Serum: differential pricing of the

Covid-19 vaccine
Sunny Vijay Arora and Malay Krishna

The vaccine industry has sacrificed billions of dollars of profits . . . in providing this vaccine at this Sunny Vijay Arora is based
price – Adar Poonawalla, CEO of Serum, April, 2021 (Inamdar, 2021). at the Department of
Marketing, S. P. Jain
Institute of Management
Introduction and Research, Mumbai,
India. Malay Krishna is
A difficult pricing decision confronted Adar Poonawalla, the 40-year old CEO of the world’s based at the Department of
largest vaccine maker – Serum Institute of India (Serum). It was the 20th of April in 2021, Strategy and Innovation,
and Serum and one other Indian vaccine maker had been negotiating prices for Covid-19 S. P. Jain Institute of
(Covid) vaccines with the Government of India (GOI) (Mukherjee, 2021). This was not the Management and
first time that Poonawalla had come to the negotiation table on pricing its Covid vaccine Research, Mumbai, India.
named Covishield – Serum’s brand name for the Oxford-AstraZeneca vaccine (Arora &
Miglani, 2021). Serum had been India’s first vaccine maker to receive emergency use
authorization for its Covid vaccine and was the first to deliver 10 million doses to the GOI, by
the end of January (Rajagopal & Bureau, 2021). Serum’s initial batch of vaccines had been
priced at INR 250 per dose (Kalra, 2021). Since then, Serum has supplied the GOI with
about 60 million doses a month, at an average price of INR 150 (equivalent to US$2) per
dose (Kapur, 2021).
What was different in April was that the GOI had confirmed a pricing move that had long been
hinted: it would pay for only 50% of vaccine supplies in India (Mathew, 2021). Called an “open
market” pricing system, beginning the first of May 2021, 50% of vaccine production in
the country would be open for procurement by state governments and private hospitals.
One rationale for this move was that public health care was part of both union and state
government charters in the Constitution of India. The announcement had created a challenge
as well as an opportunity for Serum. The challenge was in the complexity: as India was The authors wish to thank
SPJIMR’s Office of Research &
comprised of 28 states, how many different price points should Serum set? Yet, this was also Innovation, which provided
an opportunity, as Poonawalla had maintained that the INR 150 per dose pricing was not seed funding for this case
study. We also wish to thank
sustainable and had previously approached the prime minister for a doubling of the price Mr Saksham Rihani and
(Sahu, 2021). In addition to the pricing for states, Serum also had to decide on the Covishield Mr Harsh Upadhyay who
provided assistance in
pricing for private hospitals. The private hospitals could charge a higher price and, gathering, collating and
consequently, would be willing to bear a higher cost of procuring the vaccine. But Poonawalla analysing the information for
this case.
also had to consider the ground realities in late April: soaring counts of Covid cases and
Disclaimer. This case is written
hospitalizations as a second wave of Covid hit India hard (Jamkhandikar, 2021). solely for educational purposes
and is not intended to represent
successful or unsuccessful
Background of serum and the Poonawalla family managerial decision-making.
The authors may have
disguised names; financial and
In 1966, Cyrus Poonawalla, father of Adar Poonawalla, founded the Serum Institute of India other recognizable information
Pvt. Ltd. and formally launched the business of producing vaccines and antitoxins for to protect confidentiality.

