially if you have a factory already and are just adding capacity,” he said. Balasubramaniam, similarly, reckoned that a 40-million-dose-a-month facility would cost around $40 million. The most generous estimate came from a former Indian government official, who asked to remain unnamed, and who thought that adding 100 million doses a month by way of capacity would cost around $200 million.

August 2020

SII signs on to manufacture vaccines under the Covax facility. Covax, an initiative led by WHO, UNICEF, the non-profit Gavi and others, aims to raise funds from rich countries to buy vaccines at $3 a dose or less and supply them to 92 lower-income countries. Initially SII commits to provide 100 million doses; a month later, in Sep. 2020, it agrees to make another 100 million doses. (Separately, AstraZeneca pledges 300 million doses of its own, presumably sourced from its other manufacturing sites.) To participate in the program, a Gavi spokesperson said over email, SII “pledged that, alongside supplying India, it will prioritize the Covax multilateral solution for equitable distribution.”

For this, SII is paid $300 million—funds sourced from Gavi and the Gates Foundation. The money is intended to help SII build out its production capacity and to “de-risk” its operations: to cover any losses that might accrue if the vaccines never get approved. And those approvals are still some distance away; AstraZeneca has just started the third phase of clinical trials, and it uses a technology that has never before been licensed for human use.

This $300 million, Poonawalla says again and again through 2020, is part of an $800 million block of funds that SII invested in manufacturing the AstraZeneca vaccine. (Another $250 million is from SII’s own funds. The source of the rest of the money isn’t known, although AstraZeneca may have made an upfront payment as well.) “And he was cutting a lot of deals with other countries on the side as well,” said Malini Aisola, co-convener of the All India Drug Action Network, which fights for equitable access to medicines.

Using this money, Poonawalla wants to be able to churn out 1 billion doses a year, or roughly 80 million a month. But details are scant on how he’s doing this: whether he’s temporarily turning other vaccine production lines to the AstraZeneca shot, how much new equipment he’s purchased, how he’s spending his money.

October, 2020

India’s first wave of the coronavirus is abating, but the government has not yet placed any orders for vaccines. It has also not funded manufacturers to boost their production capacity in anticipation of a successful vaccine, the way the US did during Operation Warp Speed. To Aisola, this is understandable. SII is receiving a lot of money already from elsewhere to equip itself. “The US has money to spend,” she said. “You can’t put India in the same bracket.”

Adnan Abidi / Reuters
Prime minister Narendra Modi

But two former Indian government officials were more scathing, accusing the government of inaction. “Any nitwit could have sat with a demand-supply sheet, figured out what the population is and how many doses we need,” one of these officials said. “Poonawalla kept saying he needed money to scale up. We should have called him in September and ordered vaccines and said, ‘Here’s 4,500 crore rupees ($640 million), by way of an advance. Do it.’ But we dithered.” The official wondered too, though, why Poonawalla kept asking for money, given SII had $800 million—”more than enough”—to plow into its operations. Modi has dismissed criticism over his government’s handling of vaccines as “politics,” saying his strategy is similar to those in other countries.

And while India’s resources certainly don’t match the US’, it does have funds. The government is spending nearly $3 billion on developing a new parliamentary complex, which includes a magnificent prime ministerial residence. Work on this project went ahead even during the second wave in 2021: The workers were declared “essential” and made to work in masks, although in many instances they went unpaid. (In a response to Scroll, an Indian news web site, a government spokesperson said: “Only critical activities are going on.”)

January 2021

Indian regulators approve SII’s AstraZeneca vaccine, named Covishield, for use. (They also approve Covaxin, another vaccine developed by an Indian firm called Bharat Biotech.) Shortly afterwards, India places its first order—an absurdly small one, for just 11 million doses of Covishield and 5.5 million of Covaxin. To achieve herd immunity in a year, taking into account a 5% wastage margin, India needs about 200 million doses per month, Balasubramaniam estimated.

Adnan Abidi / Reuters
The vaccinations begin.

The pandemic has by this point ebbed so much in India that it appears as if the government doesn’t even anticipate having to vaccinate its entire population, the way many other nations are gearing up to do. Indeed, speaking at a virtual Davos summit that same month, prime minister Narendra Modi declares that India has decisively won its battle against the coronavirus. In doing so, he is disregarding a parliamentary panel report that predicts a severe second wave. Another group of scientific experts will warn the government again about the surge of disease that will wash over the country just two months later; they will also find themselves ignored. One healthcare expert, who asked to remain anonymous, called the government’s attitude “ignorance combined with arrogance.”

SII sells its first batch of vaccines to the government for around 210 rupees ($3) a dose. Poonawalla will later admit that this price allows SII to make a profit. (AstraZeneca had pledged not to profit from its vaccines during the pandemic. But SII did not clarify whether this extended to its own sales of AstraZeneca vaccines.) Balasubramaniam suspects that the cost of producing a single dose is around 30 rupees.

Late in January, a fire breaks out on the fifth floor of a building under construction on the SII campus. Poonawalla says that the accident will not hurt the production of Covishield, and that it will only affect a planned expansion of vaccines for other diseases.

February 2021

Another month, another small order. India asks for 10 million more doses of Covishield and 4.5 million doses of Covaxin. By now, SII claims to be able to produce around 60 million doses a month. India exports tens of millions of these vaccines to other countries, even though, by March, cases are creeping up again.

March 2021

When the UK begins to fall short of AstraZeneca vaccines, the company imports 5 million doses from SII. This seems to contravene SII’s agreement with Covax that, aside from supplying India, the company will prioritize Covax production for low-income countries. The SII vaccines went to the UK as part of a secret quid-pro-quo struck between the British government and AstraZeneca.

