American Enterprise Institute

April 19, 2006

[Edited transcript from audio tapes]

3:15 p.m.	Registration
3:30	Presenters:	Barun Mitra, Liberty Institute
		Julian Morris, International Policy Network
	Speakers:	Roger Bate, AEI
		Nicholas Eberstadt, AEI
		Maureen Lewis, Center for Global Development
	Moderator:	Vance Serchuk, AEI
5:00	Adjournment

Proceedings:

Vance Serchuk:  The microphone probably seems a little bit silly, but this is going to be recorded.  And we have a transcript, and that’s the reason why I had to wise up.  It’s actually kind of nice to have a smaller and more cozy group to discuss this subject.  My name is Vance Serchuk.  I’m a research fellow here at the American Enterprise Institute.  I help coordinate our development policy program.  It’s my pleasure to welcome you all, as well as welcome a distinguished panel for what I think is going to be a very interesting and rewarding conversation today.

The subject of today’s panel and the occasion for it is the publication of a new report, a Civil Society report, on intellectual property innovation and health, which all of you should have copies of there available in the lobby and also available online.  This report is producing in response to an effort by the World Bank – I’m sorry, World Health Organization – let me see if I can get my multilaterals correct – by the World Health Organization to look at these issues beginning in 2003.  That report itself recently released.  We’re very fortunate today to have two of the intellectual forces behind this report here with us.

I think that the way that we’re going to proceed is to begin just going down the line.  First Julian Morris, who is the Executive Director of the International Policy Network.  Then Barun Mitra from the Liberty Institute in New Delhi.  Then our own Nick Eberstadt, Henry Wendt Scholar in Political Economy AT AEI.  Maureen Lewis from the World Bank and the Center for Global Development.  Got the multilateral organization right that time.  And then finally, our own Roger Bate.  So without further ado, let me turn the floor over to Julian to explain a little bit about this report and its origins, and then we will go from there.

Julian Morris:  Thanks, Vance.  Well, as Vance explained, the World Health Organization commissioned a report with a very similar title to ours in 2003 and has been deliberating over the production of that report for the past three years.  During that time, IPN and various other organizations submitted ideas and our own assessments of various issues to the World Health Organization.  We nevertheless felt that the WHO, being a membership body and the members being countries or governments, would be unlikely to be as independent and perhaps sort of critical of government policies as might be necessitated by the nature of the subject under discussion. 

So we put together with 15 of us – 15 organizations – put together this alternative report, if you like, which probably is the same remit as the WHO report, looking at the extent of the disease burden in poor countries and the extent to which there is access to medicines in those countries and problems of the development of new drugs for some of the diseases that are faced in those countries.

I’ll quickly sort of summarize the conclusions of our report.  I’m happy to discuss some of the details, although, as I’ve stressed to some of the other panelists already, I wasn’t that deeply involved in the writing.  Barun was probably more involved in some respects than I was.  So just to quickly summarize.  The top line, at the moment, every year about 10 million children are estimated to die from preventable or treatable, curable diseases.  So that, in a sense, is the fundamental problem.  These diseases could be prevented through a variety of changes including improved sanitation and improved access to clean water.  Over a billion people currently don’t have access to clean water and don’t have access to appropriate sanitation.

Improved indoor air quality would also improve or reduce the number of childhood deaths from diseases such as pneumonia and other respiratory infections.  Increased use of indoor residual spraying of pesticides, such as DDT, would dramatically reduce the number of people who die from malaria, currently estimated to cure between 1 and 3 million people a year.  And improved education would also have a significant impact on the disease burden.  So those are issues which really need to be put on the table and understood better in the context of improving the health of the world’s poor.

In addition to that, there is the potential to treat and, in many cases, cure millions of those who currently die through improved access to medicines and also through the development and use of new medicines.  It’s currently estimated that 50 percent or more of people in the poorest countries in the world lack access even to the most basic off-patent medicines.  That’s a pretty bold and rather sad statistic.  And one of the things we tried to do in our report was to identify the causes, the underlying reasons why people don’t have access to medicines because clearly if people don’t have access to those medicines now, then developing new medicines for the diseases of poverty is, at least for those people who don’t have access, going to be in vain.  They’re not going to get to their intended recipients unless that problem is addressed.

So, obviously, one fundamental problem here is poverty itself.  The fact that people are poor means that they don’t have the purchasing power to procure even the most basic medicines, and we believe that underlying that poverty is a lack of good governance, to use a rather trendy phrase.  An alternative would be weak root of law.  There isn’t, in many countries, a legal framework which encourages and enables economic development to take place.  There are also both direct and indirect barriers to access imposed by governance. 

We identified – and Roger Bate has done a lot of work on this recently, so he might give some more detailed examples.  We identified taxes and tariffs as a substantial barrier to access.  These can increase the price of medicines to the final consumers by a third or more.  Poor transport infrastructure is also a major barrier.  When the roads are rutted and the rail networks don’t work, then it’s difficult to get medicines from the places where they’re produced or the places where they’re imported to the people who need them.

A further problem is the misdirection of government health budgets, something that Maureen might talk about in more detail, but that by some estimates it would be possible to reduce the number of children who die through interventions which cost about $10.  And yet, in many of the poorest countries, government health systems spend $50,000 to $100,000 to save one life.  Why - because they’re diverting monies away from rural areas and towards urban areas and towards the middle class rather than towards the poorest and into extremely inefficient bureaucratically run systems. 

Another barrier is the regulation of health care provision in general.  A good example is the restrictions on the sale of medicines that have been approved in the US, Europe and Japan.  We looked at – and Roger might tell us more about this because his organization, Africa Fighting Malaria, has done some work looking at it.  In South Africa, it can often take up to 39 months – sorry, an average of 39 months – to register a product which has already been through FDA approval processes.  It’s already approved in the US, but it takes 39 months to get it registered in South Africa.  Now, that’s a significant barrier.

On top of that, governments regulate insurance markets, so one of the problems for the poorest people is the inability to have the right amounts of money at any one time to pay for drugs which might be a significant multiple of weekly income.  If they’re able to pay a small amount of money into an insurance fund every week, then when they suffer from an illness they can draw down on that insurance.  But when the government regulates insurance to the point where there’s no incentive to provide it to the poor, then they don’t have that mechanism available to them.   And then to add to that, in terms of especially the restrictions on rolling out new medicines, many poor countries have weak data exclusivity laws, which mean that pharmaceutical companies are unwilling to register their products at all.

Finally, price controls.  Again, one can talk about South Africa, and Barun, I’m sure, will talk about India.  But when a generic medicine has its price controlled, then the pharmacies and the wholesalers who would otherwise be selling these products are often unable to make a profit on the sale, so they don’t have an incentive to stock it.  In South Africa, hundreds of pharmacies have been sent to the wolves because of price controls, which have prevented them from making any profits from the sale of drugs at all.  And as a result, access to drugs in rural areas especially has fallen dramatically.

