The Real Obstacles to Treating AIDS, Malaria, and Tuberculosis in Developing Countries

May 12, 2004

Unedited transcript prepared from a tape recording

Proceedings:
MR. GLASSMAN:  Welcome to the American Enterprise Institute and our conference on the real obstacles to treating AIDS, malaria, and tuberculosis in developing countries.  My name is Jim Glassman.  I'm a resident fellow here at AEI and host of the Web site techcentralstation.com.

The title of our conference suggests that the true obstacles for treating these pandemics, which kill millions each year, are not the obstacles, or the obstacle, often portrayed in the press and by activist groups.  That obstacle is said to be the high cost of patented drugs developed by companies, usually called innovators or research pharmaceutical companies.  Now, this is a simple story, and the press and political activists are fond of telling it, but it is not the right story.

Lately the press and activists have been highly critical of the decision by the Bush administration to deny the use of U.S. government funds for antiretroviral copy drugs for HIV/AIDS delivered in fixed-dose combinations, or FDCs.  For example, the Boston Globe asked the U.S. government "to relent in its opposition to generics," since they "cost far less than brand name drugs."  The Washington Post criticized the administration for its reluctance to use "unpatented generic medicines made by foreigners."  The Post also stated that "brand name drugs in most cases are about three times the price of generics."

This conference will examine these criticisms and raise the question of whether the lack of access to drugs is the only or even the most important obstacle to treatment for AIDS and other pandemic diseases.

I can tell you that on my trip to Africa in a delegation last December under Secretary of HHS Tommy Thompson, I came away believing that infrastructure, not medicines, was the main obstacle to health in Africa.  In most cases, there simply is no infrastructure.  There is not merely a lack of hospitals, doctors, and nurses, but a lack of roads, of communication systems, and of education.

On the specific question of copy drugs, we are fortunate to have timed this conference as we have.  Two very important studies have now been released on this issue.  These studies, as well as a previous article in JAMA, are available outside.

In the new issue of Health Affairs, out just a week ago, Amir Attaran has written an article titled, "How do patents and economic policies affect access to essential medicines in developing countries?"  Mr. Attaran, a fellow of the Royal Institute of International Affairs, from whom you will hear shortly, concludes that "poverty, not patent policies, more often inhibits access to essential medicines in the developing world."  In an extensive study, he found that, quote, in 65 low- and middle-income countries where 4 billion people live, patenting is rare for 319 products on the World Health Organization's model list of essential medicines.  Only 17 essential medicines are patentable, although not actually patented.  So the overall patent incidence is 1.4 percent and concentrated in larger markets.  This is not the impression we get from the media and from groups and politicians who often try to exploit a dire situation.

The second study is a Hudson Institute white paper issued just yesterday--Carol Adelman, Jeremiah Norris, and S. Jean Weicher.  This study is titled "Myths and realities on prices of AIDS drugs used by the Medecins Sans Frontieres pricing guide for the poorest countries," and came to the conclusion that single-dose ARV patented drugs are actually cheaper than their copy-drug counterparts.  For example, the average price per person per year of 13 ARV drugs compared was $404 for patented drugs and at least $494 for their copied counterpart.  In fact, only one copy drug was significantly cheaper, but that drug is offered by its German innovator firm for free for developing countries for use in mother-to-child transmission prevention programs.  And Dr. Carol Adelman, who's a coauthor of the Hudson study will speak on our second panel this morning.

So why is it that the Associated Press can report that pills produced by generic manufacturers are considerably cheaper than the patented equivalent?  In fact, the Hudson Study showed that it is patented drugs that are cheaper.  And as Attaran's study shows, the issue of innovator versus copy drugs is not particularly relevant in most cases anyway.

The issue of FDCs is a little trickier.  No regulatory agency in charge of approving drugs in any developed nation has approved the three drug fixed-dose combinations, such as Cipla's trimune, which has been proposed practically as a panacea for HIV/AIDS in Africa.  Putting three drugs together creates a different medicine entirely, and the consequences of misuse could be dire, namely, the creation of resistant strains that are either untreatable by the medicines we have today or treatable at a far higher cost.

At a conference in Botswana, African health officials themselves insisted that FDCs used in their countries be held to the same standard as drugs used in developed countries.  Africans, quite properly, do not want to be treated as guinea pigs or held hostage to political considerations.

We have heard over and over again about FDCs that cost $140 per patient.  This is a promotion of the Clinton Foundation and it is, at this point, a fantasy.  More typical is the average copy price found by the Hudson Study of about twice that figure or more.

We can only wonder about the Clinton Foundation's true motives here.  It was unclear yesterday, the New York Times reported on April 6th, "whether the ambitious plan would be realized."  And that is an understatement.  In fact, it is politics that's driving much of the discussion about treatment for pandemic diseases in the developing world, and that is a shame.  We hope that today's conference can set things right to some extent.

The Bush administration says Doctors Without Borders "is more interested in protecting the interests of the pharmaceutical industry than it is in expanding treatment."  That is, on the evidence that I have seen, flatly untrue.

A year ago, President Bush committed $15 billion to Africa and the Caribbean to fight AIDS, malaria, and TB.  This year, the United States will spend, according to Randall Tobias, who heads the president's emergency plan for AIDS relief, approximately twice as much internationally as all other donor governments combined.  But this commitment sticks in the craw of activists who do not like the president--or Americans, in some cases--and do not want him to be seen as a compassionate conservative.  Or perhaps some people are just misinformed.  And we aim to help today.

Secretary of State Colin Powell told Haitians last month that AIDS is the greatest weapon of mass destruction on earth today.  He is right.  But only if we can consider the facts about that disease, as well as malaria and TB, can we determine the true obstacles to treatment and eradication.  And that is our charge here.

Just a word about the conference.  Roger Bate will moderate the first panel, which will conclude about 10:45.  I will moderate the second panel, which will end at noon.

Roger Bate is a visiting fellow here at AEI, where his focus includes endemic diseases in the developing countries.  He's also a member of the board of Africa Fighting Malaria and a former director of the environmental unit at the Institute of Economic Affairs in London.  He has a Ph.D. in economics from Cambridge University.

Roger Bate.
Panel I:  What's the problem--patents, prices, innovation, or infrastructure?

MR. BATE:  Thank you very much, Jim.  I will introduce the speakers from this chair so that we can move swiftly and you can get as much time as possible from their talks.

Thank you, Jim, for that great introduction to the topic.  I think that we will have some very interesting discussions today.  Thank you all very much--I'd like to add my welcome--thank you very much for coming here this morning.

As Jim has said, there are numerous reasons why people don't receive treatment for their ailments, and especially the poor people in the poorest regions of the world receiving treatment for their diseases.  Sometimes treatment is not warranted, or at least is not the most sensible intervention given budgetary constraints, and I'm sure we'll hear about this from one or two of the speakers today.  On other occasions there's simply a lack of infrastructure, as Jim mentioned, to deliver treatment, and sometimes the treatment itself is unaffordable.  This may be due to a variety of reasons--patents, it may be due to naturally high prices of drugs, and sometimes it's due to the policies of the countries that are importing those drugs.  Ethiopia and Congo, for example, have 30 percent import tariffs on all pharmaceuticals, or at least on most pharmaceuticals.  So sometimes the countries are not helping themselves.

Our speakers today will tease out the reasons for the lack of treatment and treatment priorities and their relative importance.  I'll introduce them before they speak.  They're a slightly different order from that in the program.  We're going to down the line from Amir, Don, Nick, and then Richard.

Our first speaker is Amir Attaran.  Dr. Attaran is a fellow, as already mentioned, of the Royal Institute of International Affairs, where he focuses on international health issues.  He's an immunologist and lawyer, and has researched and taught at some of the best universities in the world, including Oxford, Yale, and Harvard.  He has published widely on the issue of patents prices and poverty, and has worked with as diverse a group of people as Doctors Without Borders, Sierra Legal Defense, Ralph Nader, and, most recently, helping the drug company Novartis.  He is always to be found in the thick of the action.

Amir, I'm going to hand it over to you now.  Thanks.

MR. ATTARAN:  I'm going to be giving my talk while standing because I can't do slides sitting.  So bear with me as I take the next 15 minutes or so to walk you through two stories about global public health, access to medicines.

[Problems with microphone.]

MR. ATTARAN:  I'm going to take you through two recent studies that I published this year which bear to some extent on this question of why poor people don't get the medicines they need.  None of the answers I'm going to give you are particularly intuitive.  None of them can or should be used in the ways that Jim has alluded to.  This is not data that I generated to polarize a policy debate among elites, on the left as well as on the right.  And so I offer that as a caveat before I lead you through the findings of these studies.

The question to both is why certain medicines that are highly essential to human health are not available in the world's poorest countries, by and large what we call the low-income countries, where 2.4 billion people live and where the per capita income is $760 a year or less--that is to say, about $2 per day per person of wealth generated in the economy.  Two and a half billion people live in those conditions.  They're very sick, for the most part.  And they're able to be helped if only medicines that they would need would reach them.

Now, Jim has mentioned that patents are sometimes thought of as a barrier.  Sometimes the are; usually they are not.  Anyone who takes this data and says patents are never a problem will be misinterpreting the data that I'm about to present.  But I'm going to try and give you a proportional view on how much of a problem they can be.