DOI 10.1108/EEMCS-11-2021-0370 VOL. 13 NO. 1 2023, pp. 1-33, © Emerald Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
 tetanus (Serum Institute of India, 2014). The decision to establish the vaccine business had
come about through a curious mix of heritage and circumstance. The Poonawallas ancestry
could be traced to a migrant who, in the mid-19th century, settled in Pune, about 90 miles
from Mumbai, the financial capital of India. He started spending time as a “billiard marker”
at a British officer’s club and used his connections with the British colonial rulers of India to
start a construction business. He grew the business many times over and owned so much
land that he received the moniker, “Poonawalla,” which meant “the guy from Poona,” Poona
being the erstwhile name for the city of Pune. Poonawalla’s descendants divided the
inheritance among themselves. One of the inheritors, Soli Poonawalla – Adar’s grandfather –
received a house and 40 acres of undeveloped land, which he converted into a stud farm to
breed racehorses. Over time, the Poonawalla Stud Farms became India’s most successful
breeder of racehorses. In 1947, India became independent of British rule, and the kings’
sport of horseracing started losing popular appeal. Soli’s son Cyrus joined his father in
running the business but quickly realized that the business demanded diversification
(Kanwal, 2019).
Cyrus soon found an opportunity close to home. In the 1960s, the Poonawalla’s family
donated some of their retired racehorses to a government lab, which used the horses to
produce anti-venom and tetanus antitoxin to neutralize snakebites and tetanus (Frayer,
2021). To produce such medical substances, horses were first injected with small quantities
of venom, bacteria or other toxins so that their bodies developed antibodies and antitoxins.
Those could then be harvested from the fluid part of their blood, also known as serum, and
then refined into treatments for humans. In 1966, a snake bit one of the Poonawallas’
horses, and they requested the government lab for anti-venom serum. The lab needed
government approval, which took four days, and by then, the horse had died. This incident
motivated Cyrus to consider making the serums in-house. At about the same time, India’s
economy was recovering after recent wars with China and Pakistan. Among other essential
supplies, India’s large population required low-cost vaccines and antitoxins. Thus, Cyrus
began producing vaccines using the antibodies from retired racehorse serum, and the
Serum Institute came into being (Altstedter, 2020).
This move coincided with the rapid international development of vaccines. In 1971, Dr
Maurice Hilleman created the combined vaccine shot of measles–mumps–rubella while
working at Merck & Co. (Tulchinsky, 2018). Health efforts to eliminate polio and smallpox
globally were also underway (Bhattacharya & Dasgupta, 2011). In India, the GOI had
sponsored some nationalized institutes to produce vaccines, but such efforts tended to be
very slow. In contrast, Serum’s management team was agile, acquired advanced
equipment and know-how and operated at lower costs while maintaining a low price for their
vaccines and other products. Soon, Serum won contracts from several Indian states and the
Union GOI for its vaccines. Serum continued to reinvest in its facilities by importing
equipment from the USA and Europe, as well as adding more product lines. Serum also
began exporting its vaccines, and by 2000, had a customer base spanning 35 countries.
Serum maintained a market focus on supplying affordable vaccines to lower income and
middle-income countries (Kanwal, 2019). UNICEF (United Nations Children’s Fund), a
United Nations body dedicated to providing humanitarian aid to children worldwide, often
purchases vaccines for target market countries. Another organization that placed such
orders with Serum was GAVI (the Global Alliance for Vaccines and Immunizations), in
association with the Bill & Melinda Gates Foundation. Serum was familiar with the needs of
such target market countries, as conditions were similar to Serum’s home country of India.
This market niche had less competition as major Western vaccine manufacturers focused
on producing more complex, high-margin vaccines for high-income countries. Reduced
competition led to rapid sales growth for Serum, which in turn led to increases in capacity.
Serum funded this expansion from its own retained earnings and bank financing; however, it
chose not to raise funds from the capital markets for fears of diluting its control and

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independence. In an interview in 2009, Cyrus mentioned that staying privately owned
benefited Serum as it could be flexible in decision-making in ways that publicly listed
companies could not (Chengalvarayan, 2009). Cyrus pointed to Serum’s large refrigerated
warehouse for vaccines as an example: the return on such an asset would only become
evident during the time of disease outbreaks, and managers chasing quarterly returns
might never invest in such an asset.

Next generation at serum: Adar and Natasha Poonawalla

In 2001, Adar Poonawalla joined the family business at the age of 20 years and, as director
of operations, looked overseas for further growth (Mahalingam, 2008). He rapidly increased
Serum’s export base to more than 100 countries. In 2014, Adar Poonawalla was designated
CEO, while Cyrus Poonawalla retained his position as Chairman of the Poonawalla group of
companies. Flexibility in decision-making, good governance and economies of scale
helped Serum achieve operating profit margins of over 40% while keeping vaccine prices
low (see Exhibit 1). Serum profit margins were significantly higher than larger and more
diversified, global competitors.
As Serum thrived, so did the Poonawalla family’s lifestyle and philanthropy. The combined
Poonawalla family wealth was estimated at about US$13bn in 2020 (Kapoor, 2020). Adar
Poonawalla’s passion for cars resulted in a collection of 35 rare cars and a customized
Batmobile (Neate, 2021). Poonawalla also owned an Airbus A320 plane, which he
converted for about a million dollars into an elegantly designed office with space for a
boardroom and a bedroom. His wife, Natasha, was the chairperson of the Villoo Poonawalla
Foundation and Executive Director of Serum (Bora, 2021). Villoo Poonawalla Foundation
was a charitable organization that worked to enhance the lives of people through providing
education, health care, water and environment sanitation and green spaces. Natasha was
also featured in fashion magazines and on page 3 of the local tabloids for high society
partying (Chakraborty, 2021).