We looked also in the report at the implications of this for innovation, and clearly the lack of a significant market means that there’s going to be weaker incentive to invest in new drug development.  Furthermore, the lack of the ability to deliver medicines undermines the case for investment in new drug developments. 

As I said at the beginning, when 50 percent or more of the population does not have access to drugs, what is the point really in developing new drugs?  Having said that, there is clearly a need for new drugs, especially because of emerging resistance and because, in some cases, there simply aren’t drugs for certain diseases, which, even if access is currently not good, it’s better than zero.

So there is some argument for developing new drugs for the diseases of poverty, but we believe that the first priority has got to be to remove the current barriers to access, both barriers to wealth creation itself and barriers to access to medicines.  We looked at some stopgap measures for the development of new drugs for the diseases of poverty, and in very quick summary I’ll go through our thoughts on that.  Firstly, there’s been a lot of investment recently in new drug development through public and private partnerships, through the Medicine for Malaria venture, through things like One World Health and various other organizations. 

There have been promising drugs being developed for a variety of diseases.  Since those have already been looked at in great detail by various people, including Mary Moran at the London School of Economics, whose work I thoroughly recommend, we decided to look more at some of the other potential areas for incentivizing new drug development.

One of these was transferable patent extensions.  The idea there is to give a pharmaceutical company that’s investing in the development of a new drug for a disease of poverty an extension on the patent of one or more of the drugs that it currently has either in the pipeline or is selling.  But our concern with that proposal, which has been sort of floated around in some measure, our concern was that it not become a tax on a single class of patients.  So if a company had the right to extend a popular patent on one of its blockbuster drugs by, say, three years in return for investing in a new drug for a particular disease, then you’re going to be transferring wealth from the people who currently use that drug to the people who benefit from the new drug, which is somewhat iniquitous.  A better way of using that mechanism - which is an important principle, not a bad mechanism.  A better way of doing that would be to provide a shorter period of extension to a broader range of drugs, so instead of one drug for three years, 12 drugs for three months, something like that, would seem a more equitable way of addressing the issue.

We also looked at advance purchase commitments.  This is the idea that government provides a commitment to buy a certain number of doses of a drug once it’s been produced.  Again, in principle, an interesting way of addressing the problem, but there is a danger that this stimulates a winner-takes-all situation where the drug that gets there first is the drug that is sold and, because there’s no follow on advanced purchase commitment for another drug in the same class, it has the potential to stifle innovation, to prevent the development of better drugs.  And we know from a fairly wide body of research that often the first drug in a class isn’t the best, and knowledge is improved over time. 

A third idea that we looked at was orphan drug type legislation, so providing tax breaks or fast track regulatory approval for drug development.  This has worked to some extent in the US, and it seems like a plausible mechanism, although one has to be careful about how that’s structured, as well.

So just quickly finally, to end with the recommendations that we came up with, we, first of all, think that policy makers in poor countries should remove barriers to the provision of health care.  That means barriers such as taxes, tariffs and regulations. 

The same policy makers should improve the institutional empowerment more generally, so enable economic development to take place, and we’re talking in the abstract here.  This is the ideal world. 

Thirdly, the policy makers, in higher income countries, should provide regulatory and tax environments that nurtures public-private partnerships, as well as nurturing private sector development of drugs for the diseases of poverty, bearing in mind the comments I just made about the various different proposals which are being put on the table.

Fourthly, we have thought about the sort of longer term problems looking forward at how drugs might be developed for diseases of poverty in those countries or specifically for those countries on a for-profit basis.  In that case, there’s going to have to be some thought given to improving the intellectual property system in those countries, and in some cases that would mean improving the efficiency of the patenting system. 

For example, there’s some significant problems in some Latin American countries and, indeed, in some Asian countries with regard to the way that the patenting system functions.  And it might be desirable to provide improved incentives to the patent offices, for example.  It might be desirable even in some cases to merge patent offices so that you don’t have excessive and unnecessary administration. 

Anyway, there’s a variety of other things that we discussed in some more details, and I’ll be happy to comment further on those, but those are the main messages that we have in our report.  Thank you.

Vance Serchuk:  Thanks, Julian.  Barun.

Barun Mitra:  Thanks, Vance.  Good afternoon, all of you.  It’s a pleasure to be here at AEI, and I’m glad perhaps that I might have had some say in that report.  Given this panel that I see, I’m probably least qualified to comment on health care research.  But what I will probably do is – Julian kept on saying that it’s in the abstract.  I’ll try to dilute it down to the indirect experience, which I know better, so that you can perhaps get report in a more down-to-earth, rooted to reality situation.

And I think what’s most interesting and how I got, in a sense, involved in this issue is all this talk about whether intellectual property, particularly in medicine, affects health care.  And this was a really interesting question for me and many of us in India because some of you might know India did not have an IP law for medicine for about 35 years.  The law was changed in 1970.  From 1972 to 2005, India did not have a law on product, patients and medicine, and, therefore, it was a very good case to see what impact that such a regulatory framework had on health care in India because there are not that many countries where you have a huge domestic pharmaceutical manufacturing base. 

Even at today’s count it’s more than 20,000 companies making virtually any number of drugs.  Yet, the health care situation in India, as many of you would know, is not exactly ideal, and, therefore, the question that intrigued me always was why are we so focused on this issue of IP when, one way or the other at least to the people or the patients, it didn’t seem to make much difference.

I have some figures here, for instance, at the time in the 1950s when Indian domestic drug manufacturing sector was very small and major pharmaceutical companies from around the world were operating in India.  The MNCs had about 60 percent of the Indian market.  The domestic companies had about 40 percent.  In 1978 after the change of the law, the situation was virtually reversed, thus 60 percent of the Indian drug market belonged to the Indian companies and 40 percent to the MNCs. 

And by 2004 and ’05, it was virtually 80-20, that is 80 percent of the Indian drug market belonged to the Indian companies, and only 20 percent belonged to the multinational companies.  Which seems, in a sense, if you go by the logic of the public debate that has taken place around the world on the future of IP would be a very healthy situation.  But here you have India, which can virtually manufacture any drug that the world has, and, therefore, the patients in India should have, at least for Indians, access shouldn’t be an issue because we can in India manufacture virtually anything.

But as we would all know, access is a very big issue.  As Julian said, in some countries it is 60 percent.  I think they estimate in India it’s about 70 percent of Indians hardly access modern medicine for any number of reasons, which obviously means that, whether we are talking of IP or whether we are talking of prices, it makes very little difference to the patients. 

One special example that I find extremely illuminating is the debate over the last five or seven years on the AIDS drugs.  I can’t believe that last year when India was trying to change its patent law the New York Times ran two edits in a matter of months arguing why India should not change its patent law.  And the question obviously was that, if India changed its patent law on AIDS, all the medicines would become the domain of the multinational companies and, because of their patent, they would be able to charge much more. 