What we did in the Health Affairs study just shown is we scrutinized the patent status of what the World Health Organization terms "essential medicines."  That is a term of art.  Essential medicines are medicines chosen by an expert committee on an annual basis because these medicines are particularly effective against diseases of developing countries and the treatment of those diseases is cost-effective.  Not that the medicine itself is cost-effective, but that the treatment is cost-effective.  And therefore you can have, in fact, a very expensive medicine, like the antiretrovirals for AIDS, being placed on the list.  The medicine itself seems ghastly in price, but the treatment itself, for AIDS, is cost-effective.

When the expert committee makes the selection of the WHO essential medicine list, it does so utterly blind to two considerations.  It's agnostic about them.  It's agnostic as to whether the medicine is patented and--perhaps you can't read this, but the expert committee itself says "patent status of a medicine is not considered--and the expert committee also says that the absolute cost of treatment is not relevant, it's the cost-effectiveness, as I said.  There it is:  The absolute cost of a treatment is not a reason to exclude a medicine from the essential medicine list.

So the committee is purposefully blind as to patent status.  It's purposefully blind as to the cost of the medicine.  It's even purposefully blind as to the cost of the treatment.  All they care about is the cost-effectiveness of the treatment.  And let the medicine be patented, let it be expensive, that's fine with them.  So there is no bias in the selection of this list against costly or against patented medicines.

There about 300 medicines currently on the list, 319 to be in fact.  Some of them aren't really medicines--condoms and oxygen, for instance, are on the list--but they serve a public health need, for obvious reasons.  Of those 319 products, our first finding was that very few of them are even recent enough to be patentable, although this list is updated on an annual basis.  Only 17 currently are patented anywhere in the world.

They are, for the most part, the AIDS medicines, and I believe it's 13 of them are in fact HIV/AIDS medicines listed here by their scientific acronyms.  There are two antibiotics, Cipro and Zithromax, a zithromycin and ciprofloxacin; an antifungal; and two antiparasitics, both malaria medicines, mefloquine and artemether/lumefantrine, in fixed-dose combination.

If you look at those 319 medicines and cut out the oxygen, cut out the condoms, cut out the injectable water and things which just basically aren't medicines, you're left with 291 medicines, true medicines.  You can then query, as we did, how often those 291 are patented in 65 countries.  It's a comparison of about 19,000 data points.  We had to scrutinize 19,000 patent conditions for this study.  And what we found is that, in those 19,000 cases of a given medicine in a given country, a patent exists 1.4 percent of the time--which is rather little.

That is not to say they're uniformly distributed at all.  It is the bigger countries or the more economically significant markets that most often have the patents. And that is a statistically significant difference--if you do an ANOVA on this, you get a statistically significant difference there.  So in fact, it's the middle-income country s that have the greatest number of patents, or the big economies--South Africa, Brazil, Mexico, countries like that.  Burkina Faso, Senegal, Chad, Malawi are not very likely to have patents, although they do in some cases.

This situation is unlikely to change much in the future, even though the list is updated on an annual basis.  There will be flux as some medicines go off patent and new medicines are added to the list.  There will always be some medicines expiring and new ones being added. You will never see a day when there are, say, 100 patented essential medicines, no way.  Two years ago it was 19 patented essential medicines, then last year it was 17.  Next year it could be 20.  But it's never going to be 50, it's never going to be 100.

Another interesting finding of the study has been that in fact the transition that is feared and talked about greatly for the year 2016, when TRIPS obliges the least-developed countries to introduce patents for pharmaceuticals--the 49 least-developed countries in the world, that is a watershed that, surprisingly, has actually for the most part already passed, although unnoticed.  Of the 30 least-developed countries in Africa that we studied, 28, we confirmed, already had the possibility of pharmaceutical patenting.  So if there is some great looming watershed out there in 2016, when the least-developed countries will introduce pharmaceutical patents, it does seem to, actually, largely pass by unnoticed.

There is a risk, as others have pointed out and as I agree with, that the availability of patents in countries that do a large amount of pharmaceutical manufacturing, like India, could impact the availability of generic medicines in other developing countries.  Things like the Doha Declaration were put in place to contend with that.  There are also discounts and licenses available from companies.  There are mitigating strategies.  But that is a legitimate concern.  It is frequently raised as an objection to the study.  I wouldn't say it's an objection at all, because we've acknowledged in the study ourselves, but it is something that is a legitimate answer to the data that are presented.

The data do, however, say something about the policy debate that I do not wish to let pass.  And it is simply this:  Among many of you in the audience, some will be from activist groups, some will be from the pharmaceutical industry.  Let me put this bluntly.  You've both been wrong.  Both been wrong.  About equally wrong.  And the reason is that there has been a polarization of the debate between the anti-patent camp and the pro-patent camp.  Regardless of which camp you belong to, you're emphasizing the role of patents.  And the role of patents here is rather minimal.  And so sweeping statements that have been made have been wrong.

When activists have said patents are a barrier in many developing countries to accessing medicines, that's wrong.  They exist 1.4 percent of the time.  When the industry has said patents are necessary to protect intellectual property rights on an global scale, that's wrong.  Absolutely wrong.  Because in many, say, least-developed countries, the option to patent has been there for years or decades and it wasn't even exercised.  The companies decided to forego the option in, we found, about 70 percent of the time.  Where we confirmed that a country had a patent law that could have been used for a given medicine, it wasn't used.

So in fact both sides here--pardon my bluntness--have been, to some extent, talking nonsense.  And there is a middle ground that needs to be found, which I think is unfortunately evasive because it's having the effect of prolonging a debate that needn't be prolonged.  This can be quickly done away with.

And this is my suggestion, and it's actually a greater challenge to the pharmaceutical industry than it is to the activists.  There are 17 essential medicines that are patented.  It is a small number.  It is, to me, quite disappointing that, years into this debate, there is not an industry-wide standard best practice to deal with all of those 17.  Each company has its own discounting scheme.  Some companies license, some don't.  Some include certain countries, others don't.  It's a hodge-podge.  It's a mess.  It's unfortunate, it's unnecessary.  It could be done better.  And when there are only 17 medicines that are essentially underpinning this entire debate, it does make me lose heart that the debate hasn't been solved sooner, to be honest.

 To put it in terms that might be more familiar, some time ago Ariel Sharon woke up and realized I have a war on my hands and there are 7,500 settlers sitting in the Gaza Strip.  Why do I have a war over 7500 people?  And we rethought it.  Now, we don't know what will happen with that sort of thinking, but it was out of the box thinking for somebody in a leadership position, to realize the relatively minor number of exceptions to a rule were underpinning a giant debate.

The same is true here.  Seventeen medicines.  I am not impressed thus far with what has been done with those 17 on a uniform basis.  Better efforts can be made, and I hope are made.

There is one area where, however, as I think Jim accurately pointed out, the debate is more complicated, and that has to do with the fixed-dose combinations.  I am worried about these.  This is an area where I absolutely believe that patents can and in fact are imposing a barrier, to be blunt about it.  Why?  Because to make fixed-dose combinations or co-packages of medicines, you need the consent of at least three companies to do so for HIV/AIDS, in most cases.  The existing fixed-dose combination that has generated so much controversy--from Ranbaxi, from Cipla, et cetera--is a combination of medicines from three different companies.  One of them is hardly patented at all in the developing world, but the other two are.

The barrier arises because unless these three companies agree to a sort of collaboration, they themselves could not do what the Indians have done and co-formulate their products into a single pill.  This is, to be quite honest about it, perhaps embarrassing, and deserves to be.  We're talking minor pharmaceutical companies in India with the market capitalization of a few hundred million dollars having just beaten multibillion-dollar companies to the post on an important invention.  That's a problem.

It would be nice to see the industry not simply try to match this effort, but to use its superior technology and innovative ability to make the next generation of fixed-dose combinations or co-packaged medicines.  I think it can safely be said the pharmaceutical industry has lost round one of this struggle.  It cannot be said that the pharmaceutical industry is irrelevant--its technologies are tremendously vital to global public health.  But I have not seen it deploy all the energy it can, or should, in the direction of making simplified AIDS treatment available.  To be honest about it, that does need to be done and it needs to be done very soon.  I'm gravely concerned about the situation.

I'll skip over this, but it just shows you very quickly that where treatment simplification is employed and adherence to therapy rises, you in fact get better cure rates for HIV/AIDS.  That's a long discussion.  That's an hour seminar itself.

Short of co-formulation, co-blister-packaging of medicines could be done.  This is a joint project of WHO and Novartis and the Nippon Foundation combining four medicines into a single blister pack, with daily dosing instructions, for the treatment of multibacillary tuberculosis.  Why isn't this done for AIDS?  I think every company making HIV medicines right now has really missed the boat in not doing this yet.  It is a critical health need.

I'm going to change gears now in my last about three or four minutes, talk about the second story that I came to tell you about.  It has to do with malaria. It has to do with the poverty side rather than the patent side of this issue.

In 1998, the WHO announced that it would roll back malaria by the year 2010, meaning that it would halve the number of malaria deaths in the world.  That would have taken malaria on this course, shown on the dotted line.  In fact, malaria deaths and disability have increased since then.  The program is a total, abysmal, egregious failure.  If it sounds like the 3 by 5 Initiative, no comment.  A goal was set, and it's being missed.  Progress has been in the opposite direction.  Regress with respect to this, and it's killing millions of children.

Why?  It is because the best available technologies are not being used.  In South Africa, where they are being used--no thanks to WHO; WHO opposed South Africa's technology strategies--the government decided to introduce DDT and a new sort of malaria medicine called an artemisinin combination therapy.  It's a revolutionary sort of medicine.  It's by far the best malaria treatment there is in the world today.  And you can see from these monthly malaria data that, when DDT was reintroduced, there was a drop in malaria cases; and when ACT was introduced, at this point, that really tidied it up. South Africa virtually had no malaria after that.  Richard Tren can talk about this better than I can.