Covid pandemic and Covid vaccines

By April of 2020, many countries around the world had imposed some form of “lockdown” or
social distancing, intending to slow the spread of the Covid pandemic (Bird, 2020). The World
Health Organization (WHO) became aware of the new disease through Chinese media
reports in December 2019 (WHO, 2020). By March of 2020, it was clear that the new virus
was both deadly and widespread – leading to it being declared a pandemic (WHO, 2020).
Early reports suggested that Covid was caused by a flu-like virus named SARS-CoV-2,
which was highly infectious and resulted in a hospitalization rate of nearly 19% for people
over 80 years of age and a death rate of 1.4% for all diagnosed cases (Mundell, 2020). In
an unprecedented collaboration between private companies and public institutions, the
development of a vaccine against Covid received tremendous support.
With the world’s population at 7.8 billion, at least 15 billion doses of the vaccine were
required to contain the spread of Covid, assuming every human agreed to receive the
vaccine. Almost all vaccine makers claimed a need for two doses of their vaccines to fight
this disease, except for Johnson & Johnson, whose single-dose vaccine was approved in
late February, 2021 (Lovelace, 2021). Many vaccine makers had already announced their
prices and reached agreements with different governments and organizations such as CEPI
(Coalition for Epidemic Preparedness Innovations) and GAVI to supply specified quantities
of doses.
About 50 vaccines to treat Covid were currently being tested on humans, and at least 87
preclinical vaccines were under active investigation in animals. Andrea D. Taylor, assistant
director of programs at the Duke Global Health Innovation Center, estimated that by the end
of 2021, the global supply of Covid vaccines would be 7.2 billion doses (Sharma, 2020).

VOL. 13 NO. 1 2023 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 3

 Supply deals of up to 5.3 billion doses had been inked, with more than 2.7 billion already
purchased by developed countries such as the UK, USA, Australia, Hong Kong & Macau,
Japan, Switzerland, Israel and the EU. Consequently, just 13% of the world’s population had
reserved 51% of the promised doses (Sanjay, 2020). Even though the demand for vaccines
vastly outstripped demand, the launch prices of most vaccines had been kept in the range
of US$10–US$35 because of the unprecedented scale of humanitarian need and general
economic contraction (Sagonowsky, 2020).
Based on extensive testing, vaccine candidates that cleared Phase-3 clinical trials were
expected to be at least 50% effective in protecting vaccinated individuals from severe
disease. By January 2021, five vaccines were being distributed around the world: vaccines
by Pfizer-BioNTech (US-based), Moderna (US-based), Sinopharm (China-based), Sputnik V
(Russia-based), Johnson & Johnson (US-based) and AstraZeneca-Oxford University (UK-
based) (O’Neill, 2021). A few other vaccines, such as those developed by US-based
Novovax, India-based Cadilla and China-based Sinovac, were expected to clear Phase-3
trials in 2021 and enter the market soon after (Forni & Mantovani, 2021).

Covid vaccine technology comparison

Of the available Covid vaccines in early 2021, the Pfizer and Moderna vaccines were based on
newer and previously untested mRNA technology. In March of 2021, research revealed that
both mRNA vaccines showed about 90% efficacy in preventing Covid-19 infection in a real-
world setting in the USA (Branswell, 2021). However, other research had reported the rise of
new Covid virus variants, which could reduce vaccine efficacy over time (Bollinger & Ray, 2021).
The Johnson & Johnson, Sputnik V and Oxford AstraZeneca vaccines all relied on what was
known as “viral vector” technology. A harmless virus was genetically modified to resemble part
of the Covid virus (Hewings-Martin, 2021). While the efficacy of viral vector vaccines was lower
than mRNA vaccines, they had the advantage of easier storage and transportation as they did
not require deep freezing (Katella, 2021). Covishield, a licensed rebrand of the Oxford
AstraZeneca vaccine, was reported to have an efficacy of 62% (Cao, 2021).
The Sinopharm, Sinovac and Bharat Biotech’s Covaxin vaccines relied on older “inactivated
virus” technology (Corum & Zimmer, 2021). While detailed trial results for Sinopharm and
Sinovac had not been made publicly available, summary results showed that these
vaccines had efficacy ranging from 50% to 80%, which was acceptable by WHO
standards; detailed data review by the WHO was expected to conclude by the end of April
2021 (Nebehay & Kelland, 2021).