The question obviously was that, if that was the case, then India ought to have, theoretically at least, the largest number of AIDS patients getting treatment.  We had very cheap AIDS drugs.  We had no law which provided patient information to the multinational companies, and, in fact, we had some companies who had made, therefore, 40 to 60 percent of their sales from the export market, which will actually seem quite ironic that we had a huge manufacturing capacity, we were exporting drugs, yet barely one percent of Indians got any treatment for AIDS.

And therefore, the question was, what is it that’s preventing this or creating this animal?  We have the drugs, we have the low prices, yet barely one percent of Indians by the latest count, 50,000, out of the estimated 5 million that the WHO says is the number of people in India who have AIDS today.  So why?  And this is where I think, to me, the access issue is not an access regulatory issue.  It’s not an issue with the multinationals or the domestic companies.  The access issues, which in a sense, as people tried to point out, has got to do a lot with the domestic environment in which health care operates.  It has an enormous amount to do with poverty and purchasing power.  And by linking this issue to IP, the WHO and the whole public debate – the New York Times – seems to have done an enormous disservice. 

I can tell you from having being, in a sense, partly involved with the Indian debate and the change of the law that happened last year that one reason why the Indian legislators, after 35 years of not paying attention to pharmaceuticals, decided part of changing the patent law and bringing in product patents was because it became extremely difficult for many legislators in India to go out to the countryside and tell the poor patients that it’s the multinational companies and the patents that are preventing access because they were not.  There were no multinational companies, and there were no patents, and the access was as limited.

And therefore, for the politicians it was no longer saleable to flog the MNC horse, as it would have been possible in the 1970s.  I think, India being a democracy, there are many, many such examples that you can flog an issue once.  You can flog an issue twice.  You can’t keep on fooling and stressing a point which people can’t relate.  It’s impossible to go to a countryside – and I’m sure it’s not just in India, but in Africa or anywhere else – but in a countryside where what we call the primary health care units, the basic public sector health delivery mechanism, where the doctor won’t be there for half the month, where the medicine won’t be there for most of the month.  And, to whatever extent it is there, the lack of electricity and the storage facility means that the medicine which is there won’t be – you won’t be able to use those medicines because, particularly happens for a lot of injections and others which need cold storage, and lack of electricity means that you can’t try and cold store it.

Therefore, it has become extremely untenable, contrary to what the New York Times would say, for Indian politicians in Parliament to defend that multinational companies and the patent law in some way or the other had a bearing on the health care.  It hadn’t.  So when this changed, another interesting thing that happened, most of you would probably know that the last few years – the last five, seven years – there’s been so much talk about Indian success stories in IP and knowledge economy sort of thing.  And the contrast couldn’t have been more glaring. 

The Indian IP industry came up in the last 15 years, and the foundation of it was on piracy.  When Indian IP started, 80-85 percent of the products in the Indian market were all pirated.  But as the Indian IP went global, there was an enormous growth of domestic interest in the IP sector in India to curb piracy because, as global operators, they wanted their products to be protected.  And which actually, the transition that one can see, even in the pharmaceutical sector in India, one reason why in 1970 the law could be changed, that is the patent could be abolished product – patent medicine could be abolished – was because there was hardly any domestic interest which wanted product patents to continue because the domestic companies were all generic, and the multinationals had hardly a voting clout to offer.

Today, quite a few of the large Indian pharmaceutical companies have or are trying to be global players.  There are at least half a dozen Indian companies who are in the US in a big way outside of the generics, and, therefore, they have an interest in figuring out what would be the right balance to have a product patent in medicine that would give them an advantage.  And this, I think, is very critical to understand this whole debate and understand the profit of the debate, that, as an economy matures, you have domestic interests like in IP and now in pharmaceuticals where Indian domestic companies, entrepreneurs, want protection for their intellectual properties. 

And in a knowledge economy, this becomes increasingly a necessary condition for survival, and this has happened across the board for, for instance, music and film industry.  The Indian film industry is one of the largest in the world, and for traditionally they didn’t even bother about piracy.  But with the spread of technology, the music and film industry has become one of the most articulate advocates of protection of intellectual property.

And all this, the reason why I’m trying to link it and broaden this discussion is because, from a public policy perspective, it’s important to understand, I think, that how policy makers, particularly politicians, because they are very important players in countries like India – I would assume they are important players in any democracy where they are subject to do periodic scrutiny of the electoral process – that a politician is not an expert typically, but they are extremely smart in terms of understanding what are the kind of trends that are taking place, the internal factors that might influence the population’s desire to opt for one particular set of policies over another. 

And this whole gamut of intellectual property issues across the board, from publishing to music and films to IT to health care, the trend seems to be that India, without the intellectual property in health care, did not provide the kind of solutions that the policy makers were looking for.  India did not become a health care haven, whereas IP and the music and medicines industry went global on the shoulders of intellectual property and have tended to survive not only in India, but increase their expansion and operations across the world.

Typically to say, if you watch any Indian TV channel, found in all Indian channels 70-80 percent of the content today is provided by Indian companies.  Why?  Because these companies can be assured of protection of their products, and this is something that the Indian pharmaceutical companies have begun to realize in the past five years.  And this is why, firstly, the law was changed last year, and, secondly, it also plays the whole debate over IP in the context of development, which is part of the issue of this report as well, that, apart from fundamental issues such as poverty, there are enormous number of factors which are affecting access.  Like I said, just think, why would one percent of Indian patients – AIDS patients – get medicine when Indian is trying to export AIDS drugs to the rest of the world?  There’s no explanation.

And the companies or the interest groups that were trying to fight patent law, they lost out on this count alone, in my view, that the political masters could not be persuaded that Indian companies wanted to export AIDS drugs, but just one percent got treatment.  And this is because the whole health infrastructure in countries like India is extremely weak. 

If there is one infrastructure which you can really say that’s making a life-and-death difference, it is the health infrastructure.  I can give you one example.  In Delhi, where I stay, and Delhi is the second largest city in India – 12-15 million people – we have about, it’s estimated, about 10,000 recognized doctors.  We are about 80,000 unqualified, what we would call in India the quacks, and the reason is – it’s very interesting to understand the reason. 

The reason is the shallowness of the former health care delivery mechanism, which is not penetrating to the bottommost layers of society.  It’s providing an incentive to a lot many people who may not have qualified degrees, but provides some level of health care service provision which otherwise they will not get at all.

Still, the option is not between different levels of service.  The option is, for most Indians, between more service and, in that situation, people would opt for health care that is being provided by these people and many times in an extremely hazardous manner.  And therefore, unless we think of how the health care delivery system is going to be improved and opened up, there would be no way that a WHO or an intellectual property or any increased funding, as you said, for AIDS development or any of the other strategies are going to work because, firstly, the health care delivery mechanism is weak.  Not just because there’s lack of money.  It’s because the regulatory environment is such, it does not encourage low end health care delivery.

