Prudence demands that decision-makers of all hues have actionable and cost-effective plans to achieve resilience even in the face of a protracted Covid.
By Rohit Bhat & Suraj Subramaniam
People across all walks of life be it investors, businesspeople, policymakers, teachers or migrant workers are struggling with the same question today: How to deal with the future uncertainty imposed by Covid-19? Below is an exposition of how we are thinking about Covid-19 scenarios.
As the fiscal year 2020 drew to a close, we thought of this pandemic as having three stages—shock introduction of the virus to society (stage 1), managing the virus (stage 2) and conquering the virus (stage 3). One can think of these three stages at the level of any geographical unit—the world, a country, its states or even districts/neighbourhoods. Stage 1 is accentuated by panic, and at the country level, we saw a wide gamut of responses across the world. For instance, in India, the government imposed a draconian 8+ weeks lockdown whose economic consequences we don’t fully know yet.
As India continues to unlock even as the virus runs riot, we are now firmly in stage 2, where we are learning to live with Covid-19. Stage 2 is all about effective public health strategies executed at scale by governments and societies—social distancing, handwashing, masking, sanitation, testing, contact tracing, local containment and healthcare capacity. Countries currently doing this well, are likes of China, Japan, Vietnam, Germany, South Korea, Taiwan, Singapore and New Zealand (mentioned in order of population size). Closer home, we have the state of Kerala. Unless all countries in the world reach a certain minimum threshold on disease control, pre-Covid normalcy for global travel would not be possible without risking relapse. So how long might the world remain in this stage 2?
Stage 3, i.e., the beginning of the end of the pandemic arrives only when there is clear visibility to either achieving herd immunity (naturally or artificially) or controlling the rate of disease transmission globally. Natural herd immunity happens when a certain threshold of a population (ranges above 60%) gets the disease, with those who survive it having antibodies to immunise them against reinfection. Data from recent serological surveys globally indicate we are very far away from natural herd immunity. Artificial herd immunity is caused by a similar threshold of the population being inoculated with a vaccine, so they are immune to the disease. An effective cure (the way Tamiflu was for swine flu) would also usher in stage 3 by allowing everyone to go about their lives without fearing Covid-19 or straining healthcare systems. Initially, there was hope that an existing repurposed drug might emerge as a cure. However, given those have proven to be incremental at best, the focus has now shifted to vaccines.
There are currently 17 vaccine candidates globally undergoing human trials, with a handful in phase 2/3 stages. Even considering historical failure rates in vaccine development, there is a reason for optimism that at least one (if not more) of these programs will cross the finish line. From a societal standpoint, we have seen an impressive wartime response from governments, manufacturers and philanthropists, who have collaborated to ready at-scale manufacturing capacity for a multiple of these candidates so time-to-market can be sped up once we know which program is successful. The key milestone to watch here would be the release of phase 3 clinical trial data for the most promising programmes, which is expected starting October or November. If everything goes to plan, there is a good chance we will have one or more vaccines available for widespread distribution in the first half of 2021.
Here’s the rub though. We don’t yet know if these vaccines will offer durable or effective immunity. Most of the vaccines we are familiar with, like the one for measles, provide lifelong immunity from those diseases to most of the people who take them. Contrast that with a seasonal flu shot which is something that needs to be updated annually given how much the influenza virus mutates. Or the CanSino Covid vaccine authorised for use on the Chinese military which appears to generate immunity for only about half of the people who take it. We won’t know for months to come where Covid-19 vaccines would sit on that spectrum of the durability of immunity; there is a non-trivial probability that these vaccines may be like the seasonal flu shot needing updates at some periodic interval. On effectiveness, US regulators have indicated that given the exceptional circumstances, they may live with a vaccine that is 70-75% effective but meets safety standards.
Returning to our earlier question, when might stage 2 (managing the virus) finish or stage 3 (conquest of the virus) begin? Piecing together all of the above, we can paint two scenarios. Let us call the first the Great Vaccine scenario, where a vaccine with desired durability and effectiveness arrives. A comprehensive global health effort is then mounted to get enough people inoculated in every geography, which combined with those who’ve already contracted the disease and survived, gets us past the herd immunity threshold. In that instance, it is not inconceivable that the virus just peters out and disappears much like SARS 2003 did (thanks to effective transmission control in East Asia), or the Spanish Flu did in summer 1919 (there is an indication that herd immunity might have been achieved in countries like the US in that case).
Absent a great vaccine scenario, it may well be that we are in for what can be called a protracted Covid scenario, given a less durable vaccine might mean having to manage mass inoculations every few months. Stage 3 (conquest of the virus) becomes more of a medium-term (or long-term) target, and we live in a prolonged stage 2 (managing the virus) world, where herd immunity remains transient or distant. No doubt, having even a flu shot like a vaccine would be a massive addition to the public health arsenal and will go a long way in making this stage 2 existence more palatable. But a flu shot like vaccine may not be sufficient for us to entirely do away with all the other elements of stage 2, viz preventive, containment and capacity management strategies. In substance, Covid-19 and the global approach to it may start to look and feel more like a modern-day rendition of tuberculosis (TB) outbreaks the world saw during the late 19th and early 20th century. The war against TB was gradual, and much of the victory was driven by public health measures like containment, sanitation and nutrition because effective cures and vaccines did not arrive in time. These measures brought down the TB mortality rate from ~0.3% to ~0.06% over a hundred years, before the arrival of a cure, which then further reduced it to ~0.02%.
No one knows the probability today of either scenario—Great Vaccine or Protracted Covid—materialising in the future. All of us are united in the hope for a Great Vaccine. But as they say, hope is not a strategy. Prudence demands that decision-makers of all hues have actionable and cost-effective plans to achieve resilience even in the face of a Protracted Covid.
PS: In the next part of this series, we will outline the changes impacting us and how businesses are reacting to a potentially Protracted Covid.
(First of a two-part series)
The authors are Managing Partners at Airavat Capital. Views are personal