Competitive dynamic for vaccine supply in the Indian market

In November of 2020, Pfizer applied for emergency approval for its Covid vaccine in India
(Chang, 2020). Pfizer’s vaccine, which required extremely cold storage, faced logistic hurdles
in penetrating the Indian market. In addition, Indian newspapers suggested that the GOI was
unlikely to purchase doses from Pfizer owing to its higher prices of about US$19.5 or INR
1,500 per dose (Das & Choudhary, 2020). In April, however, Pfizer stated that its prices for the
Indian market would be “not-for-profit,” implying lower levels than the US pricing (Raghavan,
2021). However, in the EU market, Pfizer had increased its prices in 2021, from e12 to e15.5
and finally to e19.5 (equivalent to INR 1,700) for orders in 2022 and beyond (Leo, 2021).
Unlike Pfizer, which had an existing and extensive presence in the Indian market, Moderna
was new to the Indian market and had not applied for emergency use authorization with the
Indian regulators. Moderna’s prices had ranged from US$25 for 100 million doses in the US
market to US$37 for smaller countries in the EU (Jacobson & Uria, 2020). Moderna’s
advantage over Pfizer was that while its vaccine did require cold storage, the temperatures
required were similar to those possible in widely available freezers.

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The Chinese vaccine makers – Sinopharm and Sinovac – faced hurdles of their own: driven
by recent border conflicts between Indian and China, the GOI had imposed several import
restrictions on Chinese imports (Misra, 2020). Thus, it was unlikely that Chinese vaccines
would be distributed in India. Sputnik V, the Russian vaccine, had begun Phase-3 clinical
trials in India in December 2020 and it cleared the clinic trials with 91.6% efficacy against
symptomatic Covid in April of 2021 (Ray, 2021). It had entered a manufacturing agreement
with Dr. Reddy’s Lab, a US$155bn Indian pharmaceutical company. Dr. Reddy’s Lab had
promised to produce 300 million doses by the end of 2021 (Jayakumar, 2021).
Among Indian vaccine makers, Zydus Cadilla, an Indian pharmaceutical major, was
expected to have its vaccine candidate in human trials by May 2021, and if successful,
emergency use authorization by August of 2021 (Mathur, 2021). Only one other Indian
vaccine – Covaxin, produced by Bharat Biotech – entered the Indian market by January
2021. Bharat Biotech CEO, Krishna Ella, promised a ramp-up of annual production capacity
to 200 million by year end (Vachhatani, 2021). However, Covaxin’s launch was marked with
controversy because the government granted emergency use authorization for this vaccine
before the completion of final human trials (Kay, 2021). Covaxin’s approval, which was
developed with government-backed research groups, was met with widespread scientific
criticism and initial public skepticism (Pradhan & Sen, 2021). On 3rd January, Poonawalla
gave credence to this mistrust by suggesting (Som, 2021):
There are only three vaccines in the world who [that] have proven efficacy [. . .] it’s Pfizer,
Moderna and Oxford-AstraZeneca, these are the only three vaccines which have been proven to
work. Everything else has been proven to be safe, just like water.

Through March of 2021, high vaccine hesitancy prevailed among many frontline health-care
workers; many refused the Covaxin shot, with a little over half of the target population
coming forward for vaccination (Kay, 2021).

Indian market for Covid vaccines

The Indian market for vaccines was one of the largest: by January of 2021, India had the
second largest number of cases and the third largest number of fatalities associated with
Covid (Manral, 2021). India also had the second largest population globally, approximately
1.3 billion, distributed across 28 states and 8 union territories (Find Easy, 2021). See Exhibit 2
for details on population distribution in India, along with per capita health-care expenses.
While the average household size in India was 4.6 (PRB, 2021), the population of those
eligible for vaccines (those above 18 years) was about 840 million (Kaul, 2021). While the total
number of adults to be vaccinated was 840 million, factors such as vaccine hesitancy could
reduce the number of fully vaccinated adults, while opening up the drive to children could
increase the total number of people vaccinated [1].
In terms of purchasing power, while the World Bank classified India as a low-middle-income
economy, there was wide variation in income levels. For instance, according to a recent
average salary survey for chief wage earners in Indian families, about 5% of the population
had incomes of about INR 3.9m a year or about INR 330,000 a month (United Nations
Secretariat, 2021). This contrasted with people in the lowest income bracket, who earned
only about INR 2,000 per month (see Exhibit 3). A government report suggested that
Indians spent about 2.2% on average of their incomes on out-of-pocket expenses for health
every year (Jena, 2020). Some observers believed that the GOI’s vaccination
announcement in November 2020 implied a focus on free vaccinations for lower and
middle-income people, which comprised 95% of India’s population. In addition, it was
reported that a few Indian states might spend as much as 30% of their health expenditures
on purchasing the Covid vaccine (Raman & Paliath, 2021).