And the contrast probably is like the last couple of years there’ve been a lot of newspaper stories where India is being considered to be one of the health care tourism spots, patients from US and UK coming to India for quick treatment, surgery particularly.  And this would be, in my view, for three to five years, going to be a very critical issue politically and a very sensitive issue politically because it’ll be very difficult for political masters to justify that at one end we have hospitals and medical staff who can perhaps provide matching treatment, matching to any of the western countries, and, therefore, you have patients from the west coming to India. 

On the other hand, the Indians themselves aren’t getting access to that kind of treatment.  It will not be very powerful, particularly with a defensible position.  And therefore, the health – and in my view, the positive thing that comes out from this is that, over the next five years, there will have been in India a much greater political action on how to improve health care delivery mechanisms within India.  And I think this report might have a bit of a contribution in helping that debate move on that line.  Thank you.

Vance Serchuk:  Thank you, Barun, for a fascinating presentation.  Now we’ll turn to Nick, Maureen, and Roger to provide some comments on the report.  Nick, please.

Nicholas Eberstadt:  Thanks, Vance.  I’m happy to share the dais with Julianne and Barun to comment on the Civil Society report.  If you look inside here, you will see that I was one of the reviewers on an earlier draft of this, and you don’t have to be espousian to understand that my name on here means that I agreed with the general thrust and the general recommendations that the report has come up with.  The general thrust and argumentation of the report is commonsensical and convincing, and I think we’ve gone a long way over the past generation in discussions of health care policy from a point where there was an almost monomaniacal concentration upon the posited phenomenon of market failure as the cause of health care problems in low and higher income countries. 

Now, I think we have a bit more of a balance where we appreciate that policy failures are involved as well in poor health outcomes and that even poor policies that disrupt markets may also have some sort of bearing on poor health outcomes in low income countries.  But I think the sort of contrarian direction that’s embraced by this report is very healthy, and I think will stimulate further debate and may even help to convince some people.

There were a few reservations that I had on particular parts of the report, at least in an earlier draft.  I had some comments about a section on Brazil that I suspect Maureen’s going to have a few words to say.  So I’ll bounce on it.  I’ll leave that aside.  I think then on the discussion of the three by five and the WHO rollback malaria program is something that my colleague, Roger, might possibly have a word or two to say about.  So I think I’ll leave off that.  Let me concentrate on – let me make sort of a technical, nerdy point, sort of a normative point, and ask two questions about the report.

The technical, nerdy point is about DALYs, about disability adjusted life years, which are sort of the prevailing fashionable metric in all health care analyses nowadays.  And even, I fear, in a page or two in this report, one may read about DALYs and see some DALY charts.  DALYs are awful.  DALYs are just plain awful. 

I was present at the creation of DALYs back as an advisor on the 1993 World Development Report on Health when this notion came up, and, for those of you whose eyes have already glazed over about DALYs, this is a notional metric for providing for health the same sort of thing that the gross domestic product or national accounts provide for income accounts, sort of a summation of all sort of ailments and afflictions to tell you how much of a burden of disease there is that falls on a society.  It’s invented.  The numbers are made up.  They can’t be replicated.  They come out of a spin factory of the World Health Organization, and they can only be replicated if the same people do them again at the spin factory.

I’m on the advisory board at the US National Center for Health Statistics, and at one point I mischievously suggested to NCHS why don’t you do a DALY report on the USA.  And I got the answer which I thought I would get, because it is impossible to do DALYs for the USA.  We don’t have the data to do DALYs for the USA.  I submit to you, dear audience, if the information for DALYs on the USA do not exist, do you think they exist for Somalia?  Do you think they exist for China?  Do you think they exist for India?  Thus, my point.  It is a wonderful heuristic device, and it can advance discussion to think in terms of this concept, but, when one puts decimal points to paper with DALYs on it, it’s a dangerous exercise in false precision, which I think can only, in the final analysis, mislead.  There endeth the sermon.

As far as a normative comment goes, I would say that, from my own metaphysics, I, myself, am most concerned in re: health with the spots on the planet where life expectancy and health conditions seem to be going in the wrong direction.  And I know that this is a normative and debatable proposition because there are places, such as the Russian federation, which have higher overall levels of health.  There are some places on Earth with lower levels of health that are going in the right direction, but I think that one should be especially alert to places where countries are going in the wrong direction.  And those places, I think, to somewhat oversimplify, those places are the Russian Federation, some of the other NIS states, especially in Central Asia and much of Sub-Saharan Africa where you can justify the general metrics of life expectancy, no DALYs needed, see that things are going the wrong way, in some cases rather severely.

Now, why are things going the wrong direction in these places?  In Central Asia, I think to a great degree we can see the reduction in life expectancy as being related in a proximate sense to awful upsurges in infant mortality and child death rates. In Russian Federation, it’s an explosion of deaths in working-age populations connected with cardiovascular disease and injury and read falka.  In Sub-Saharan Africa, the approximate engine is the catastrophic explosion of HIV/AIDS.

Taking that into account, where do the insights from this report lead us?  I think that the insights from this report can be extremely valuable, especially in Central Asia, especially in dealing with the communicable diseases and the lack of good governance there.  In Russia, Lord knows and students of Russian Federation events, know about how much more civil society strengthening is needed in Russia. 

And as civil society is strengthened, wealth creation could be strengthened, and then we can have a happy long run story.  But in the short run, I would think that the sorts of things that Russia would need would be better trauma centers in big cities for drunks who fall down and can’t get up, better anti-alcohol education.  This might have something to do with the cardiac deaths from binge drinking.  I’m not sure how much we can find here in this report that will help us with that.  And with Sub-Saharan Africa, even if Bill and Melinda were to buy all the ARVs in the world and donate them for free to Sub-Saharan Africa, we’ve got the ugly cost-benefit analysis problem of HIV versus other diseases of poverty. 

And yes, we can certainly do things through advances in civil society and more market-friendly policies.  But that ugly disparity between cost-benefit analysis of years of potential life lost for HIV interventions and other interventions seems to me to be a big chasm.

Now, two questions, and these are not rhetorical questions.  The Chair can address them or not.  One is about the issue of private health insurance in low-income areas.  I am, in principle, entirely in favor of more private health insurance in low-income areas, and the restrictions and administrative regulations that are criticized in here I wholeheartedly agree with. 

What I am curious about in practice is, if the recommendations in the report were embraced, where would the impact of better or more extensive private health insurance be witnessed?  Would it be witnessed primarily in urban areas of Latin America, in urban areas of India and parts of Southeast Asia?  In rural areas?  I’d be interested in where the impact might be.

And finally, just a kind of a curiosity about the Michael Kramer prize or lobby or purchase order or theory of awarding remuneration for innovation or research in diseases of poverty.  The report discusses this a little bit, but only a little bit, and seems to not be terribly interested in it.  Is the report unduly dismissive of this idea?  Does it deserve more of a hearing in a free market-oriented approach towards low-income innovation in the health area?  A question of curiosity.  Thank you.

