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Immunity for Vaccine Makers? Try Insurance Instead

By – Ramesh Vaidyanathan & Suyash Sarvankar

It is evident that India has a serious shortage of vaccine doses. Governments are trying to resolve that by floating global tenders for procurement. However, issues related to pricing, payment modalities, logistics, bridging studies and legal indemnity remain contentious. Some suppliers have insisted on Government protection from potential lawsuits relating to vaccine-related adverse events, without which, they will not participate in India’s vaccination program. There is more to this issue.

Vaccines are generally not considered very profitable as their market exhausts after a dose or two being administered to a population that is limited. As a result, pharma companies tend to prioritize medicines that must be taken repeatedly and continuously in order to generate revenue for years to come. It doesn’t help that typical vaccine buyers (Governments) will only buy millions and billions of doses, thereby tilting the negotiating power in favour of the buyer.

As a result, vaccines have traditionally seen little interest from BigPharma. Most COVID-19 vaccines currently approved under emergency use authorization in various countries were funded by tax-payers. For example, of the two vaccines currently available in India, Covishield was developed by a public research university, and Covaxin was developed, at least in part, by an Indian Government organization.

However, public research institutions do not maintain a supply chain network for vaccine delivery. Invariably, they must tie up with someone who does, which is where BigPharma manufacturers come into picture. These manufacturers are usually given exclusive marketing rights of a developed vaccine with a mandate that they make the vaccines widely available at an affordable price.

For a vaccine that is likely to be distributed worldwide, there is an inevitable risk of serious adverse events such as allergic reactions, disablement or worse, which will become known only with extensive Phase IV trials. These serious adverse events expose manufacturers to litigation by victims and considerable potential liability in torts, contracts, or both. It is, thus, without surprise that manufacturers routinely refuse to supply vaccines without immunity from liability, or indemnification from the state, or a combination of the two.

In the US, the Public Readiness and Emergency Preparedness Act, 2005 (PREP Act) provides manufacturers immunity from lawsuits related to injuries caused by vaccines, with narrow exceptions (such as if the manufacturer was negligent). When faced with a compensation claim, the PREP Act protects a manufacturer from all liabilities other than for wilful misconduct and it covers all those involved in the development, manufacture, testing, distribution, administration, and use of such countermeasures.

India does not offer any such immunity, indemnification or vaccine compensation program. Some of the vaccine manufacturers are lobbying the Government to follow the trend of other jurisdictions and to provide them with immunity and indemnification. The Indian Government, based on the information in public domain till date, has not accepted the vaccine makers’ demands that they be indemnified against mishaps.

On the face of it, BigPharma makes a compelling argument for such immunity or indemnification. It is said that liability is unforeseeable given that adequate trials would take years, but pressing public health needs dictate that the vaccines be administered today. They argue that such limitless liability will disincentivise them from supplying vaccines on emergency basis and it would in general discourage development of new vaccines.

While there may be merit to some of these arguments, what will be the consequence of such immunity or indemnification? When it comes to immunity, it is not open to the Government to waive an Act of Parliament (such as the Consumer Protection Act or the Drugs and Cosmetics Act) that imposes this liability. An amending law of Parliament would be necessary. Thus, what is essentially sought here is watering down of laws that are accessible to far and few between to begin with, leaving people with rather limited access to justice.

Indemnification, on the other hand, poses a moral hazard. A Government required to indemnify significant sums is incentivised to do away with laws that impose these significant sums, or not recognize legitimate claims from victims of serious adverse events. Either outcome does not look desirable. Moreover, the public confidence is unlikely to be high in a vaccination program that leaves them without recourse in case of an adverse event. The dilemma, therefore, involves whether to refuse manufacturers protection against liability and go without COVID-19 vaccines, or to extend liability protections (if even possible under laws in force) and risk having a large number of people injured to whom the government may be unable to offer compensation.

It seems the solution is already in existence in the form of a no-fault vaccine-injury compensation system. At the international level, the WHO has set up the COVAX No-Fault Compensation Programme. The model is simple: high income countries will pay a small fee per dose of vaccine administered through COVAX. This fee will be used to fund premiums of liability insurance in mid-income and low-income countries. Residents of these countries who suffer serious adverse events as a result of vaccination may file claims with the insurer and receive a quick settlement.

At a domestic level in India, the same solution may be found by enacting a law along the lines of the Public Liability Insurance Act, 1991 for vaccines under emergency use authorizations. Manufacturers who supply vaccines, the effects of which are not fully known, may be required to maintain adequate liability insurance by paying a fee per dose they sell. This insurance would compensate the few victims who suffer serious adverse events, in a no-fault manner. Thus, the immunity or indemnification from the Government may not be the most appropriate solution to the dilemma.


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