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 On 16 January 2021, India started its vaccination campaign, with its first phase focused on
30 million frontline workers (Kaul, 2020). However, some health-care and other frontline
workers were reluctant to get vaccinated because of safety concerns: one report suggested
that 40% of doctors in India were unsure about taking the vaccine and wanted to wait
(Pradhan, 2021). From the 1st of March 2021, India commenced the second phase of its
vaccination drive, focusing on people over 60 years of age and those over 45 years with
certain underlying health issues (Bhaduri, 2021). This phase was expected to cover more
than 130 million of the 60+ population alone (Kapur, 2021). The vaccine was provided free
of cost at government facilities, and the market price had been capped at INR 250 per dose
at private medical facilities (Iswarya, 2020). However, vaccine hesitancy persisted, and
6.5% of coronavirus vaccine doses in India were said to have be wasted in March 2021
(Das, 2021a). The GOI had set a permissible limit of 10% of dose wastage, irrespective of
the vaccine make (Dey, 2021a).
During Phase-3 in April 2021, all individuals aged 45 years and above were eligible for
vaccination (Chaturvedi, 2021). On 19 April, the GOI announced that on 1 May, vaccination
would be open to all Indians 18 years and above (Dey, 2021b). This decision was seen as
an acceleration of the vaccination drive in the wake of a rapid rise in the number of Covid-19
cases. Between 9 April and 19 April, India’s active case count had doubled to 2 million and
was second only to the USA as the worst-affected country in the world (Bhattacharya,
2021). This level of cases had overwhelmed the nation’s health infrastructure, and hospitals
across the country were reporting shortages of medical oxygen, which caused the GOI to
direct oxygen production for industrial purposes to be diverted to medical use (Arora et al.,
2021). This also resulted in heightened public awareness of vaccines as a protection
against the pandemic.

Indian hospitals
In February of 2021, the GOI announced plans to include nearly 24,000 private hospitals as
Covid vaccination centers to augment the 10,000 government facilities already pressed into
service (Sharma, 2021a). At government-run public hospitals, the Covid vaccine was
delivered free to all eligible citizens, while at private hospitals the price to consumers was
capped at INR 250, which was comprised of INR 150 for vaccine procurement from the GOI
and INR 100 for the vaccine delivery fee (Sharma, 2021b). However, in mid-April, the
likelihood of new government guidelines introduced uncertainty for private hospital pricing
going forward. As the COO of Fortis, a major Indian hospital chain, remarked in April, “We
are waiting for the guidelines which are expected in a week. But our understanding is that
private hospitals would need to procure directly from the vaccine-maker” (Sharma &
Thacker, 2021).
Also, by mid-April, the delta variant of the Covid virus caused a massive surge of infections
in India, with a concomitant quadrupling in demand for vaccines, as hospitals saw long
lines of people hoping to get doses (Bellman & Agarwal, 2021). In Mumbai, the financial
capital of India, 25 of the 71 private hospitals that were designated vaccination centers had
run out of vaccine stock; and vaccine supplies across hospitals (120 including public
hospitals) were down to just one day (Staff Writer, 2021). Hospitals across the country were
also under pressure because of increasing rates of Covid-related hospitalization and
shortages of critical resources such as ICU beds and medical oxygen (ET Bureau, 2021).