Those 5 million doses could have gone to India or to other countries whose vaccination programs were still struggling. A Gavi spokesperson said that, as of April, Covax had delivered around 29 million doses from SII to target countries. This is just more than a tenth of the 200 million volume SII had committed to supply in 2021; it’s falling behind schedule. As of that same month, just 0.3% of the vaccines administered the world over went to people in low-income countries, said Tedros Ghebreyesus, the director-general of WHO.

As the second wave gathers, India finally places its first big order of vaccines: 100 million doses of Covishield and 20 million doses of Covaxin. It also moves to smother vaccine exports, redirecting most supplies to its own citizens. “We had expected, in March and April, about 90 million doses, and we suspect we’ll get much, much less than that, and that is a problem,” Seth Berkley, the CEO of Gavi, says.

 

Adnan Abidi / Reuters
The second wave worsens.

April 2021

Poonawalla asks the government for a grant of $403 million, to expand his capacity to 100 million doses a month and meet India’s new orders.

By his own statements, he has already been scaling up his manufacturing to that capacity, so this is a puzzling new appeal. On the one hand, Poonawalla now claims that the fire on his campus in January has set back his production targets of Covishield, contradicting his earlier statement. But through one of his other companies, he has also just bought a 60% stake in a financial services firm for around $500 million—a move unrelated to the pandemic, but indicative of his financial health. Weeks later, he will announce an investment of $333 million in a new research facility—in the UK.

“It was like blackmail,” Aisola said of Poonawalla’s demand. “There was huge public pressure in the country, the pandemic was getting worse, there was a clamor to open up vaccinations to all the age groups. The private sector was asking to be allowed to sell vaccines.” Given how much money Poonawalla had already raised, she said, this was “an outrageous demand.”

The government grants SII its $403 million as an advance payment for vaccine orders. (It also grants Bharat Biotech, the manufacturer of Covaxin, $214 million, for the same purpose.) But no one seems to be able to understand how SII needs more money, given the $800 million it collected last year. “I mean,” Neelakantan, the lawyer from the pharma industry, said wryly, “I assume they didn’t just put this in a fixed deposit.” When SII tried to inflate its profit margin more still, by selling its doses to the governments of Indian states at 400 rupees apiece, an uproar ensued. As a “philanthropic gesture,” Poonawalla reduces it to 300 rupees.

The government also permits SII to sell directly to private hospitals, and a couple have begun advertising shots at 800-900 rupees, Aisola said. Systemically, the incentive now exists for SII to sell its output preferentially to the private sector, to bolster its own profits. Aisola noted that India has gone from being a supplier of low-cost vaccines to being the consumer of one of the highest-priced Covid-19 vaccines in the world.

Additionally, Poonawalla claims that US curbs on exports of vaccine raw materials are hampering SII’s plans to manufacture another vaccine line still, developed by Novovax. Subsequently, as the ferocity of the second wave mounts, the US lifts the legal barriers around these exports. But the Biden administration doesn’t distribute its surplus doses or grant wider licenses to manufacture vaccines developed in the US.

On April 30—a precise year since the Oxford-AstraZeneca deal was announced—Adrian Hill’s company Vaccitech, which owns the patent for the vaccine, goes public on the Nasdaq, valued at roughly $464 million. The firm’s single largest shareholder, a company started by Oxford to capitalize on innovations born at the university, is itself part-owned by asset management firms, sovereign wealth funds, and Chinese conglomerates.

May 2021

At a time when India is registering around 400,000 new cases daily, Poonawalla temporarily decamps to London, citing aggression and threats from chief ministers and business executives. He tells a reporter that the Indian government didn’t place enough orders to warrant increasing production further: hence the shortage.

Very swiftly, though, Poonawalla rolls his statement back. He says SII is working closely with the government, and that producing vaccines for all of India “is not an easy task.” The same day, the Indian government announces a fresh vaccine purchase: 110 million doses of Covishield and 50 million of Covaxin, paid for in advance and to be delivered through July. In total now, India has now ordered nearly 350 million doses of vaccine: sufficient for 175 million people, or around 12% of India’s population. This is a new phase of India’s vaccine strategy, the government claims, and will result in “scaling up of vaccine coverage.”

If vaccine shortages persist, India has several options still. At one extreme, the government can prohibit exports outright, forcing SII to use all its capacity for the domestic market. “There’s precedent for that,” Neelakantan said, so “AstraZeneca knows that it can’t win a legal battle in the UK against SII.” The government could order SII to cease manufacturing the Novovax and other vaccines and concentrate on Covishield; it could use the “compulsory licensing” exception provided by the World Trade Organization to allow other Indian firms to manufacture Covishield, whether AstraZeneca agrees to it or not.

But these are nuclear options, Neelakantan said. Even leaving these aside, India can force other domestic manufacturers to temporarily “loan” their plants to SII: “Just say, ‘The next six months, we’ll paint this factory Serum,’ and start manufacturing there.” The government can also compel Bharat Biotech, the producer of Covaxin, to license it to other Indian manufacturers—especially since the Indian Council for Medical Research, a government body, played a large part in developing the vaccine and co-owns its intellectual property.

At least a dozen other companies and institutions have the resources to scale up the production of Covishield or Covaxin. “They’re mature facilities, they’ll know what to do,” Neelakantan said. “If we’d done that in December, we’d have product by now. Instead, the government was so happy with itself in January, thinking that it had gotten rid of Covid, that no planning got done at all.”

Correction: The Indian government paid SII $403 million as an advance on vaccine orders. An earlier version of this article described it as a grant.

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