Vance Serchuk:  Thanks, Nick.  Before we give Julian and Barun a chance to respond, why don’t we move to Maureen and Roger.  And then we’ll swing back to you guys to have a chance to mount a defense of DALYs, if you so wish.  It doesn’t sound good, actually.  Let’s just avoid that and never mention it again.  Maureen.

Maureen Lewis:  Okay, thank you very much.  Well, I wanted to say I think that some of the issues that we’ve discussed here I was surprised weren’t more central in the report, and I think a lot of the IP issues are things that are going to affect the Indias, the Brazils, the Turkeys, some middle-income countries, but it’s not really going to affect many of the developing countries partly because the enforcement is really not something that’s viable in many countries.  So I was a little bit surprised, and most of my comments have to do with the kind of things that we’ve talked about here already because I think that that’s where the big impediment is. 

But first, I do want to endorse this criticism of DALYs and the cost-effectiveness approach that the World Bank embraced based on recommendations and data from the World Health Organization and has sort of been maintained and sort of a focus of what we should be worried about.  And the fact that manufacturing drugs doesn’t get them out there, I think, is sort of the summary of a problem that, it doesn’t matter if you have enough money, it doesn’t matter if you have the right drugs and the right people and enough people, because this has been a big issue in Africa.  We don’t have enough people.  We can’t get any health services delivered. 

But one of the big problems is there’s a lot of corruption in the system, there is no accountability in the system, and people don’t show up for work, and the drugs go missing, and you can’t have a public service that is being aimed at rural areas, low-income areas, be functional if these things don’t get fixed.  So I think that much of the problem really has to do with not being able to order, stock, deliver and treat patients with drugs in a timely fashion.  So that’s one of the enormous, I think, bottlenecks.

So much of the emphasis, especially the philanthropic sector, if you will, has really focused on new technologies.  And new technologies are fine, but, if you can’t get an aspirin out, trying to get something more sophisticated out is a problem.  And one of the things that you mentioned in the report many times and I think is a really serious problem is that of antibiotic resistance because, if there’s resistance in El Salvador, there’s going to be resistance in the United States eventually.  There’s going to be resistance in Argentina.  There’s going to be resistance in France. 

So we do have a very serious problem.  We don’t have any enforcement of drug utilization, of drug selling, of things that really do affect the world community, as well as the national community.  So I think this is a rather serious, serious issue.  I think it’s quite problematic, and, when you apply the idea that you have a cost-effective intervention, whether it be immunizations or oral rehydration therapy, if you can’t deliver it in an effective way it is no longer cost-effective. 

It is, in theory, in the same way that DALYs provides you with a theory, but you don’t have something that is a cost-effective intervention.  And I think we err on the side of assuming that, if it’s cheap and it can be delivered easily, that it’s going to be delivered and it will be a successful intervention.  And I think that’s also true for new technologies we make that implicit assumption.  So that was one point.

The second point I wanted to pick up, something also that Nick mentioned, and that was insurance.  I think insurance is actually quite critical to getting access, but one of the things we find is that it – I’m answering your question actually – it’s most common in urban areas, it’s most common among the middle class, and in India 25 percent of the population has private insurance, and in Brazil 25 percent of the population has private insurance, and in Spain 25 percent of the population has private insurance.  And these are all countries where you’re supposed to get free health care, so it’s clearly not something that everyone is getting access to.

And I think some of these issues that Barun mentioned about the trends in India is that you have a private sector that’s quite sophisticated, it gets some public money, and it’s providing the best care, very high quality care, which is why it’s getting health tourism.  But you could say the same thing about the US.  We have a large proportion of the population that is covered.  We have very high-end care, and we have people who have access to no care. 

So the problems in health care tend to be very consistent, and the answers are not very clear.  And they’re certainly not based in DALYs, and they’re not something that we can take off a shelf and say this is something that we know how to do.  We tried insurance in rural areas in Africa.  It has been a consistent failure.  The size of the risk pool is not large enough, the ability to manage is not great, and the ability to do, the logistics for drugs and services, are not very great.  And if you don’t have an insurance sort of experience within the culture, it’s very hard to impose.  So it hasn’t been very successful.

They’re sort of going forward to try again.  Latin America has a lot of private insurance.  Interestingly, one of the big problems they have faced is lack of regulation.  This goes back to Barun’s point, the lack of regulation has been a problem for them because you have 90 percent of the companies that are abiding by rules, 10 percent are not and undermining the market within the country.  So insurance is a big issue, and, in terms of intellectual property, getting technology out, it’s a really critical piece.  So I’m glad it was in the report, but I do think it’s rather important in this venue.

So what do you do?  One of the things that you raised in the report that I thought was quite telling was that malaria spraying was very effective.  In Brazil, they had the entire Amazon communities covered for years in spraying.  It’s very limited, and, as you point out in the report, the DDT use has been really quite minimal.  The alternative of getting bed nets, drugs just does not work very well.  What are the incentives for workers to go out there?  To whom are they going to be accountable?  Do people really understand what they’re telling them? 

Well, you know, a mother has that hole in a bed net.  Well, am I going to go and spend an entire day getting a new bed net or am I going to use the one with holes?  Well, use the one with holes - somebody gets malaria.  So there’s some really serious issues with behavior change.  We know behavior change is very difficult.  It’s very difficult in developed countries.  So I think finding some of these alternative routes is very important.

Finally, I really wanted to pick up on Brazil.  And I thought the report was quite good.  I think you raise a lot of issues.  I don’t agree with all of them, but your box on Brazil is patently wrong.  I worked on the Brazil program from its inception, and it is based on a civil society model.  Most of the money goes out through non-governmental organizations, the competitive grants program.  It is what has kept the program growing.  It is fundamentally a preventive program.  The government provides the ARV treatment, but the prevention is largely private.  And the public awareness campaign is one of the best I have ever seen. 

It’s far better than what we did in the United States.  They had ads on television that you would never show in the United States or in most countries.  They were so explicit.  They were so explicit that the Cardinal talked to the government, talked to the President, about pulling them.  And there was strong support within society who went to the President and said you can’t do this.  People are going to die if you do this, and we have to have this kind of information dissemination.  And they maintained it over the objections of the church, and they did it on the grounds of prevention.

Secondly, they set up counseling and testing centers, which they’d never had, mostly through civil society, and they’ve been quite successful.  And if you look at the prevalence in Brazil, like Thailand, it’s the only country where it’s absolutely taken a plunge, and it’s because of prevention.  So I take issue with it partly because they have done such a phenomenal job on all the points that you criticized them on.  So I think that undermines credibility of the report in my eyes, but I do appreciate the rest of what you’ve done. 

And I think that on the drug side, I’d like to say that a Brazil approach actually makes a lot of sense because it does exactly what you’re talking about.  It gets to prevention.  It gets to awareness.  It gets to people making decisions on their own.  If they know more about antibiotics, they may be more apt to be able to manage them better and put themselves and the rest of society not so much at risk.