Serum’s Covid vaccine production

In 2019, Poonawalla revealed that Serum’s R&D was oriented toward maximizing
production yield and making their products stable in a variety of temperatures (Kanwal,
2019). These choices helped Poonawalla back Covid vaccine products that fit with existing
strengths and were also thermally stable. A big decision that Poonawalla made during the

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pandemic was over a 5-min conversation with his father (Frayer, 2020). In the spring of
2020, the Poonawallas decided to acquire hundreds of millions of glass vials and other raw
materials to manufacture millions of doses of Covishield and other Covid vaccines, even
before clinical trials and regulatory processes had begun. Again, the speed and
decisiveness of the decision, a calculated risk, was possible only because of the
company’s private ownership. The gamble paid off, and Covishield was able to begin
shipping its doses as soon as regulators reviewed the vaccine trial data and granted
approval.
Then, in January 2021, an electrical fire broke out in Poonawalla’s factory complex, close to
the Covishield inventory, causing damage worth INR 10bn and the death of five contractual
workers (Mascarenhas, 2021). Shortly after, Poonawalla tweeted that the Covishield vaccine
production and inventory had not been impacted, even though a stockpile of Covishield
vaccines was stored just 1 km away from the fire. Poonawalla also shared that he had
enough reserve capacity that even in the case of damage to one factory, others could be
brought online.
In March 2021, Poonawalla confirmed plans for the company to ramp up production of
Covishield to 100 million doses per month by the following month (Frayer, 2021). However,
these goals remained unachievable in April because of a shortage of raw materials caused
by an export embargo by the USA (Mascarenhas & Raghavan, 2021). Tagging US
President Joe Biden, Poonawalla tweeted (Poonawalla, 2021):
Respected @POTUS, if we are to truly unite in beating this virus, on behalf of the vaccine industry
outside the U.S., I humbly request you to lift the embargo of raw material exports out of the U.S.
so that vaccine production can ramp up. Your administration has the details.

Serum’s capital investments in Covid vaccine production were significant: to upgrade its
production capacity, Serum had imported stainless steel vats from Europe worth about INR
300m or US$4m each for producing the Covishield vaccine (Frayer, 2021). In addition, its
refrigerated warehouse now stocked 70 million vials of Covishield at any given time.
Poonawalla estimated that the direct and indirect expenses required to develop and
produce Covid vaccines was INR 11.3bn or US$150m (Mukherjee, 2020a).

Serum’s pricing till April 2020

In the second half of 2020, news media coverage on Covid vaccines focused on the launch
times and pricing of the vaccines. In July, Poonawalla announced a price of under INR
1,000 per dose for procurement, while noting that the GOI would likely make it free for the
public (Ray, 2020). In August 2020, Serum announced a reduced price to the government,
of INR 225 per dose (Mukherjee, 2020b). In the same month, GAVI, which procured and
supplied affordable vaccines to low- and middle-income countries, placed a purchase
order for 100 million doses at a maximum price of US$3 per dose – equivalent to INR 225
per dose (Fulker, 2020).
However, the very next month Poonawalla tweeted to check with the government if they had
INR 800bn to pay for the vaccine (Singh, 2020). The government’s health ministry took
objection to the figure and political supporters of the government tweeted that Indian patent
law had provisions to “. . . force you and your peers to produce vaccine free from
exploitative royalty” (Dwivedi, 2020) Just a day later, Poonawalla addressed the PM in a
tweet, “. . . It was clear that all your arrangements for India will take care of all needs for the
Indian people” (Poonawalla, 2020). On 25 October 2020, Union Minister of State Mr Pratap
Sarangi announced that all people in India would be provided the Covid vaccines free of
cost. But on 1 December 2020, India’s Health Secretary, Mr Rajesh Bhushan, clarified that
the government never spoke of vaccinating the entire country (Sharma, 2020).

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 In November 2020, Poonawalla stated that the vaccine would be supplied to the
government for between INR 225 and 300, but private individuals might have to pay INR
500–600 for each dose if bought on the open market (Raghavan, 2020). Later in the same
month, in another interview, Poonawalla declared the vaccine price to be INR 250 for the
government and INR 1,000 a dose for the private market (Seal, 2020). In early January
2021, a top government official made a passing mention that each citizen who could afford
to pay for the vaccine should as doing so would subsidize two of their fellow citizens who
might not be able to afford the vaccine on their own (Roychoudhury, 2021).
After receiving the first batch of 10 million doses of Covishield from Serum for INR 250, the
GOI negotiated the price of the next 100 million doses down to INR 150 per dose (Sharma,
2021a). By mid-April 2021, vaccine hesitancy was trumped by concerns of personal safety,
as cases had increased exponentially (Local Circles, 2020). As demand for vaccines
increased, the GOI banned vaccines exports, which meant that Serum had to delay its
promised shipments to GAVI (Inamdar, 2021).

