The government should now start preparing for the new Kovid variant

Most of the people are tired of the battle of covid and covid and follow more masks as a form of a serious precaution. It is not completely irrational. Sero-positivity surveys in Delhi have shown that even children who have not been vaccinated show high levels of COVID antibodies, suggesting widespread exposure to the virus and acquired immunity. But new variants of the virus keep appearing. Two subtypes of Omicron, BA.1 and BA.2, have emerged, as has yet another variant, called XE, which is derived from BA.1 and BA.2. These are probably slightly more contagious than Omicron, but not more virulent, as far as available evidence is concerned.

India is nowhere near where it can be in terms of genome sequencing of the virus that causes fresh outbreaks of disease. Nevertheless, evidence suggests that the XE variant has surfaced in Mumbai and Gujarat. Novel or as yet unknown existing forms may emerge. Without giving up on the vaccination front – completing the coverage of the basic two-dose course and providing a third, booster dose – efforts should be on to equip the healthcare system with the widest range of drugs now available to treat COVID .

Monoclonal antibody infusions that were effective in combating severe infections in the delta wave are not effective against all Omicron and its subtypes. But new treatments from Pfizer and the repurposed molnupiravir from Merck are effective against all known forms so far. While molanupiravir is already widely available, nirmatrelvir, which markets it as paxlovid, is not as efficacious as Pfizer. Paxlovid is prescribed in combination with the established antiviral ritonavir.

The good news is that Pfizer, which has been facing criticism for making hefty profits from its COVID vaccine, even as the vaccine remains elusive in large parts of the developing world, has sent its approval for Paxlovid to the United Nations. Decided to offer Intellectual Property- Backed Medicines Patent Pool, without any royalties. MPP is licensing drug manufacturers around the world, including 19 from India, to manufacture nirmaltravir or a combination of its components and even ritonavir. This is an important and welcome development.

However, many drug makers with the capability to make a Kovid pill will not guarantee the availability of the pill when needed. A vaccine for a pandemic is something that has a ready market: a preventative is something that every sane person needs. But the treatment pill is needed only when there is a disease. Since there is no certainty about the potential occurrence or scale of new outbreaks, why should manufacturers mass-produce, stock and distribute the drug? Why should the corner drugstore buy stock when its demand potential is slim?

If this problem is not addressed, we stare at the possibility – supposedly, only one possibility – of the world’s largest drug-producing capacity, armed, to boot, with the necessary sub-licenses of COVID-19. Not able to produce the pill, not be able to supply if a fresh outbreak occurs, the scale that the drug is needed.

The cost and benefit are on the following lines. If a large enough and deadly enough outbreak occurs, supply chains will be disrupted, economic recovery will go into reverse drive and more vulnerable populations will fall prey to disease. The cost of that disruption would be really big. Conversely, the government ordering a large supply of COVID tablets, while paying the manufacturers upfront, would cost much less. The gains from this outlay would be to avoid major economic disruptions from an irreversible fresh wave of the pandemic.

The government should pay the manufacturers upfront, and manufacturers can push the tablets through their regular distribution channels to the level of their key stockists in each COVID-prone district. If there is an outbreak of disease, the pills can be pushed to local stores faster, and the proceeds of the sale go back to the drug companies. The amount thus obtained can be pooled into a pool legitimately owned by the government. GST on transactions will help the government to track sales across the distribution chain.

The government will have to fund the upfront outlay to buy an adequate supply of COVID tablets. If an outbreak does occur, the outlay will be reimbursed through the sale of pills paid for by patients or their insurance companies or state-funded health care systems. If there is no outbreak, the money will be spent like an insurance premium.

Reversing the logic of disaster bonds, it is possible to design a risk transfer mechanism to finance the initial outlay. In a normal calamity bond, the principal is exhausted, i.e., will not be paid to the bondholder if the disaster occurs. The risk premium built into the coupon leaves the investor in the lurch of disaster. In the present case, if a fresh COVID wave does not occur, the bond will expire.

However, the outlay on stockpiling an adequate supply of the drug would be too small to worry about such a risk transfer mechanism. But it is possible to think of a larger COVID relief pool financed by the likes of disaster bonds.