So I think those two things are quite positive, and I would like to just end on one thing.  And that is that I think we also have to worry a lot about enforcement.  Regulations are one thing, laws are important, and it’s not that you shouldn’t have them.  It’s just that the enforcement is so weak.  It’s part of the same institutional limitation that you have in-country, and that that piece is really critical to making this work.  So thank you very much.

Vance Serchuk:  Thank you so much, Maureen.  Roger.

Roger Bate:  Thank you all very much for some fascinating comments already.  I’ve been striking off things that I don’t have to say and adding things that I should.  I think I’ll start with Brazil.  I think the prevention obviously is key in Brazil, and I think, in terms of its treatment, it was an example of – I would go midway between you, probably closer to Maureen’s camp.  I have to be perfectly honest.  I haven’t read the box in the report, so I don’t really know what they said on that. 

But I know that, from my experience, the Brazil program, in terms of treatment, has been extremely effective.  However, it has opened up some of the questions about innovation and follow-on research into new drugs for new anti-retrovirals for HIV.  And I tend to work on African health, and innovation, of course, is important in that setting.  But I think Brazil is actually an example we can look to for good treatment, but it’s impact in terms of research and development for future anti-retrovirals is probably, I would argue, negative because we certainly need new anti-retrovirals because, as resistance builds up, we will need new and better treatments down the line. 

And it’s probably markets like Brazil – I would also argue India in the future, perhaps now China – to the middle-income markets where money has to be made from products if we are to maintain interest of the pharmaceutical companies that are so far developed in some public-private partnerships, but in many cases individually developing products that are currently being used.  So I think Brazil is actually a paradox.  It’s an example of a successful treatment and prevention campaign, but, at the same time, may have negative long-run consequences on R&D.

But HIV is not really a neglected disease.  When I was thinking about why this report – because there isn’t a problem with innovation for hypertension, cancer, mood enhancing drugs, erectile dysfunction drugs, you name it.  So really we’re talking about the so-called neglected diseases.  And I was looking at something that was in the World Health Organization report, and, if you add up the number of deaths from trypanosomiasis, Chagas disease – this is a really bad idea to read out all the list of diseases – shithosomiasis, leishmaniasis, lymphatic theraliasis and oncosacarsis.  They account for only .2 percent of total global mortality. 

If you add dengue to that as well, African trypanosomiasis and dengue probably are the only two diseases out there where there are not treatments or successful forms of easy prevention.  Dengue, of course, there is prevention.  You can, in the same way that there is for malaria, as has already been mentioned, indoors there is spraying and other forms to knock out the mosquito that spreads the disease.  But most of these diseases, which do not kill that many people, there are cures for or there are preventative methods.

So I’m somewhat worried that the entire process has been driven by – it’s not exactly a red herring because I think there aren’t enough drugs.  One would like to have more forms of treatment for these diseases, but they’re at least out there.  I would argue that – and I think the report does a pretty good job of exposing this – is that the true bottlenecks, the big problems, as Maureen just mentioned as well, is not the innovation so much.  It’s actually getting the existing products and the existing preventions out into the field. 

I’ve told audiences on numerous occasions at AEI on the important of DDT spraying for prevention of most insect-borne diseases and also other forms of prevention for and other forms of treatment for numerous diseases, which are simply not being purchased by the multilateral agencies.  And in many instances, people don’t want to get involved.  And I take an example from Sierra Leone where something like 65 percent of the health budget is spent on HIV because that’s where the donors want to spend money. 

Sierra Leone has many, many bigger problems.  HIV is a big problem in Sierra Leone, but there are many other areas where the health budget should be spent on, and it’s being incorrectly spent if you look at the entire budget because of Western focus on HIV.  And I think that, if you’re trying to deal with those other diseases, you would probably have a much bigger impact on health in the country.  And therefore, the health systems work that the bank does – the World Bank does – I think is very important.

But I’m getting slightly off the topic.  I would argue obviously that innovations are important.  The work that I’ve done in terms of pricing on anti-retroviral drugs and the reduction in pricing, I think that there is – I wouldn’t say it’s clear cut that the reduction in pricing has massively damaged the profitability of western pharmaceutical companies in both middle-income markets, but it is pretty indicative.  And we’ve had something like 23 to 27 percent of companies who were working in this area leave the field over the last five to seven years. 

That should be worrying.  And I think it’s an indication of how not to encourage other companies to get into these diseases, combating these diseases that we’re talking about today, the so-called neglected diseases.  So I looked at the R&D proposal scrutinized and the recommendations from this report, most of which I would go along with. 

It’s a report written by lots of people, so, therefore, there’s some fence-sitting, which I guess is understandable.  And I’m going to put the authors on the spot in a second to ask them what of the proposals they discussed they actually personally favor, if they’re prepared to say.  I have the list here.  I sit in favor of two. 

I think knowledge to the innovator is absolutely vital, and I think that the issue of transferable patent extensions has not been pushed far enough.  And maybe I should work on that, I don’t know.  I’m sure there are other people more competent to work on it, but I think that it allows greater certainty to the people who are doing innovation.  And I think that would probably be something that I would favor.  I understand some of the problems.  I would wonder what the other panelists think about transferable patent extensions.

And the other thing, on orphan drug legislation, I know we need to have testing of drugs.  I think someone has been highly critical of using anti-retrovirals which have not been shown to be bioequivalent, so I’m not about to start turning around and saying we should be treating Africans, Latin Americans and Asians as guinea pigs because there’s absolutely no doubt that there are many people who are not getting treatments for numerous diseases.  And if we can lower the cost of development and, in some respects, lower the cost of clinical trials, there’s no doubt that more drugs will be developed and get into the field.

But I think the sad part of having to do this report at all is that that innovation is required, but the focus has been driven over the last 5 to 10 years is very much on patents are a problem, and, therefore, we need to think of other ways of getting around the patent system.  The reality is that they may be in some circumstances.  They’re absolutely vital in others.  But the real reason people are not getting treatments and preventatives is because of other bottlenecks in the system and not because of the innovation problem.

Vance Serchuk:  Thanks so much, Roger.  Julian, why don’t we – do you each want to take about five minutes or so, if you want to respond?  And then we’ll open it up to questions from the floor.

Julian Morris:  Okay, very, very quickly, DALYs, I quite agree.  Well, clearly we could live without them.  Maybe it’d be nice to come up with an alternative, at least for rhetoric.  This is the point.  I think it only actually appears in one bullet point in the report though.  If it’s elsewhere, then I stand corrected.  Your point about where this applies, yes, it is a significant issue.  But I think, at the end of the day, in Sub-Saharan Africa it would be good if institutions were improved, that point alone. 

And that comes to the point, what would we do to improve the situation?  Well, if I could wave a magic wand and get the rule of law into Sub-Saharan Africa, then I would wave that wand.  It might not solve the problem of HIV/AIDS, which seems not entirely related to root of law.  There was a very interesting paper at a conference I went to a couple weeks ago by Rob Seabrick pointing out that in Botswana there had been an attempt to provide a prevention strategy similar to the one that was brought out in Uganda, this abstinence, be faithful, condomize program.  But it’s been unsuccessful because of the dominance of traditional healers as providers of health care in that country.