Pricing options for phase-4 and beyond

In Phase 4 of India’s vaccination drive, just 10 days away, the entire adult population of India
would be eligible for Covid vaccines (Dey, 2021b). As the demand for Covid vaccines continued
to rise, several states complained of vaccine shortages and demanded that they be allowed to
procure vaccines from the vaccine makers directly. In response, on 19 April 2021, the GOI
confirmed that it would only purchase 50% of all vaccine doses, while the rest of the vaccines
could be purchased by state governments and private hospitals, all of which had different
budgets and requirements (Sharma, 2021b). This opened the door for Poonawalla to contemplate
several options for pricing beyond the INR 150 price, which even the rival pharmaceutical
company Biocon believed was too low to be profitable (Sheth, 2021). Poonawalla also claimed
that at the current price of INR 150, Serum was not earning any profits (Das, 2021b).
One pricing option was to set different price points for different states. Given the highly
variable GDP and health expenditure per capita (see Exhibit 2), perhaps a case could be
made for a lower price for poorer-than-national average states and a higher price for
wealthier-than-average states. Another possibility could be pricing the vaccines for different
states based on the quantities they order. Larger states could probably get the vaccine at a
lower price. A few states such as Maharashtra were witnessing a new upsurge of cases that
was significantly higher than the rest of the country in April. Should these states be given a
higher priority for delivering vaccine? In that case, should they be charged a premium for
preferential delivery? One objection to such tiered pricing, however, was the perception of
fairness. Already some prominent state politicians and public figures had attacked the
GOI’s decision and demanded a “one-India, one-price” system (Prabhu, 2021). However, it
still left open the question of how to set prices for private hospitals. As Poonawalla had
already announced in 2020 a retail price of INR 1,000, that was a possible anchor
(Suryawanshi, 2020). However, many private hospitals had suggested that they would need
a service charge of about INR 300 to cover overheads for administering the vaccines
(Gupta, 2021). Thus, the total price might be as high as INR 1,300. Another school of
thought was that the INR 1,000 price point was an important psychological frontier, and the
fully loaded cost of vaccine delivery should not exceed INR 1,000.
Another option was to set the same price for all states and future contracts with the GOI at a
level higher than the current INR 150. Such a move would avoid the perception of
inequitable pricing. India was, however, a country with a large section of the population with
very low income (Kochhar, 2021). Charging a high price could make it unaffordable for
many. Most countries in the world, including other middle-income countries such as China,
Bangladesh and Indonesia, were providing vaccines to their citizens free of charge. A
comparison with these countries could generate perceptions of unfairness. Such perception

PAGE 8 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 13 NO. 1 2023

of unfairness and lack of affordability could add to vaccine hesitancy and lead some
population segments not to be vaccinated.
Perceptions of unfairness might also originate from Serum charging multiple prices for the
same vaccine. Given India’s wide income disparity, charging a higher price from the rich
and subsidizing the vaccine for the poor could be seen as thoughtful. The vaccine,
however, was the same and provided the same benefits to all. Hence, some people might
feel the strategy was unfair. Moreover, it was not easy to differentiate the rich from the poor
in terms of the distribution of the vaccine through hospitals. There was no geographical
separation for the two income classes. The pricing policy might have to ensure the
achievability of the lower priced vaccine to the poor wherever they reside.
Furthermore, Serum was understood to be the largest seller of vaccines globally. Even
when it supplied its vaccines at a low price, it was known to make large profits. The
Poonawallas make headlines regularly for their opulent lifestyle as well as philanthropy. If
the price increase seemed unreasonable, Serum could be perceived to be profiteering from
the misery of the poor.
Charging a higher price for Covishield at private hospitals also came with its own issues.
While Serum might offer the vaccine at a few discrete price points, the variation in charges
levied by the private hospitals for their administrative expenses could introduce another
layer of variability in vaccine pricing. The result could be too many prices prevailing for the
Keywords:
same vaccine. Disorderly prices could increase public suspicion of private hospitals and
Pricing,
Serum, which could be seen to be colluding with private hospitals. Pricing strategy,
Price discrimination,
However, all of the above options needed to be seen in light of the immense health-care
Differential pricing,
crisis that had overwhelmed India’s health-care infrastructure. Poonawalla did not want to Price fairness,
be seen as profit-maximizing while his compatriots suffered (Bhan, 2021). Should Marketing,
Poonawalla, then, not increase the price per dose much beyond the current INR 150? Was Microeconomics,
maintaining a uniform price an appropriate decision for Serum, or was differential pricing Marketing ethics,
Pricing policy
more befitting of the situation?