Well, I and many other scientists waited for years for the WHO and the Global Fund to act on these data.  They didn't.  So in January, we published a paper in The Lancet with this title:  WHO, the Global Fund, and Medical Malpractice in Malaria Treatment.  Got their attention.  It made all the major newspapers, New York Times, Wall Street Journal.  Kofi Annan literally was on the phone to the head of WHO about this, fuming.  And since then, they've actually started listening, God forbid, to science for a change.

What they had been doing up until that point was approving the use of old medicines, known as chloroquine and SP, in countries where they don't work.  In Ethiopia, chloroquine fails to treat the patient 88 percent of the time, on average.  And yet, until a few months ago, the Global Fund was happily paying Ethiopia to purchase chloroquine, a medicine that fails to treat the patient 88 percent of the time.  Thanks.  That's wasted money and it's wasted lives.

Well, we've begun to move this--and it's a longer story than I can get into--but essentially the Global Fund and WHO have agreed on some progress.  It is not yet public, but in a meeting two Sundays ago--yes, on a Sunday we got the U.N. to meet--they've agreed to provisionally reprogram their funding towards combination therapy for about 25 African countries.  This is 24 more than they were supporting in January.  Big change.  Pressure works.

Many of you in this audience are well connected.  Malaria kills a million children a year.  Nineteen out of 20 children will live in Africa through malaria, they'll survive.  Many will be brain damaged, many will have their growth retarded.  One in 20 will die.

The point is that we can do something about this disease.  Combination therapy for malaria, ACT, costs $1 a treatment and it's not being bought.  And that's why all these kids are dying.  A treatment costing $1 is not being bought.  And it's available as a generic, it's available at no profit from a brand-name company. It's not a patent issue, it's a money issue.  And if you want to ask who there is to blame--and for those of you who are well connected who would like to work with me on changing this, we can literally save a few hundred thousand children next year if we change the behavior of three agencies to pay a dollar for a child's life.

The agencies that are most shameful right now?  Top of my list is USAID, and we need pressure in Congress to fix them.  They have a $65 million malaria budget.  They have confirmed to me in writing that their total expenditure on malaria medicines of any sort is zero dollars and zero cents.  What are they doing with the $65 million malaria budget if not actually treating the disease, I'd like to know.  That they haven't told us.

UNICEF, the world's leading child survival agency.  Well, malaria's the number one killer of children in Africa.  You might expect them to spend some money on it.  Leading child survival agency, leading killer of children--hey.  Their total expenditure on malaria treatment worldwide last year:  $3.7 million, only $1 million of which was for combination therapy.  We could literally do good for malaria by auctioning off the UNICEF headquarters in Manhattan, sacking the staff, and putting the budget toward purchasing malaria medicines.  That would do more good than maintaining the agency.  I know that's sounds inflammatory to say, but it is a fact literally true.

The World Bank has promised $300- to $500 million on an annual basis for malaria.  They will not disclose how much they actually spend.  In a study I published last year in the Malaria Journal, which was picked up in The Economist, I estimated it at $40 million.  They refused to confirm or deny whether I was accurate.  We've asked them since how much they spend on purchasing ACT for malaria treatment.  They will not answer.  They refuse.

There's no transparency in these agencies.  Let me be blunt.  These three agencies are responsible for killing hundreds of thousands of kids a year who they could save.  I'm throwing down the gauntlet, I'm begging for your help.  Any of you who are connected to Congress, who are connected to opinion leaders, please help me go after these three.  As a result of the progress we made with The Lancet paper pressuring the Global Fund and WHO, we have had--our epidemiologists estimate that up to 100,000 lives will be saved next year alone, just in the countries that they affect.  We could save a few more hundred thousand.  Please help.

That's all I have to say, except I want to end with this final note.  I've talked about two contentious debates here.  The patents debate, the financing debate, the role of the industry, the misstatements that have come from activists--the whole thing.  I'm very lucky to stand here and to be healthy and to be able to say these things, and you're very lucky to be sitting there and to be healthy to hear these things.  The kids who really need the help, like this girl in Burkina Faso, who I met, do not know a damn about the debates we are having.  They just don't know.  It's not their world.  Let's get off the debates.  There are simple things we can do to help.  Please.  And let's move toward real political action, an activism of a better-informed sort, to change what is wrong right now.

That is my e-mail address.  I will be very happy to hear from any of you. I have no higher priority than to affect these problems.  Thank you.

[Applause.]

MR. BATE:  Thank you, Amir.  We will take questions at the end of all the speeches.

Next we'll hear from Donald Roberts.  Professor Roberts is a senior researcher, a professor at the Uniformed Services University of the Health Sciences in Bethesda.  The military, until recently, spent more money combatting tropical diseases than anyone else, so he has a research and publications record second to none. He's one of America's leading medical entomologists and is a specialist in Latin America, where I'm sure we'll hear some stories about what works and what doesn't work in Latin America.  He's the bug expert that the Virginia, D.C., and Maryland governments come to when they have a West Nile, malaria, or insect-borne problem, and is, as I said, one of the world specialists on tropical diseases, especially those spread by mosquitoes.

So without further ado, Don.

MR. ROBERTS:  Thanks.  I promised Roger that I would keep my comments brief and to the point.

Like Amir, I have passed the last 20-some years wondering when our malaria control specialists with WHO and other agencies around the world would do something to straighten out the mess that has been created in malaria control in countries around the world.  I was very slow to come to the realization that the reason that our malaria control specialists, and there are many, have had little influence on what's happening and what's being done for control of malaria is that they have been pushed aside.  And they have been pushed aside by the environmental movement.  And it's my opinion--and this is just opinion--it is my opinion that the environmental movement is in complete control today of what is taking place in malaria control around the world.

One of these environmental groups that you can access very easily on the Internet is the International POPs Elimination Network.  The World Health Organization, UNICEF, World Bank, USAID are organizations that are strongly influenced, perhaps even controlled, by environmental considerations.  And we have now added to that another organization coming out of the Stockholm Agreement, is the Global Environmental Fund, which is described as the agency that is now responsible for funding countries to move away from the use of DDT for malaria control.  And you saw from Amir's slide how effective DDT was in South Africa.  There's a long history of the effectiveness of this chemical for control of malaria.  I don't need, really, to go into that.  It's a very effective--very effective--insecticide, and we have no replacement.  But there are many blocks now to the use of this chemical.

What I would like to do is emphasize here in contrast to what Amir has talked about, the need for the available of drugs.  In the case of malaria, there are situations where the availability of drugs can be a problem.  And I'm going to focus on the Global Environment Facility's program in Central America to reduce the reliance on the use of insecticides for malaria control.   Keep in mind that malaria is transmitted by mosquitoes to humans.  It's a parasitic disease.  And there are complex interactions between human behavior, the parasite, and the mosquito, and the use of insecticides breaks the connection between the mosquito and the humans.  That is the way that we use insecticides.  It is a preventive measure.

Since 1979 the emphasis for malaria control has been on the use of drugs.  It's called case detection and immediate treatment.  That's the World Health Organization's policy, de-emphasizing prevention.  So in the case of Central America and the Global Environment Facility's program, they have been working with seven countries in Central America to reduce the use of insecticides.  How do you control malaria if you cannot use insecticides?  Well, there is such a thing as integrated vector management.  Basically that is fantasy when it comes down to malaria control because malaria is a rural disease and there are not many options for controlling the contact between humans and mosquitoes if you do not use insecticides.

So in the absence of insecticides, the first line of defense against malaria is the use of drugs.  And so through this emphasis on reducing reliance on the use of insecticides in seven countries of Central America, they have increased the distribution of drugs by 682 percent since 1991.  And that translates into an average number of curative treatments per diagnosed case in 1991 of 17.2 complete treatments for each diagnosed case.  In 2002 these countries distributed on average 117 complete treatments for each diagnosed case.  This is referred to as pharmaco-suppression.  So you're using drugs as your primary defense against malaria.  And "primary" means a control of the disease.

The statistics for these countries look pretty good. They're rather impressive. They have reduced the amount of malaria in those seven countries by 63 percent.  The malaria control specialists have very little role in this.  And the reason I can say that with some confidence is that we learned 50 years ago that you do not carry out programs of mass drug distribution for control of malaria.  And the reason is very simple.  As soon as you do that, you start exerting pressure for drug resistance in the malaria parasites.

Central American countries have been blessed because, until now, there have been no problems with resistance.  So they have been able to use one of the cheapest drugs in existence--that's chloroquine--for treating their cases of malaria, which are primarily cases of vivax malaria.  And when we discovered that they had started to use pharmaco-suppression, as opposed to the use of insecticides, the predictions were clear:  This is going to lead to resistance, and their problems are going to grow worse.  And we have now documented--it's not my program, but the CDC program has documented the appearance of chloroquine resistance in Guatemala.  And that's probably the tip of the iceberg.  So we are now seeing from 10 to 29 percent of all cases in Guatemala not responding clinically to the treatment of their cases with chloroquine.

