Buying Chinese vaccines easier said than done, officials and experts sayThough some provisions have been eased, the non-disclosure agreement condition proposed by Sinopharm could pose a challenge to procurement.
China’s announcement on Wednesday to provide 1 million doses of vaccine to Nepal under grant assistance has raised hopes that it would pave the way for procuring more vaccines from the north.
But purchasing vaccines from China does not look as easy as it sounds, according to officials.
At least three government officials from different ministries and a diplomat based in Beijing said a proposal from Sinopharm, a company whose vaccines Beijing is likely to donate, had already been under consideration in Kathmandu. Earlier in March also, China had provided 800,000 doses of the vaccine of the same company.
The Chinese firm’s condition that Nepal sign a non-disclosure agreement for commercial procurement, however, has put officials in a fix.
A non-disclosure agreement implies a legally binding contract, establishing a confidential relationship, which would mean many details, including the price, are not made public.
Dipendra Raman Singh, director general at the Department of Health Services, told the Post on Wednesday that the department has received a proposal for a non-disclosure agreement from Sinopharm. He refused to elaborate.
A Health Ministry official also told the Post earlier this week that the proposed non-disclosure deal contains over a dozen issues, including the price and specifications.
Specifications in a non-disclosure agreement could include trade secrets, intellectual property, product formulas, information about products under development, computer code, financial information, contractual agreements with other companies, and proprietary information, among other things.
“The company will notify us about the quantity, price and delivery schedule only after signing a non-disclosure agreement,” said the official.
And here is where the catch lies.
Nepal’s Public Procurement Act 2007 and the recently introduced Covid-19 Crisis Management Ordinance are silent on non-disclosure agreement, even though both allow the government to procure directly from suppliers or manufacturers without competitive bidding under extraordinary situations.
An official at the Public Procurement Monitoring Office told the Post on condition of anonymity that except in a situation where the government decides to procure defence-related materials, which are sensitive from a national security point of view, details of all other procurement must be disclosed as per the existing law.
“The objective of our procurement law is to ensure transparency and fairness,” said the official. “If any citizen seeks the procurement details by invoking the Right to Information Act, the government has to provide such details.”
The official said he is unaware if any other law supports a non-disclosure agreement.
Those with a good understanding of the nature of non-disclosure agreements say such a condition could make it immensely difficult, or even impossible, for procuring vaccines from the north. Firstly, because the country’s procurement law is silent on whether such an agreement is permitted, and secondly, Nepal plans to pay for vaccines from donor funds.
“Apart from some defence-related purchases, Nepal does not engage in the practice of non-disclosure agreements,” said Rameshore Khanal, a former finance secretary. “If we are taking money from donor agencies, we have to disclose procurement details such as the rate, cost and logistical and transportation issues, among other things.”
According to the Health Ministry official, one of the provisions in the proposed non-disclosure agreement is that the information from the agreement cannot be disclosed to any third party, which in general is a key condition.
“But if we procure any goods or services with the money received from the donor agencies like the World Bank and Asian Development Bank, we have to send all the procurement-related documents to them,” the official told the Post.
The government’s existing plan is to procure Covid-19 vaccines with the money from international development partners.
On April 2, the government and the World Bank signed an agreement for a loan worth $75 million to support access to safe and effective Covid-19 vaccines for Nepal’s prioritised populations.
The government is also in discussion with the Asian Development Bank to secure an aid to the tune of $150 million in order to purchase Covid-19 vaccines, according to officials at the finance and health ministries.
“We have to send both pricing and contract documents to the development partners if we use their funds for the procurement,” said the Health Ministry official. “It is also difficult to use the government’s own resources for making purchases through non-disclosure agreements because transparency questions could arise, as the public could ask how the taxpayer money is being spent.”
The coronavirus, which has so far killed over 3.5 million people worldwide, continues to remain a massive threat to countries like Nepal, and vaccine has become the world’s newest diplomatic currency. And countries that have developed vaccines or are manufacturing them as well as drug companies do not want to share details while doing business.
Governments worldwide are currently buying vaccines either directly from manufacturers or through the governments of vaccine-manufacturing countries.
The Nepal government has not cut any deal with any vaccine manufacturing firm, except the one it signed with the Serum Institute of India in February. But Serum failed to provide 1 million of the 2 million doses for which Nepal paid. Nepal had agreed to buy the 2 million doses from Serum at $4 per dose. The deal did not involve a non-disclosure agreement.
Nepal had planned to buy an additional 5 million doses from Serum, but with India itself sliding into a devastating crisis after a sudden surge in Covid-19 cases, vaccine supply from the south immediately is unlikely.