Notes
1. For ease of calculation and as a reasonable approximation, one can assume that half of India’s
entire population is likely to be fully vaccinated by the end of 2021.
2. Total Indian population in 2021 was 1,393,409,038 [www.macrotrends.net/countries/IND/india/
population-growth-rate#::text=The%20current%20population%20of%20India,a%200.99%25%
20increase%20from%202019].

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PAGE 14 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 13 NO. 1 2023

Exhibit 1. Selected 2019 financial and operational data concerning leading Covid
vaccine makers

Table E1
Financial parametera Serumb Pfizerc AstraZenecad J&Je Moderna

Revenues 750 39,419 24,384 42,198 60

R&D expense – 1,047 6,059 8,834 496
Other operating expenses 392 14,579 16,942 25,572 110
Total operating expenses 392 15,626 23,001 34,406 606
EBITDA 357 23,793 2,924 7,792 546
EBITDA/sales 48% 60% 12% 18% 906%
Name of COVID vaccine Covishield BNT162b2 ChAdOx1 nCoV-19 Ad26.COV2.S mRNA-1273
2021 COVID vaccine production (billions of doses) 1 1 2 1 2
Notes: R&D: research and development; EBITDA: earnings before interest, taxes, depreciation and amortization. All figures are in US$
millions unless stated otherwise. aBusiness units not related to pharmaceutical or vaccine products were excluded; bSerum Fiscal Year
2019, as with other Indian companies, was counted as the period from 1 April 2018 through to 31 March 2019. The US$/INR exchange
rate was taken to be 68.915; cPfizer’s Biopharmaceuticals Group, an operating segment that included the development and production
of vaccines; dAstra Zeneca’s vaccine candidate was the same as Covishield; eJ&J’s Pharmaceuticals division, which excluded medical
devices and consumer healthcare. Cost of goods sold; selling, general and administrative expenses were assumed at the corporate rate
provided in the annual report; fas reported in Moderna’s annual regulatory filings
Sources: Created by the case authors based on information from Serum Institute of India, Standalone Financial Statements for Period
01/04/2018 to 31/03/2019, 26 August, 2019; Pfizer Inc (2020); Astra Zeneca (2020); Moderna (2020)

VOL. 13 NO. 1 2023 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 15

 Exhibit 2. Population and health expenditure of Indian states in 2020

Table E2
State Population Health expenditure per person (INR)

Delhi 18,710,922 3,808

Himachal Pradesh 7,451,955 3,780
Arunachal Pradesh 1,570,458 3,717
Manipur 3,091,545 3,717
Meghalaya 3,366,710 3,717
Mizoram 1,239,244 3,717
Nagaland 2,249,695 3,717
Sikkim 690,251 3,717
Tripura 4,169,794 3,717
Jammu and Kashmir 13,606,320 3,163
Uttarakhand 11,250,858 2,367
Andhra Pradesh 53,903,393 2,261
Kerala 35,699,443 2,085
Assam 35,607,039 2,053
Haryana 28,204,692 1,778
Chhattisgarh 29,436,231 1,711
Rajasthan 81,032,689 1,706
Gujarat 63,872,399 1,610
Tamil Nadu 77,841,267 1,602
Telangana 38,510,982 1,534
Odisha 46,356,334 1,501
Karnataka 67,562,686 1,462
Punjab 30,141,373 1,357
Maharashtra 123,144,223 1,295
Madhya Pradesh 85,358,965 1,284
Jharkhand 38,593,948 1,111
Uttar Pradesh 237,882,725 1,065
West Bengal 99,609,303 988
Bihar 124,799,926 781
Source: Created by the case authors based on information from UIDAI (2020) and RBI (2020)

Exhibit 3. Categorization of Indian population [2] by income

Table E3
Percentage of Earn annual income equal to or more Monthly income Monthly income per
people than (INR) (INR) person (INR)

5 3,960,688 330,057 71,752

12 2,776,748 231,396 50,303
21 2,159,860 179,988 39,128
68 901,524 75,127 16,332
88 460,793 38,399 8,348
97 235,540 19,628 4,267
99 121,417 10,118 2,200
Source: Created by the case authors based on information from Potocnik (2021) and PRB (2021)

Corresponding author
Malay Krishna can be contacted at: malay.krishna@spjimr.org

PAGE 16 j EMERALD EMERGING MARKETS CASE STUDIES j VOL. 13 NO. 1 2023