Surprisingly this article, 90:10 ratio, is not another on persistent and ever increasing income inequality in India but rather on a possible solution to a problem gripping everyone equally, the Covid-19 pandemic.
It has been more than three months and yet the "pharmacy of the world" is struggling with its own campaign of vaccinating citizens. There are many problems right from the production to the distribution and even pricing, but the biggest of them all is the shortfall in production. India needs 7 million doses of vaccines daily, as against an extrapolated production capacity of 4-4.5 million doses daily, to vaccinate all above 18 twice by January 2022.
The manufacturer of these vaccines could be nearing their production threshold or might have reached it. In both case, it's a worrisome situation. The solution to this might lie in the 90:10 ratio arrangement.
Given the shortfall in production voices are rising in the favour of compulsory licensing. Even a country like USA, which has been very adamant on protection of IPR, is considering the move. Compulsory licensing would surely allow generic companies to help ramp up the shortfall, but would also definitely affect investors confidence thereby affecting flow of FDI into India, that too at a time when we are trying to attract investors fed-up with Chinese IPR regime into India.
In the midst of all this, In my opinion, this 90:10 arrangement could act as a middle path or a win-win for all.
This arrangement is a simple profit sharing arrangement between the current vaccine manufacturer and the other pharma companies who would be granted permissions to produce vaccines.
To compensate for the R&D expenses and to remunerate for IPR the generic vaccine manufacturer would share 90% of their profits with the existing manufacturers(SII and Bharat Biotech). Concerns of existing manufacturers regarding fair profit sharing via fair reporting of production could be taken care of by the CoWin app. Another of their concern regarding loosing market share from competitive prices could be addressed by capping production of these generic companies.
Now the question arises 'why would generic companies agree to a 10% profit and that too with capped production limits?'. Well, the answer to this lies in the probability of government agreeing to compulsory licensing which, as of now, seems 90:10 in favour of existing manufacturers. Even a 10% profit on profit, given the demand would culminate into higher revenues.
At the same time existing manufacturers should agree to this 10% potential income loss and look at it as insurance against loosing almost everything if compulsory licensing was initiated.