So it's already started.  It's underway.  What does that mean for us?  What it means for us is that with pharmaco-suppression, just the distribution of drugs into the environment, to the people that are being affected, they will take the drug because it's readily available, they'll take the drug until they are feeling all right.  They'll stop.  Next time the symptoms recur, they take the drug till they feel better.  This leads to immunity to the parasite, and it leads to something else--asymptomatic carriers of malaria parasites.  That can affect us because it will increase the frequency of infected people in the environment in the Central American countries, these individuals come to the United States.  And let me give you some statistics that suggest that we are already experiencing problems from this.

Since 1958 there have been six outbreaks of [inaudible] malaria--that means locally acquired malaria--three or more cases in the United States, six outbreaks.  That's since 1958.  Four of those outbreaks have occurred in the last 10 years.  Two of the outbreaks have occurred in the last two years.  So there are reasons to believe that the risks for the United States are in fact growing.  And if you trace the details of what's going on in Central America, you'll understand.

[Change tape.]

MR. ROBERTS:  --reliance on the use of insecticides in these countries, you replace with mass drug distribution programs to control the disease are in fact leading to increased risk of introduced malaria in the United States.

Thank you.

[Applause.]

MR. BATE:  Thank you, Don, for that interesting take on some of the problems in treatment.

Our next speaker is AEI's Nick Eberstadt.  Dr. Eberstadt holds the Henry Wendt Chair in Political Economy at AEI.  Formerly a leading demographer at Harvard University, he's currently a member of the Visiting Committee for the Harvard School of Public Health.  He's consulted and advised numerous influential bodies, including one that's been attacked liberally this morning, the U.S. Agency for International Development, and he's published hundreds of scholarly and popular articles on the development issues.  His article on AIDS in China, India, and Russia in Foreign Affairs last year helped to open up the debate on the problem of AIDS in those countries.

Nick, over to you.

MR. EBERSTADT:  Roger, thank you very much.  My assignment here this morning, I think, is to spend a little bit of time talking about the HIV situation in Eurasia.  And I'll try to spend about a minute for each million infections in the area.

Of course, I don't know how many infections there are at the moment in Eurasia.  Nobody else knows how many infections there are in Eurasia.  God knows.  But there's no surveillance system uniformly in place to provide us humans with more reliable information about this.  In the interest of brevity, I think I'll touch on three major emerging HIV countries in Eurasia--India, China, and the Russian Federation.

Well, again, how many people are living with HIV in India?  The Indian government plays a kind of an interesting game, as best I can tell.  And the way the game goes is like this:  Tell me how many people are said to be living in South Africa with HIV, and we'll say a number that's a little bit less.  We'll be second, we won't be first.  And this sort of a game has gone on for some period of time, I think, and so the official numbers suggest that there are just slightly fewer people in India than in South Africa living with HIV, about 5 million.

That's probably not a good approach to epidemiology.  Nor is the Indian government's plan, which envisions a zero rate of new infections in the year 2007.  I mean, that's fantasy.  So that's not good.

What is promising is that the Gates Foundation has committed substantial resources to HIV prevention.  In the infelicitous phrase, they're going to partner with India.  And that is probably good, because I think one of the seriously good people working in this area, Helene Gayle, a colleague of Phil Nieburg's back there from CDC, is intimately involved in the HIV strategy of Gates.  So that may be promising.

What about China?  Well, China looks like a fantastic success story, because the Chinese government just announced last month that a total of 697 people, only 697 people, had died of all causes, all communicable diseases, in the first quarter of that year.  A country of 1.2 billion people.  That really sounds awfully good, doesn't it?  Of course, in Nigeria, where the health minister may be a little bit more forthcoming, the ministry of health has just estimated that Nigeria's cumulative death total from HIV is 2.3 million.  So we've got a few extra decimal points between friends, looking at the situation.

Why does the Chinese government come up with this wonderfully happy calculation?  Well, one reason is because the Chinese government doesn't test people on a routine basis.  Just a few weeks ago the Chinese government took what for it is a big step.  It said they will pay for AIDS testing in what they believe to be the worst afflicted areas.  So maybe we'll have a little bit better impression of the nature of the problem, the scope of the problem soon.

One of the unique and heart-rending aspects of HIV epidemiology in China is the transmission of HIV through plasma sale, through blood sales.  And I'm sure that many of you know this story.  In the 1990s in particular, the Chinese government, depending upon whom one listens to, either tolerated or positively encourage people in poor areas to sell blood to help make a living and pay for the health services in those areas.  And now in these poor parts of China there are God only knows how many people who are living with HIV as a result of infection through blood sales.

Until fairly recently, the Chinese government would arrest people, activists in China, for talking about this and would close down their Web sites.  You can censor people; you cannot censor an epidemic.  I'm happy to see that just a few days ago, in the South China Morning Post, there was the beginning of, really, a piteous series on the plight of these people with HIV from blood sales in China.  Why am I especially happy about that?  Even though the South China Morning Post is in Hong Kong, in free and democratic and vibrant Hong Kong, the South China Morning Post has increasingly become a kind of a lap dog paper for the Chinese government, for Beijing.  And this series would not be in there if the editors of the South China Morning Post thought they were daring to offend leadership in China.  So that's actually, in a Kremlinological sort of way, a kind of a hopeful sign.

There are other indications the Chinese may be beginning to think of HIV as an economic problem.  I submit to you that the Chinese government will not embrace, will not join the battle until they see this as an economic threat.  As long as it is a humanitarian threat, any number of people in addition to those 697 can die.

Finally, let's talk for a moment about Russia.  Russia is a story with good news and bad news, except I haven't been able to find the good news.  The Russian government estimates that a cumulative total of 300,000 people have been infected with HIV since the 1980s.  This is a pre-scientific registration system that they maintained in the post-Soviet era, and the only question there is what sort of multiple of this number one wishes to use.  And there are many different intuitive multiples that different people operate with.

Let's skip a couple of other things about what's going on in Russia today. I suppose what we should note is there's, as far as I can tell, an almost complete disinterest on the part of the government in dealing with HIV.  Brazil, for example, a country about the same size as Russia, has a unit in its ministry of public health of, I think, about 300 people, dealing with this.  The Russian Ministry of Health has a unit of five people, and two of them are not--that's for all STDs--and two of those people don't deal with HIV.  The Russian approach is let the foreigners pay for it, and so far that hasn't worked terribly well.

Any number of people you talk to in Russia about HIV will give you a speech that begins, "You must understand that our country is not Africa."  And of course that's true.  But there are a couple of similarities that I find somewhat unsettling.  First is that, like some parts of Subsaharan Africa, Russia's life expectancy today is no higher than it was 40 years ago.  That's kind of a neat trick.  And it doesn't--in this case, it doesn't yet involve the real bursting of the HIV storm.  But that's one way that the Russian Federation kind of is like a lot of places in Subsaharan Africa, and it should make one think about why this could be in an industrialized, literate society.

The other way in which the Russian Federation increasingly seems to be looking like parts of Subsaharan Africa has to with sexually transmitted curable infections.  As you may know, Subsaharan Africa appears to be the STI capital of the universe.  And this is not unrelated to the transmission of HIV in large parts of Subsaharan Africa.  What one is hearing now episodically in Russia, because this is not being tracked systematically, what one hears now anecdotally is absolutely astonishing prevalence levels for STIs in parts of Russia.  I'll give you just one or two examples.

In St. Petersburg last year, I talked with a number of M.D.s who work in polyclinics in that very beautiful city.  And they reported that in pretty representative parts of town, over a quarter of the young women that they treated had one or more STIs--over a quarter.  That's high.

In a journal that Yale Medical School puts out, in an article that came out last year, just for the heck of it Russian medical students who were in the cooperation program with the Yalies were asked about their STI situation, their own personal STI situation.  And of the couple of hundred people canvassed, the prevalence level turned out to be 16 percent.  That's very high for medical students.

What this suggests as a sort of a leading indicator is that a problem may be under way in Russia which even some of the outsiders who are actually paying attention to this haven't fully grappled with yet.

And what I would say in conclusion is that from China and India and Russia, just looking at those cases, the real obstacle to the battle against HIV is government commitment.

Thank you.

MR. BATE:  Nick, before you move on, I read an article, I think it was a couple of weeks ago, that said that whatever number of cases of HIV in India that there are, whether it's 2 million, 3 million, 5 million, however many million, there's something like 17,000 people being treated.  I wonder if you could comment on the accuracy of that statement.  And if you could give any indication of the level of treatment in Russia and China.

MR. EBERSTADT:  I don't know if that number of 17,000 is accurate, Roger, but we're talking about low thousands.  I mean, as a general measure, that's certainly in the right area.

The Chinese government is aspiring to treat eventually as many as 80,000 people.  And the Russian government is happy to announce that everybody who wants HIV treatment in Russia is receiving it.  And I think that, in their calculation, amounts to about 3,000 people.

MR. BATE:  No doubt we'll come back to this in the discussion.

Our last speaker is Richard Tren.  Mr. Tren is a South African.  He is the South Africa director of Africa Fighting Malaria, a health advocacy group.  He did post-graduate research in Britain and is becoming an increasingly prominent health economist.  He's worked tirelessly in recent years to expose the reasons for the lack of interventions--medical interventions and other forms of interventions--to combat the diseases of poverty in Africa, and is published widely in the popular press, especially in Africa, on the issues germane to today's discussion.

So, Richard.

MR. TREN:  Thanks very much.  I think that the previous speakers--Amir and, in his opening comments, Jim Glassman--exposed the seriousness of poverty and the lack of infrastructure in delivering drugs and good medical treatment in poor countries.  And I don't think that you can overestimate the importance of those fundamental problems.

