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Indemnity and Vaccine Pricing

Indemnity and Vaccine Pricing

Why in news?

  • Pfizer, which supplies the Pfizer-BioNTech mRNA vaccine, is said to have requested that the government indemnify it from any claim that may arise from vaccine users in the future based on any adverse effects after getting the jab.

What is Indemnity?

  • Indemnity is protection to vaccine-makers from legal proceedings, which means that they can’t be sued in India.
  • Section 124 of the Indian Contract Act, 1872, defines a contract of indemnity as one by which one party promises to save the other from any loss caused to the latter.
  • Once the government of India grants such indemnity to the vaccine manufacturer or importer, it would mean that if a particular vaccine is perceived to have caused death or any lasting damage to a recipient, any claim of compensation arising from it will have to be met by the government, and not by the company.
  • The law on drugs in India does not have a provision for indemnity related to the grant of approval for any new drug or vaccine in the country.                Indemnity and Vaccine Pricing
  • If at all any indemnity is to be granted to any company for a particular drug or vaccine, it can only be in the form of an indemnity bond executed on behalf of the government of India, or a clause or set of clauses in any contract that the government may sign with the supplier.
  • There appears to be no precedent for any company getting such indemnity in India for any drug.

What has happened so far?

  • Amid the shortage of vaccines, as the COVID-19 cases soar, India pledged to fast-track approvals for overseas vaccine makers such as Pfizer, and Moderna. However, none of them has since sought permission from the Drugs Controller General of India (DCGI) to sell their vaccine in one of the world’s biggest markets.
  • In February 2021, the first drugmaker to apply for emergency use approval of its COVID-19 vaccine candidate in India, Pfizer, withdrew its application after the country insisted on a local trial.
  • It is to be noted that the vaccines which are currently in use in India, developed by AstraZeneca, Russia’s Sputnik V and Bharat Biotech in collaboration with state-run ICMR, have completed the small-scale safety trials.              Indemnity and Vaccine Pricing

Exceptions to Indemnification

  • There are a number of common exceptions to indemnification.
  • An indemnification provision may exclude indemnification for claims or losses that result from the indemnified party’s:
    • Negligence or gross negligence.
    • Bad faith failure to comply with its obligations in the agreement.
    • Improper use of the products.

Consequences Of Indemnification

  • Faster Vaccination: Reduced prices and faster production may help accelerate India’s national vaccination drive.                                Indemnity and Vaccine Pricing
  • Lower Prices: In the absence of indemnity, overseas manufacturers may load the risk onto the price of the vaccines, making each dose more expensive. By indemnifying the companies in respect of these vaccines, the government of India may be able to negotiate lower prices and higher volumes.
  • Government needs to bear entire risk: Providing indemnity to all by government to ensure level playing field is inviting upon itself the entire risk associated with more than a billion vaccine shots.
  • Demand for Level Playing Field: The demand from indemnity from Pfizer has already given rise to a similar demand from domestic vaccine-maker Serum Institute of India (SII), which says all players should be treated the same way.


Mussoorie Times

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