Now, possibly had there been more rapid growth in Botswana than actually occurred, maybe there would have been more demand for western medicine.  Botswana was the fastest growing country in the world for 20 years, from 1965 to 1985, so difficult to imagine.  I really think that maybe there is something else that needs to be addressed there, which is cultural and so on.  Take the criticism of Brazil.  I think the really offending sentence here is this assertion had it been tackled head on – that is HIV/AIDS – in the early days, we might not have had more than 160,000 HIV positive patients needing the expensive and complicated anti-retroviral treatments today. 

I don’t know if that sentence is true.  If it’s not true, then – we did pass on Nick’s criticisms to the – this box was written by Margaret Say , one of the partner producers of the report, in Brazil.  It would have been, I think, more appropriate for us to have involved a health organization in Brazil in this as well.  So an error on the part of all of those involved, and we could have done more so to prevent it probably.

Since Nick’s first question about private health insurance has been answered, in some measure at least – I’m hopeful that over time private health insurance really can provide some answers, but clearly in rural areas it’s going to be problematic until wealth is the point where or technology is to the point where it’s possible to enable that to happen.

Michael Kramer’s prize idea, are we unduly dismissive?  Initially, I was quite a fan of the prize idea in principle.  This is just my personal opinion, so not within the collective that produced this.  I think it can work for some diseases better than others, so if we really kind of focus on trying to get new drugs for leishmaniasis or trypanosomiasis or whatever then maybe it’s workable because you’re not going to get more than one drug maybe developed.  In which case, you don’t have the concerns about follow-on development. 

The question then is, whether we really want to prioritize our resources towards those diseases, given their relative prevalence.  I’m not a global central planner, so I can’t answer that question.  Anyway, I’ll pass it on to Barun.

Barun Mitra:  I don’t know if I can answer some of the questions, but what Maureen said about 25 percent of Indians having health insurance I don’t think 25 percent of – I think 25 percent of urban India might have health insurance, but health insurance is one of the least penetrating issues in India.  And one of the reasons for that is quite simple, that, just like the health care debate in India started off with the patent issue in the 70s and therefore patents were abolished in the hope that the domestic sector would be strengthened, the insurance industry are in sharp contrast to the financial markets in India. 

Financial markets in India, by all Asian standards are considered to be very developed and mature.  It is much, much well developed than China, for instance.  But the insurance sector, for one reason or the other, has been completely nationalized in the early 60s and the 70s, and, therefore, health insurance – there was no health insurance there in India in the private sector until four or five years ago.  And therefore, the growth has been very rapid in the last few years, but it’s still very shallow.  Most of us depend on private savings and cash payments for our health needs than on insurance.  And therefore, the problem is the same regulatory environment.  The one that afflicted health has afflicted private health insurance even deeply.

Price control, I think Julian mentioned it earlier too, this is one of those Indian ironies that we have currently about, I think, 75 drugs under price control, all of which are generic.  The government has a proposal to extend that to about 370 drugs, 95 percent of which are generic.  Which of course, there is a question that, if there is any thought the generic are going to make B at a lesser price and be accessible to people, why do you need price control? 

And as Julian said, that it will do price control and succeed in actually implementing it because in countries like India there’s a big difference between having a policy and actually being able to implement it.  What kind of an impact would it have if retailers and others don’t even have an interest in stocking that kind of drug?

Taxes and tariffs, I think we attempted our people, where in India it’s probably between 30 to 40 percent, the impact on price, the retail price of various kinds of taxes and tariffs, which in a sense, particularly in a poor economy or poor income countries, is quite substantial.  If you have 40 percent of the retail price of a drug contributed through taxes and tariffs, there is a significant problem.  There’s a huge problem.

But there is, particularly in the medical community, for the first time there has been a lot of medical practitioners who have been pointing this out and trying to get the government to reduce.  And now in the VAT regime that India instituted last year, there is an effort to reduce the VAT rates, particularly for the lifesaving drugs.

But as far as – something that Maureen also said, and this issue comes up all the time, that if Gates Foundation – and he had tried, and I’ve heard it from people in Gates Foundation in India – that even if the Gates Foundation were able to distribute ARVs free of cost, it’s not going to reach.

And which actually brings the point that the issue is not money.  No amount of money is going to solve this problem.  The money that rich countries can give, perhaps it helps in kind of satisfying some emotional or social or other conscience, but in terms of impact on the ground, extremely marginal.  And people in Gates Foundation, they have learned it quite the hard way in India, that, even by making it free, it’s not going to reach.  And yeah, it’s impossible.  It’s simply impossible.

And which I think gets me to my fundamental issue here, that perhaps there’s a big contrast with Brazil, and perhaps we should do a kind of comparison between the treatment that you think has worked so well in Brazil and has not worked so well in India.  It would be interesting to do a kind of comparison, but I think the bottom line, as I see it, in health care is that the health care regulatory mechanisms and the health care delivery systems are problematic to say the least.  They have been the cause of the problem, rather than trying to solve the health care situation. 

And we really have to figure out, particularly in open societies like in India – and I am extremely conscious of this in the last few years that I have been more closely involved with legislative changes – that we need to be able to identify not DALYs for sure.  No politician would understand DALYs.  But we need to figure out how the policy argument that we would like to make regarding reform in Indian health care or any other health care system could be made politically viable.  That is the key, that an argument that has to be made in a manner which political establishments can recognize and relate as political entrepreneurs when they go to their constituency.

And that is the patent debate in India taught me quite clearly, that the only reason the Indian legislators changed the law was because they found no relationship between the health care situation on the ground in the villages to the whole debate of patents.  And therefore, New York Times had no impact on Indian legislators.  But all we really need, even in price control, we really need to figure out an argument where we can relate it to the politicians that this is not going to deliver the desired results. 

Like I said, the answer for the price control is, one, India has a generic manufacturing base much larger than most countries, yet it doesn’t reach.  And backed up by people from Gates Foundation who say that, even if you make drugs free, it’s not going to reach, which means we really need to be able to figure out how we can improve the regulatory and the delivery mechanisms on the ground, which would interest politicians because otherwise it just becomes slogans.

Vance Serchuk:  Thanks.  We have about 10 minutes, so we can take some questions.  Why don’t we start in the front.  John.  We’ll just go down the line.  Yeah, if you could wait for the mike and also identify yourself just for the purposes of the transcript.

John Gardner:  Sure.  I’m John Gardner.  I’m a consultant.  I was formerly General Counsel at USAID.  One quick comment and one question.  First, in fairness, the WHO-affiliated report did use the words “indoor residual spraying” in the malaria section.  I know they did not use the magic word, DDT, but I’d still encourage you all – and that includes you, Roger and Vance, fax that to all your favorite European development agencies and NGOs. 