I recently spoke to a doctor who works at Chris Hani Baragwanath Hospital in Soweto, in Johannesburg.  This is the largest hospital in the world.  It's got more beds than any other hospital.  And I asked him how good he thought the government's chances were in delivering the AIDS treatment roll-out that's been announced in South Africa.  And he said that maybe they could do it in some hospitals if they pretended that there were no other diseases that they were treating.  So in South Africa, which is Africa's wealthiest country, which has arguably the best medical infrastructure, in the largest hospital in Johannesburg we'll maybe be able to do it if it's the only thing that the government does.

I think that the problems of poverty and lack of infrastructure have been well described very widely.  What I'd like to talk about, and it picks up on the comment that Nick has just made and the point of his presentation, was in the lack of government commitment to delivering drugs.  And I think this is perhaps less well known.  And I think that, certainly in Africa, this happens on various levels.  Sometimes it's simply through incompetence, but in other cases seems almost like governments are willfully attempting to block access.  The lack of political will that the South African government has shown in rolling out its AIDS treatment program has been very widely documented.

Now, what I just said about the lack of infrastructure is important.  And maybe it is important that the South African government was cautious in what it could deliver and what it could promise.  But nevertheless, we've known about AIDS for a long time, and all the while the government has done nothing to build the infrastructure.  Instead, and very worryingly, it has done almost everything to alienate any kind of partner that could work with us.  And I think that the approach that the South African government has taken contrasts with the approach that the Botswana government has taken, which has been to work with its friends and donors and the industry.  They've got a long way to go, but they're making good progress.

I think that another very significant barrier to delivering drugs, apart from the lack of political access, is the medical bureaucracy in South Africa and other Southern African countries.  Very often, drugs that have been registered for use in the United States and the EU and Japan wait for, on average, 39 months in the South African Medicines Control Council procedures.  So lengthy are these delays that recently a group of generic drug manufacturers in South Africa began legal proceedings against the Medicines Control Council.

In an almost unbelievable case, the Medicines Control Council authorized the use of a generic version of nevirapine, the drug that blocks mother-to-child transmission of HIV.  They authorized its use in April of 2003.  The drug still cannot be sold or distributed or used in South Africa because, more than a year later, the Medicines Control Council hasn't authorized the insert, the pamphlet insert that goes into the box.  I mean, this is just outrageous.

And there have been frequent accusations against the Medicines Control Council--which is supposed to be an independent scientific body--of political influence, that it's been doing the bidding of the Ministry of Health.

The various medicines control councils and medical bureaucracies in Southern Africa are supposed to have been harmonizing their procedures, streamlining their organizations, reducing costs and time delays.  But they've actually been going in the opposite direction.  A couple of years ago I sat through a presentation by the head of the Namibian Medicines Control Council, where she explained that every single drug that was registered for use in the Namibia prior to 1990 had to be re-registered.  The reason was that, before 1990, Namibia was governed by South Africa, so any drug was authorized by the South African Medicines Control Council.  And when Namibia gained its independence, it set up its own ministry of health and medicines control council.

And so there can be absolutely no health benefits in requiring companies to go through the incredibly expensive--and by the way, they asked for 10 copies of all the dockets.  It was very amusing, because when--and I heard this from someone in industry in South Africa--when these boxes and boxes of files of data started arriving in their offices, they had nowhere to put it.  They simply had no idea of what actually involved re-registering a medicine.  And this is just one of the most shameless acts of bureaucratic empire building that I've come across.  One can argue, but I'm not always convinced of this, of the value and the need of the strong medicines control councils, but it's increasingly clear in South Africa that this kind of medical bureaucracy is just an expensive blockage in delivering safe and effective medicines.

The South African government recently published its drug price regulations that looks set to have an enormous impact on the availability of drugs in South Africa.  It is said that it's implementing these regulations in order to increase access to drugs.  But it seems, and it's increasingly clear, that the South African government thinks that South Africa and the market for medicines are somehow exempt from the laws of economics.  There is no way that these regulations can go ahead without reducing the availability of drugs in South Africa.  Perhaps more importantly, these strict rules on markups and fees that distributors, wholesalers and retailers can make would ensure that drugs would only be available in urban centers and wealthy high-volume pharmacies and that in rural areas and in low-volume urban retailers, pharmacies, drugs simply will not be available.

When these regulations were proposed, one drug company in South Africa, Boehringer Ingelheim, said that, in light of these regulations, it would find it difficult to continue investing in South Africa.  This is the company that has nevirapine, but does a lot of research into AIDS and, in recent years, has invested about half a billion rands, about $80- or $90 million in South Africa just on that disease.  It has other diseases that it researches as well.  When the minister heard about this, she accused the company of bullying, of using bullying tactics.  It's a topsy-turvy world when a government pushes through legislation that will drive out companies and then accuses the companies of bullying.  Anyway, I don't want to go too much into that.

But apart from those drug pricing regulations, the government has now implemented a policy that makes it illegal for doctors to dispense medicine from their practices without getting a license first.  Now, in many rural areas and in many poor parts of South Africa--and in fact in wealth parts; I get medicines from my own doctor--that's the only way that people access medicine.  The licensing procedures are so lengthy and difficult that doctors are refusing to do it.  Which means that, this kind of legislation simply means that [sound loss].

While the government has focused on increasing access by pushing down prices, it's done nothing about the taxes and tariffs that it charges.  In South Africa we have 14 percent VAT charge on all medicines.  Now, if the government were serious about reducing the cost of medicines and increasing access, overnight it could reduce it by 14 percent.  Roger mentioned earlier the import duties.  Southern Africa has no import duties on medicines, but many other African countries do, and Roger already mentioned the Congo and Eritrea that have a 30 percent import duty.

And so I think it's really--one has to question the commitment of governments to increase access to drugs when they so blatantly are increasing the cost of drugs and reducing availability.

There is an important need for increased funds for disease control and for increased donor commitment.  But I'm always very cautious about the way in which donor funds are spent.  We've already heard that donor [sound loss]-- The past five decades of aid transfers in Africa have only left Africa poorer than ever before.  Aid transfers tend to prop up some of the most vicious regimes.  And because they increase the size of government, they reduce economic freedom and can exacerbate poverty.

Perhaps one of the most damaging aspects of aid is that it can send the wrong incentive.  If you can keep your people poor and ill, you get more aid transfer.  So what kind of incentive does that give to a government to implement good policy?  If you're going to be spending money, perhaps the best way that you can spend it is on health care.  And maybe health care is different.  But as I said before and as Amir has explained, so far aid is actually doing more harm than good.

The problem is that African countries simply need to grow rich.  That's the only way that we can deal with these persistent health problems.  To get rich, we need to redouble our efforts to support the institutions of a free society, which include the rule of law and protection of property, low taxes, and limited government.  I think the problem is that some countries are going in the opposite direction.

When it comes specifically to health care, we certainly need more investment in diseases that affect Africa and investment in Africa.  One of the problems is, though, that in South Africa in particular we have an exodus of investment.  Since 1994, around 30 innovator drug companies have closed down their manufacturing plants in South Africa.  Some of this has been because of increased production in centers of excellence around the world.  But I think the important point is that South Africa has been completely overlooked as a center of excellence.  And that's not a good trend for Africa and it's not a good trend for improving the health care system in Africa.

But perhaps it's understandable.  Companies invest where they can make money and investors are made to feel welcome.  And if the people that are part of the solution--not the whole solution, but developing part of the solution for disease--are made to feel welcome, it shouldn't be any surprise that they pack up their bags and leave.

And I think fundamentally, certainly in South Africa and internationally, there is a perception that Africa should be a no-profit zone for companies.  And I think this is very damaging.  Companies can make a profit in Africa, and they should make a profit.  But in focusing attention on the wrong targets in the debate about access to drugs, I fear that we are creating new poverty diseases and simply ensuring that Africa is a continent that's only ever worthy of charity.  And that's no way to improve the health of Africans and health care in general.

Without addressing the very significant state and bureaucratic impediments to delivering access, apart from the state and bureaucratic impediments to creating wealth, Africans, I fear, will always remain ill and unable to treat themselves.

[Applause.]

MR. BATE:  Thank you, Richard.  We have just under 25 minutes for questions and comments.

QUESTION:  I'm David Sudwell [ph].  I'm a physician.  I'm senior medical officer of the American Clinical Laboratories Association.  But my comments relate to wanting to give a little bit of optimism about China.  I had the privilege of going with what I believe was the first HIV/AIDS training team to Chengdu in March.  And in preparation for that--this was a faith-based group out of Portland, Northwest Medical Teams--we had the benefit of a lot of data and information.

I'm surprised you didn't reference the China-CDC surveillance in 2002, I believe, which was really quite sobering and, I think, very scientific, based on as good information as they had, estimated at least 800,000 to a million infected now, with projections of 10 million by 2010--which hardly seems like covering up.  It's a proportion that would be serious to them, and is.

We had the benefit of going to teach them how to do rapid HIV testing.  A Canadian firm has produced a very affordable kit which you can do hepatitis B, C, and HIV screening.  We spent a full week teaching at what I understand is the largest hospital in China, 3,300 beds, the first hospital in Setzuan Province; an earnest, serious house staff, faculty, doctors, who are preparing for what is a real epidemic.  And the Chinese government has in fact announced the manufacture of retrovirals by their government.

So I'm not suggesting for a minute they don't have a bad record in public health and in kind of questionable surveillance, but I think it's a new world, possibly provoked by SARS and their very real recognition that they have an economic impact.  We hope to go back next year for follow-up, but I've had some very healthy dialog with these people there.