The Nepal government, according to officials, is currently in talks also with the United States, the United Kingdom and Russia, apart from China for vaccines.
Even though the new Covid-19 Crisis Management Ordinance has sought to fast-track the procurement process, it is mum on non-disclosure agreement. As per Section 26 of the ordinance issued on May 20, the government can procure medical goods such as vaccines, medicines, oxygen and other equipment directly from manufacturers, distributors and authorised distributors based on the specifications and rates determined by the government.
The government, through the ordinance, however, has removed some obstacles, when it comes to advance payments, full payments and direct payments, which were earlier not allowed by the law.
“In order to simplify the procurement process, we have recently amended some provisions related to direct and full payments to the receiving parties and it applies not only to Sinopharm, but also to J&J, Sputnik V and others,” Foreign Minister Pradeep Gyawali told the Post.
Since drug companies make huge investments in vaccines, they own the patents. This means they decide where they would manufacture the vaccines and for what price they would be sold.
Hence, while signing a deal, they try to push for non-disclosure agreements, thereby putting the buyers (governments) in a legal bind that they cannot disclose the deals. Such a non-disclosure agreement gives the vaccine manufacturers the upper hand, as the government negotiators would never know what other countries are paying.
It’s not that governments do not sign non-disclosure agreements at all. This, however, depends also on the respective countries’ procurement laws.
In December last year, Reuters news agency reported that Kazakhstan had signed a non-disclosure agreement with Pfizer, the US-based vaccine maker. Bangladesh announced on May 18 that it signed a non-disclosure agreement with Sinopharm, according to a report published in the Daily Star newspaper. Bangladesh also signed a non-disclosure agreement for production of Sputnik V vaccine in Bangladesh, according to the report.
But such “secret” deals could also mean that the taxpayers would never know the actual price the government is paying to the drug companies from taxpayer funds.
The New York Times reported in January that an accidental revelation that the United States taxpayers were paying $19.5 per dose for the Pfizer vaccine, while Europeans paid just $14.70 per dose, had caused quite a stir.
Government officials said they have yet to figure out a way to procure vaccines from China.
According to an official at the Health Ministry, none of the government agencies that the ministry consulted were positive about procuring vaccines from China under a non-disclosure agreement.
“So we sent the proposal back to the Nepali embassy in Beijing for further negotiations,” the official told the Post.
After a few rounds of negotiations with Sinopharm, the Nepali embassy sent a revised price list to Kathmandu, but the Health Ministry is yet to take a final decision.
Officials said, in the latest proposal that is under consideration by different government agencies, Sinopharm has agreed to sell the vaccine at a “preferential” rate to Nepal.
“But we do not know the price yet, it will be disclosed by the company after signing a non-disclosure agreement,” a Nepali official familiar with the matter told the Post.
According to officials at the Prime Minister’s Office, the price quoted by China’s Sinopharm was around $36 per two doses, which after negotiations has come down.
“It is the commercial price quoted by the Chinese company,” said an official at the Prime Minister’s Office who did not wish to be named.
Going by the valuation made during the import of Sinopharm’s BBIBP-CorV donated by China, the price for two doses of the vaccine was valued at a little over $30.
According to data from the Department of Customs, the total value of the Chinese vaccines for 800,000 doses stood at Rs1.52 billion, which translates into Rs1,900 per dose. In US dollar terms, it cost $16.23 per dose–or $32.46 for two doses.
“This fiscal year, Nepal has not imported any vaccines from China for humans, except the ones the Chinese government donated,” said Laxmi Prasad Niraula, chief of customs office at Tribhuvan International Airport.
Nepal needs around 43 million doses as it needs to inoculate 72 percent of the country’s 30 million population above 14 years of age.
Since COVAX, an international vaccine-sharing scheme backed by the United Nations, had committed to providing 13 million doses, enough to inoculate 20 percent of the total population, the government needed to buy just 30 million doses on its own. But a struggling COVAX has already communicated to Nepal about delays, putting the government in a tight spot.
Nepal has received 348,000 doses of Covishield so far under COVAX.
Amid this, the Chinese supplier’s insistence on a non-disclosure agreement could further impede Nepal’s plan to purchase the vaccine, which is the only credible measure to beat the virus.
Khem Raj Regmi, a former president of the Transparency International Nepal, said he wondered how a non-disclosure agreement could be signed under the current laws and rules of the country.
“I have never heard about procurement of goods without disclosing the price, specifications, suppliers and buyers,” said Regmi, who is also a former government secretary. “I don’t think there is any legal basis for such an agreement except the provision of allowing the government agencies to fast-track the procurement process and procedure directly in emergency situations.”
After all, he said, people have the right to know about how their tax money is being spent.