MR. EBERSTADT:  Good on you on doing that work, and I hope you continue to do that work.  That's very promising.  I should have mentioned one other promising feature on the horizon, which is the cooperation between the National Institutes of Health in the U.S. and the Chinese government now.  And that at least offers the possibility of having a genuinely scientific approach to surveillance.  Unfortunately, at the moment there are only 150 sentinel surveillance sites in all of China and I think about 40 of them are down in the Yunnan.  And when you do the arithmetic, that leaves you with about one site for every 11 million people.  So there's room for improvement.

QUESTION:  Princeton Lyman from the Council on Foreign Relations.

Mr. Attaran, you emphasized the treatment for [inaudible] malaria.  Dr. Roberts talked about possible resistance.  But there was no mention of other preventive techniques, bed nets, et cetera, and I wonder if you could indicate how you see that in a total malaria program.

MR. ATTARAN:  There's only so much you can pull off in a 15-minute talk, so I apologize for not being able to cover that ground.  Yes, malaria is a disease that is a--I think it's a very complex disease, because it's an ecological disease.  It is brought about by the interaction of a mosquito with a human that transmit a parasite in a certain environment.  Those are the four variables.  And so Don would be the first to agree with me that malaria in Central America is nothing like malaria in Africa.  I mean, it's just a very different kettle of fish.  And if you want to actually see how different it can be, roughly speaking, there are about 60 different mosquito species transmitting four different types of parasites in dozens of different ecological and epidemiological settings.  Do the math.  I mean, this is not one disease.  It just has the misfortune of going under a single name.

Now, because of that, there are a number of arrows in the quiver for how to treat it, as you correctly point out.

Drugs, yes, you always use the most curative ones, for obvious reasons.

Insecticide spraying, residual spraying of insecticides, as Don advocates and I strongly agree with, in which you spray insecticides on interior walls of dwellings.  That has the effect of both killing mosquitoes when they enter the hut, or the house, but more importantly, if it's the right insecticide, of repelling them before they even enter.  The most damaging sorts of malaria epidemics are transmitted by mosquitoes that bite in the nighttime in Africa, and so if you treat the inside of huts with insecticides, you actually prevent the mosquitoes from coming into the huts at night and biting people while they sleep--a very effective way of doing things.  USAID doesn't spend one dollar, literally, on that strategy in the world.  Again, another piece of genius from the U.S. government to not support that.

And finally you mentioned bed nets as a possible strategy.  This is another thing that can be done.  You take a net, and insect net, you treat it in an insecticide, you hang it over the bed, you sleep under it.  That's another tool.

You need all of these.  However, at the moment, the global policy from Roll Back Malaria, which is basically ghost-written by USAID, is to use only drugs--and the ineffective ones, for the most part--and to use only insecticide-treated bed nets, and to forget the indoor spraying.  A more stupid set of policies would be hard to devise.  Really.  If you set out to come up with a more stupid policy, you'd be hard-pressed to do it.

Nevertheless, that's the policy that has been taken.  And the defense for it has been from USAID on a consistent basis, that there is no evidence that residual spraying or the proper medicines would be more cost-effective than using bed nets.  Similarly, there is no evidence that anyone in USAID has read a medical journal in the last 10 years.  Because if they had, they wouldn't say that.  The evidence is utterly clear, including from WHO itself, that residual spraying in the artemisinin combination therapies are highly important.

But they are not funded.  And here's the simple reason.  You're from the council, you want a political answer, let me give you a political answer.  USAID can hire private contractors, American contractors, to purchase and distribute bed nets and to retreat them insecticides.  That you can do with contractors who are American who are based around the Beltway.  But if you want to provide medicines or you want to spray houses, that has to organized by a government.  You have to hand the money to a developing country government, rather than give it to American contractors who charge a 50 percent overhead.  Well, you wouldn't do that if you're USAID.  You'd rather stick with a strategy that supports a network of contractors.

This is basically corporate welfare for a large number of contractors [inaudible] USAID.  It is the aid-industrial complex, as opposed to the military-industrial complex.

MR. BATE:  Amir, thank you.

MR. ATTARAN:  That's it.  That's the point.

MR. BATE:  The next question, the lady over there in the corner.

QUESTION:  My name is Jean Capps [ph], and I'm a consultant to many U.S.-based PVOs, or other people know it as NGOs.  We work in partnership with USAID and WHO at times.  Everything you said, Mr. Attaran, I don't have any problem with.  But there are some technical issues in making it happen.  One are the U.S. government procurement regulations.  USAID--and I'm not an apologist for AID--but to be fair to them, is not allowed to buy any drugs because of the Buy American policy.  And to get approval to buy antibiotics or even any other noncontroversial drugs is almost impossible.  You want to talk about a bureaucratic nightmare, that is one.

So first of all, one of the things that would have to be looked at would be an easing or some sort of relaxing of the procurement regulations both for drugs and for insecticides.  Currently, that's not allowed, at least through most of the procurement regulations that I see.  If it's not true, I would love to be proven wrong.

MR. ATTARAN:  It is not true.

QUESTION:  Your pressure on UNICEF--God bless you, go forward.  There are many people working in child survival interventions within UNICEF that can't come here and speak, but most of the child survival interventions within UNICEF have languished from lack of support over the last several years.

Accountability to the World Bank, again God bless you.  Please try to find out about that.  The current thinking is that there will be no development in Subsaharan Africa without addressing the malaria issue even if all of the corrupt governments all of a sudden became democratic overnight.  The HIV approach, with going through the MAP program, seems to be a bit more transparent than dumping it into the World Bank country programs and trying to account for it that way.

With regard to the DDT, I think you should clarify to those non-technical people here that you're talking about indoor residual spraying, not massive spraying of the environment, which is--everybody who cares about the birds and it being retained in the fat tissues of women [inaudible] indoor residual spraying, most of my colleagues who actually work in this field are very, very interested and would like to go forward with this.  There are, again, some technical issues because it means taking everything out of the house and evacuating everyone out of the house and somebody spraying who knows what they're doing.  And that probably means a new cadre of health worker.

And I'll stop there.

MR. BATE:  Thank you very much.  Amir, before you answer that, can we take about four or five more questions before we run out of time?  Try and keep the comments and questions as brief as possible.

QUESTION:  [Off microphone, inaudible.]

MR. BATE:  Okay, next question over there.

QUESTION:  [Off microphone, inaudible.]

MR. TREN:  Roger, can I take those, because there are two of them pointing at me right now.

MR. BATE:  All right, let's just take one more question.

QUESTION:  Katie French, Senate Health Committee.

Someone needs to clarify from you all about USAID's policy on procurement, which I'm pretty sure we can purchase drugs.  One of you will take care of that, right?

MR. ATTARAN:  Yes.

QUESTION:  Okay, and the other question that I have for you all, I focus generally on domestic health so I'm new to the foreign aid world.  I'm sure this discussion has come up before, even before aid, on some sort of leverage donors can have, particularly legislative, statutory leverage, on dollars appropriated to foreign aid to countries that impose these sorts of tariff structures and taxes.  Is there a legislative strategy or appropriations strategy that has been discussed, and what were the considerations brought up at that time?

MR. BATE:  Thank you very much.  Okay, Amir, do you want two or three minutes to answer some of those?

MR. ATTARAN:  Okay.  And if I forget some bits, whoever I'm forgetting, it's not because I'm avoiding you, it's because I have a lousy memory.  So raise your hand again.

On the question of whether USAID can buy medicines and insecticides, by God, they can.  Oh, they can.  They definitely, definitely can.  They just don't want to.  And it's for the political reason that I stated before, that there are a bunch of consultants, you know, suckling at USAID for whatever handout they can get.  And I was at Harvard.  I saw how much the Harvard School of Public Health or the Yale School of Public Health pulled from USAID.  Hopkins pulls more.  There are consultants like the Family Health International, Management Sciences for Health, et cetera, et cetera, that charge tremendous overheads and deliver rather little of the value to the field.

It's to maintain American contractors.  That's why we have USAID.  I recall a piece of testimony from 1998, where there's an association of these contractors, sort of a trade association, and the person testifying before Congress said I'm proud to tell you that 80 percent of the money USAID gives us stays in the U.S.  He was bragging about it.  I've got the document.  So that's the reason that we do aid this way.  There is no country on earth that does foreign aid worse than the United States.  We just have--it's a foolish approach to it.

Now, they can purchase medicines, they can purchase insecticides, I am a lawyer, I've gone looking for those provisions of law that you're mentioning.  And unfortunately, they've managed to fool a lot of people, yourself included.  There is no such limitation.  I've asked them point blank, I've asked USAID to provide me with any legal basis that they could cite for why they could not purchase medicines or insecticides.  They have confirmed to me that none exist.  They could even purchase DDT if they wanted to, notwithstanding the fact that it's banned here.

On the question of DDT, yes, you're quite correct.  It's not sprayed outdoors for malaria control.  Not, not, not.  It is sprayed indoors in gram quantities, very small quantities.  Think sugar cubes rather than tons.  And it has a dramatic effect on reducing the incidence of disease, as you see here.

Further, on the question now, shifting to what Jeff [inaudible] from Merck raised about six-dose combinations, cross-licensing and so on, I agree with this.  You know, it's not existence of a patent that's problematic, it's what you do with the patent that can or cannot make it problematic.  What disappoints me greatly and what I would like to see the industry address and, to be frank, has not been addressed to my satisfaction, having watched this for years now, is that your point is entirely true. Cross-licensing for the manufacture of six-dose combination AIDS medicine, to use your words, could be done in days or weeks.

My problem:  I've been waiting for years.  And that is a problem a great many people in the public health field are beginning to feel over this issue.  Too little progress has been made by industry in this respect.  As I see it, if the AIDS drug inventive companies wanted to take on this challenge, they could do it better than anybody else.  By God, they could sweep the Indians right off the field.  But they have not done it yet.  And it is, to my mind, a depressing but true observation that in the last few months I have seen many companies expend more effort on spin doctoring the effect of WHO listing the Indian six-dose combinations the treatment guidelines, spin-doctoring what their response will be through panels, like the one we're having.  More effort has gone into that communications problem than has gone into the R&D problem or the licensing problem of the actual combination medicines.  Now--

MR. BATE:  Okay, can we--

MR. ATTARAN:  Let me just finish with one thing very fast.

MR. BATE:  Okay.

MR. ATTARAN:  That either means a failure of communication, it either means that those of us in the public health field like myself have not been appropriately told of what the industry's actually doing behind the scenes--that's the generous interpretation; or the not-generous interpretation is that actually nothing or very little is happening behind the scenes.  I don't have a way of discerning between those two.  But what I can say is that, from the outside perspective, it seems as though action is lacking.

MR. BATE:  Okay, we'll be able to come to this point in the next session, because the next session discusses what drugs the U.S. should be buying.  And I know we're going to be having and FDC debate at that point.

Answers to the other questions?

MR. TREN:  Yeah, kind of a quick answer, I don't know.  In theory, NEPAD is a promising and good initiative.  It's supposed to be a political oversight, the initiative, and ensure good governance.  So far, it's failed miserably.  You've had an excellent example of African countries standing up against revolting abuse of human rights in Zimbabwe, and they've done nothing.  So that's--generally, I'm not confident about NEPAD.  But if they do, then it will be a good thing.  And if they can encourage bureaucracies to stop holding up the delivery of new medicines and turn their attention to ensuring that what medicines there are are safe and are not counterfeit, then that would be a good thing.  But I don't know.  Somebody else might know more about what NEPAD is doing.

MR. EBERSTADT:  You asked a question about legislation and health.  I can't tell you the answer, but if you turn around and look directly behind you, there's a woman, Carol Adelman, here, who's going to be on the panel in a moment.  She spent several honorable years at USAID, and I think that she, perhaps of anybody in the room--perhaps her colleague Jerry Norris over there--could answer those questions for you in some detail.

MR. BATE:  Okay, well, thank you very much indeed to all of the panelists.  Don?

MR. ROBERTS:  I just wanted to comment about the insecticide-treated nets.  There was a question earlier.  There is a general belief that the insecticide-treated nets are strongly supported by the malaria control community.  In fact, insecticide-treated nets are not even recommended for use in the Americas.  And where they are being used corresponds very well with where the donors are pushing these on the malaria control community through the power of money.

MR. TREN:  I just wanted to make a comment.  You mentioned when it comes to indoors as you're spraying and the use of DDT, that it requires infrastructure and the people have to go and take stuff out of houses.  That's true, but it can be done.  Zambia's doing it, Zimbabwe does it, Mozambique does it.  These are not wealthy countries with huge infrastructure.  Zimbabwe's doing it with the assistance of South Africa.  Namibia does it. Swaziland does it.  These are countries that have made a decision to control malaria effectively.  And you just do it.  You support these programs.

It seems that the policy decision has been made using these factors to make indoor spraying unsustainable.  And guess what?  When you're not given any money, it's unsustainable.  But it does work, and it works very effectively.

MR. BATE:  Well, thank you very much to our panelists.

[Applause.]

[End Panel I]

Panel II:  Which drugs should the U.S. support?

MR. GLASSMAN:  The title of the second panel is "Which drugs should the United States support?"  You just heard the first panel discuss, in a very wide-ranging way, some of the obstacles to treating AIDS, malaria, and TB in developing countries.  Poverty.  As Richard Tren said, I thought very cogently, African countries need to grow rich.  And also he said that they need to support, well, what I would call liberal institutions.  And this is a big, big problem and a long-term problem, but one that, unless it gets solved, if it's not AIDS, not HIV, if it's not TB or malaria, it's going to be something else.  Poverty is the health problem in Africa.

We also heard about taxes, about bureaucracy, about medical malpractice by government agencies, about action by environmentalists.  There was some criticism of innovator companies--which is an issue we're going to get into in a second, although I do have to make a parenthetical comment here.  You know, if I were in the drug business as an innovator company, I don't know why on earth I would be making AIDS drugs.  The companies that make them are the ones that get targeted as the villains over and over and over again.  Maybe that's something we can discuss a little bit later.

But what we are going to discuss today is in fact the issue of which drugs should the United States, as the largest contributor to programs around the world to fight AIDS as well as malaria and TB, which drugs should the United States support.  And we have a terrific panel to discuss this.

Carol Adelman, whom I cited earlier as a co-author of an important Hudson Institute study that just came out yesterday, is a senior fellow at the Hudson Institute.  She has worked in the public policy arena, especially in areas of health, with such organizations as the Council on Foreign Relations, the American Red Cross, the Agency for International Development, which has gotten a little bit of a going-over in the last session, the Office of Economic Opportunity, and many others.

Scott Gottlieb is an M.D. who is director of medical policy development at the Food and Drug Administration.  He was formerly an FDA senior advisor for medical technology under Commissioner Mark McClellan, and he was formerly also a resident fellow at AEI specializing in areas of medicines, pharmaceuticals, and biotechnology.

And Abner Mason, with whom I traveled to Africa in December, is the founder and executive director of the AIDS Responsibility Project.  He is also a member and in fact chairman of the International Committee of the Presidential Advisory Council on HIV/AIDS.

Carol will start.

MS. ADELMAN:  Thank you, Jim.

I am in this business because I served with AID, actually, many years ago in Africa, when our problems were malnutrition, vaccinations.  And I came back and was very moved by that, and did a master's in public health and a doctorate in public health at Johns Hopkins.  So I've followed these issues for many, many years.  And what has struck me, and particularly my years at AID working in the field, and I've been in many, many dusty villages drinking warm Fantas, getting ready to work in a clinic or to recommend something or how AID should wrap money around some problem--and what struck me, though, what strikes me about these arguments that are going on now with the price of drugs and so much politicization of this against the companies is that it's such a diversion from the real problems at hand.  We really owe it to these people, to that little girl that Dr. Attaran put on the slide, to try to get over this and move beyond.

So when I heard that Jim and others here at AEI were doing this conference, I was really delighted to be a part of it.  It's one of the reasons that I worked with Jeremiah Norris and Jean Weicher with Hudson Institute, to really look at this price issue.  Although I must say, as has been pointed out, and I know the rest of you will point this out as well, price is, we think, about maybe 20 percent of all of the costs of treating HIV/AIDS.  We actually have very few numbers on that.  But the recent South African plan is one of the few plans that have actually estimated the cost of the doctors and clinics, and they're showing it about 20, 22 percent.  So you have to ask yourself how is it that we've had the major attention over the last three or four months just on the price of drugs when there are so many other issues.  We'll get into those, too, with some of our other speakers here.

I think prior to that we seem to have spent a lot of time on patents.  And again, we weren't going to the real problems.  And I think Dr. Attaran's work on patents really helped resolve that.  I'm hoping now that our--it's why we did this study on prices, so we could try to get to is this real, how much more are these prices, how much of an impediment is this?  So that's why we did the study.

I think I'll start with the first slide here.  We found, and Jim Glassman summarized this, we found that, we looked at the Medecins Sans Frontieres pricing guide, the latest one of April 2004, which lists--and in our paper we have the Web site, you can go to that and check all of our numbers.  We spent hours doing these averages and numbers.  But we went through first, looked at the single-dose drugs.  And we took an average number, because usually in the case of the patented, there was just one price.  Each company had one price and produced one drug.  So for the patented drugs, we didn't have to do much average.  But the patenteds were $404, and the average copy drug was $449.

Now, you'll see we have on here average price plus transportation.  And the reason is that almost all the innovator companies will put transportation from the site of manufacture to the country.  They include that in the price, whereas the non-innovator companies do not.  That is paid extra.  So we've talked to many, many people who transport drugs, and we've come up with a figure of 10 percent, which we think is a very fair number.  So we feel to really be correct in comparing them, we have to add the 10 percent on.

But I must say that there are some other considerations with differences between copy drugs and patented drugs, and that is that a company that makes a patented drug will, if there's been any damage in shipment or if expiration dates are exceeded, will recall those drugs and frequently provide new ones.  They will monitor the drugs for any adverse effects.  They'll send their physicians, their heads of research over to see if these drugs are causing any bad effects.  So there are some additional benefits which we didn't attempt to put a value on.

So we looked at the average, and this is what we found.  And then I'll just turn to the next slide, where I wanted to go through each of the individual drugs very quickly.  And these will be--they're in the white paper, which we have copies out there for you.  What we found is that the first three drugs--and in treating AIDS there's a whole panoply of drugs that are used in different combinations.  And that's done because drug resistance comes after awhile.  Remember, there's no cure for AIDS, so ultimately after a time, you're going to run into drug resistance.  So drugs are measured on how long they can take a patient to drug treatment.  So doctors use a whole combination of them and using different drugs to try to get the patient to prolong life and survive with a good quality of life.

First eight drugs, single drugs here, as you can see, the patented drug prices are all lower than the average copy drug price, plus the 10 percent for transportation.  The last five in that, from efavirenz down to nevirapine, all--with the exception of one, and that's nevirapine--the patented drugs are somewhat higher than the copy drugs, but not all that much.  Nevirapine is significantly higher, but you should know that the company that makes that actually provides that drug free of charge to mothers in their third trimester of pregnancy to prevent mother-to-child transmission.  But nevertheless, it is a high number, and that's probably what figures into some of these misleading statements about the Indian copy drug being one-quarter to one-third the price of patented drugs.

What Table 2 doesn't show, though--and I think this is very important.  It was alluded to, and I didn't get your name, by the woman from the Senate Health Committee--not alluded to, but directly pointed out--is that there are considerable add-on costs, with customs, VATs, taxes, the retail distributors that add on the cost.  And you'll see in our paper that--and we don't have comprehensive data on that, because our purpose in this paper was prices, not customs duties.  But when we started digging in just to show that as an example on prices, we were rather stunned by the 30 percent, sometimes 70 percent is added on at the port, sometimes another 15 percent is added on by a retail distributor, then the pharmacist will add on another hike-up.  So these numbers that we're hearing, this 38 cents per day that we hear from the Clinton Foundation on this low $140 price, is actually--may bear very little relationship to what the value that a government or a clinic is getting for what they're paying.

This No. 2 that we dealt with in the paper is, as Jim and others and Dr. Attaran have so correctly characterized, is with the fixed-dose combination drugs.  With these drugs, the average--and I'm going to show, then, the individual drugs too, and that's where the story begins, really--the average of fixed-dose combination drugs, for patented drugs, was $659 and for the copy drugs was a considerably higher cost, $1,296.

I want to turn now to the second-to-last table here.  These are some of the combinations.  In fact, this is almost all of them that are most commonly used.  You'll notice that there are really only three drugs where you can compare patented prices to copy drug prices, and those are the first three that I have in the table.  And as you can see, the patented drug price on the first double combination drug is $500, versus $2,168 and so forth.

Now, the last five drugs, you'll see there's an average copy drug price starting with the $270 there that goes down to $253 in the middle column, but we have a NA in the column under Patented Drug Price.  And that's because there is no existing patented drug for those copies.  And this is--herein is the debate.  And you'll notice we put--the drug there, the fourth drug down, is the combination of those three drugs are the two Indian drugs that are the two fixed-dose combination drugs that the Clinton Foundation is recommending and says costs $140, that the WHO has pre-qualified and that this is the drug that is causing the furor, that all the health care activists and media are recommending that that drug be used.  So you can see that even on the Medecins Sans Frontieres price list, even without transportation, the price for that is $270, nowhere near the $140.

We did find one Indian company just recently that put out a $158 price for it, but we haven't been able to find if there are any deliveries anywhere.  We can't find if it's being used.  And the last that we heard at the Botswana conference was that there were no sales, that this $140 price was just a price, I mean, that it was public-health-by-press-release or something because nobody had actually bought the drug for that price.  So it remains to be seen.  And we have heard, indeed, from the Indian companies and the Indian drug representative here that in order to sell at that price, they would have to have agreements to have supplies for three years, payment up front, you know, commitments that people are probably not too interested in doing for a drug that has not been tested.

My purpose here on the price was not to get into the testing thing, but it is very important to know that the trimune and the triviro are made with lamivudine, stavudine, and nevirapine.  Okay?  Now, the problem with this drug is they decided to put these three drugs together.  We have had not-good results when we put those three drugs together separately, okay?  The bulk of the studies show that any combination with the nevirapine is not as effective as with efavirenz, the drug that substitutes for nevirapine.  So this is a big problem.

Also, there is definitely more toxicity with nevirapine.  It's been put on the FDA Medical Product Alert List.  That doesn't mean that it can't and shouldn't be used for the mother-to-child transmission, but it has to be used carefully.  There's a very few number of people on this trimune and triviro right now, from the Medecins Sans Frontieres.  We think it's maybe about 9,000.  We have not seen that they have done any careful studies on what effects they're having and whether they're measuring whether treatment failure is coming or whether they're measuring the death rate from this.

So these are not--this sort of bumper-sticker, you know, health-by-press-release that we've seen over the last couple of years are very, very serious issues.  And we would like to see this evidence from the WHO, and I think our U.S. government has asked them for the evidence.  And it has not been forthcoming.  And even the WHO, in its pre-qualification of these drugs, has a disclaimer at the end of the pre-qualification list, which you can go on their Web site and see, where they do not guarantee the safety and efficacy of any drugs that they put on the pre-qualification list.

So we need to be very careful on these issues and we need to look at them carefully.

The final point on the price--I'm probably going on a little too long here, Jim, I apologize--is--we'll turn to this very last slide here.  What I was showing you were price lists.  We then went to another Medecins Sans Frontieres study and looked at what the governments were actually paying for the fixed-dose combination.  This is for the trimune and triviro.  And they're actually paying much more than what's even on the price list.  And that doesn't even include the customs and the transportation.

So again, this $140 price does not seem to be in existence and it's, quite frankly, very misleading because it makes you think that you can solve this problem for minimal cost, and it doesn't help us get to the real obstacles that are causing this.

The final point I'll make on this whole issue is you shouldn't just look at the price of drugs.  And Dr. Attaran got to that, as many others have.  You have to look at the total cost of treatment and the cost-effectiveness.  This is just basic.  If one pill costs you $80 but it keeps you out of the hospital and keeps you from having to go to the doctor, you know, then it's a cost-effective drug.  And so we need to--what we do know, though, is when drugs fail and when drug resistance develops, AIDS patients have to move to a second line of treatment.  And Medecins Sans Frontieres, from these same studies in Africa, are showing that when the drugs fail, they have to move--the second line cost of treatment is around $3,000 per patient per year.  So it may be, we don't know because we don't have the data on trimune and triviro, it may be that this treatment is going to be astronomically more expensive than the other combinations.

So I would not--I do believe that we need to, the companies need to work on the FDCs.  One of the companies has made one and they've had problems with it.  While it worked up to a certain point, it had a failure rate that was sooner than another combination of a double and a single.  And what that tells me is quite different from what Don McNeil [ph] in the New York Times said, that this shows that the Indian trimune is better, when there wasn't even a comparison of it.  It shows how difficult it is.  It supports Dr. [inaudible]'s point--not to say that they shouldn't be getting on this more, the companies; it's very difficult to take three individual drugs, put them together, and have them work the same as when they're taken separately.  The science is complicated.  And so the one drug that they have tried to do, they've had problems with.  So heaven knows what's going on with the trimune and triviro, which by law in India does not have to be tested if the drug is only for export.

So I will close with that, with these warnings.

MR. GLASSMAN:  Thank you, Carol.  I do think we'll get more deeply into the efficacy of these FDCs when Scott speaks next.

Just a couple of things.  First, your report is available outside the whole study, so people can read that.

MS. ADELMAN:  Yes.

MR. GLASSMAN:  Second, I just wanted to point out that, just looking--I'm looking at the study right now.  And you put the slide up there.  So trimune puts together lamivudine, stavudine, and nevirapine.  And the first two of those drugs, if you add up the patented prices versus the copy price, you find that the patented prices are lower, in fact considerably lower than the copy price.

MS. ADELMAN:  Mm-hm.

MR. GLASSMAN:  I'm not saying it's the same medicine if you add the three together.  It's clearly a different medicine.  We'll hear from Scott in a second about that.  So the issue really then becomes on cost, the cost comparisons, what you said earlier.  It's the nevirapine which is given away free for mother-to-child transmission.

MS. ADELMAN:  Mm-hm.

MR. GLASSMAN:  I just wanted to clarify that point.  My question is this:  Why is it that these copy drugs are more expensive than the innovator drugs?

MS. ADELMAN:  I think that they really--it's a good question.  It depends on the amount of product they're selling, if they're negotiating different deals with the government.  The companies have been--I think they're under such scrutiny, they brought their prices down over the years.  And I don't know, I honestly can't explain some of these astronomical prices.

MR. GLASSMAN:  Part of it has to do with the fact that these are difficult drugs to actually make, as opposed to, I don't know, antibiotics or something?

MS. ADELMAN:  Yes.  Definitely ARVs are more difficult to make.  But I don't know whether, you know, the increases in price are because of, you know, the prices that they're trying to get through governments and how much and much corruption or kickbacks might be going on there, or whether it's their actual cost of production.  I welcome anyone who might--

MR. GLASSMAN:  We'll get into this in the Q&A.  But I think your main point is that, contrary--and this actually infuriates me, so sorry if I get angry about this--to what has been in the press consistently over the last few months, your study, which is the only study I've seen on this--maybe somebody else has done a study--and you're using MSF data, your study shows exactly the contrary.  It's not, as some have reported, that these drugs are three times more expensive.  You might say, well, some of them are a little bit cheaper or something, but basically, on average, they're more expensive.

Scott.

DR. GOTTLIEB:  Thanks, Jim.

There's been a lot of, as you mentioned, misconceptions in the press recently on this issue, and I think it's partly fueled, or largely fueled, by the press releases being put out by some of the companies in India.  So I thought I would take the opportunity today to discuss some of those misconceptions and try to answer some of the questions that they create.

The first broad question, I guess, is are fixed-dose combination drugs good for Africans.  And the answer to this question is probably not, at least in the way that the World Health Organization proposes.  They do have an important place, but they're not the entire solution.

In the West,