[laughter] 

Question, one of the things that the WHO report criticizes is the US negotiating strategy in its bilateral FTA, CAFTA, what we’re trying to do with SATAC and groups like that, to have what I would certainly regard as a higher standard of intellectual property protection, i.e., higher than the Doha declaration.  I just wanted to get senses from that from anyone who would like to comment on that as to whether that, as I would believe, is actually a good thing because it provides certainties for investment and for innovation in a country or whether or not it retards the development of industry in those countries.  Thanks.

Vance Serchuk:  Thanks, John.  Any takers?

Julian Morris:  A good example is obviously CAFTA, which encourages stronger protection of IP, and, from the perspective of the countries in the Central American region, they saw it as a quid pro quo.  Okay, we’ll accept this apparently burdensome requirement in return for greater access to US markets. 

My view, and the view actually of some of our partner organizations in the Central American region, such as the consumer groups in Costa Rica, was that actually it’s quite possible that the legislation itself, far from being burdensome, would in fact, as you say, encourage inward investment by creating a framework which is rule of law based rather than more arbitrary.  So I think the comments, the remarks in the reports pertaining to the way the patent offices work as well, I think, are relevant here. 

In many countries, patent offices are extremely slow and evasive in a sense, and, to an extent, there is evidence that they give preference to local companies, which, again, it’s contrary to the rule of law where you want to apply the same rules to locals and to foreigners.  If through FTAs it were possible to improve that situation, then I think that would be a good thing.

Vance Serchuk:  Roger.

Roger Bate:  I just have one thing.  I think it’s something of a red herring.  In reality, as I think has been discussed around this table, is that it’s a topic that newspaper reporters are primed on.  It’s a topic that activist groups are ready to pounce on, and, therefore, it makes the newspapers.  But as you’ve heard today, the main problems are not at that end of the pipeline.  It’s actually getting the stuff out there. 

And so, would I argue against what the US government is doing in some of those negotiations?  Probably not.  But do I think every time a country is added to those lists it means you can have the same argument again, which is largely a red herring?  I find that really annoying.  That’s my thinking.

Vance Serchuk:  Okay.  Why don’t we have these questions?

Peter Kimmer :  Peter Kimmer at the Center for Global Development.  I have to say I’m just shocked to learn that access is a problem for drug and health care.  I work on food security questions, and I think we’ve known this for 30 years.  And I wonder whether there wouldn’t be some useful overlap that you might pick up in the literature in the food security debate, the entitlement and access literature that’s out there. 

The second point, on insurance, again, it’s part of our ongoing discussion on financial system development.  Insurance is just one piece of that, and my guess is you’re going to get a whole lot more out of an effective financial system and especially microfinance, in term of reliable smoothing of access to health, than you will through formal health insurance systems.

Maureen Lewis:  It’s interesting, one of the first HMOs in India grew out of a veterinarian pooling arrangement for livestock, and the cows were surviving, and they had enough money to afford to keep the kids alive.  So I don’t think they’re so far apart.  And I think on the insurance issue, one of the problems with the microfinancing is the pooling is too small, but I think that in India out of pocket government spends only 20 percent of the total amount.  So by virtue of the fact that there isn’t anything else, you’re taking it either out of savings or selling assets.

Male Voice:  It is fine for idiosyncratic sickness but not for[off microphone]

Maureen Lewis:  Catastrophic is where the problem is.

Vance Serchuk:  Okay, why don’t we take our final question.  Thank you.

Jessica Wolf:  My name is Jessica Wolf.  I’m also from the Center for Global Development and have worked very closely on advanced market commitments, among other things.  And I’d like to clarify a few points on that, not least the name.  In the report, which I admit that I just was able to read in the past half an hour, it was describing and critiquing Michael Kramer’s idea of advanced purchase commitments, APCs, as described in his 2004 paper, Strong Medicine.  The critiques he leveled about it being a winner take all or a prize adds some legitimacy in that regard, but nobody is considering that proposal anymore. 

That paper formed the basis of a working group at the Center for Global Development, very much the basis for much more discussion and development to introduce how could you reintroduce the idea of demand so you’re not linked to or guaranteed to buy a certain number of doses that aren’t useful.  How could you reintroduce the idea of having multiple suppliers, not just for the best in class versus first in class debate to insure the security of supply, which is a huge issue in vaccine?  And also, in our report the scope is limited to the discussion of vaccine, although we would like to maybe expand that discussion a bit.

And it is that version that the GA has endorsed for further discussion, and we expect that this Friday, around, say, 7:00 p.m., that they’ll have an announcement about which disease they would like to announce an advanced market commitment for, for a vaccine.  This would be AIDS, malaria, human papilloma virus, pneumococcal disease, rotavirus, and one more that I’m – and tuberculosis.  But so, I do think that you, in your report, intentionally or otherwise, set up a straw man that you knock down and that people acknowledged this criticism about a year or so back and have developed a much stronger proposal as a result.

And then a question coming from that bent a little bit more broadly.  Out of our work on that, we acknowledged and recognized that supply chain in the pharmaceutical market was a critical constraint on aid effectiveness and the ability to deliver current and future vaccines and drugs.  One of the things we kept hearing is that forecasting for demand was the biggest concern of manufacturers, and I was wondering if that was something that you heard, and, if so, why isn’t that included in the report?

Vance Serchuk:  Thanks.  Julian.

Julian Morris:  So I have to repeat that I wasn’t actually an author particularly on this.  I helped frame it, I helped in the editorial processes, and I communicated with some of the reviews.  And if what we’ve criticized here is a straw man, then so be it.  I suspect that what we criticized here is an idea that was being promoted and that other ideas have been promoted in a specific context.  You mentioned vaccine. 

Okay, maybe a particular formulation of advanced purchase commitment, advanced market commitment, whatever, could work for vaccines.  I don’t know.  Maybe it will.  We’ll see.  As regards the demand issue, clearly that’s a problem.  I guess if we haven’t talked about it explicitly here, but even though it’s implicit in the sense that there’s a lot of discussion of the lack of demand for drugs and the lack of delivery.  So I suppose it would have been useful actually to pull all that together and say this results in uncertainty over demand, which is part of the problem.  The more fundamental problem is just lack of demand, but uncertainty, of course, constitutes a risk for supplies as well.

Maureen Lewis:  Can I just say something?  I think one of the problems with something like TB, for example, there isn’t a demand for it, but it’s a communicable disease.  So governments have a demand that people get treated so they don’t pass it on, but this problem of implementation is probably more difficult with TB than probably any other disease.  Or it involves behavior change, as it does in AIDS. 

So demand is sort of a funny term in a sense.  There is a national demand.  Individual demand really varies because they don’t necessarily internalize, again, an understanding of how the drugs are going to work, and they really don’t want to take the drug regime. 

Again, this has been a big problem with tuberculosis.  But even if you take something like prevention that’s onerous, I think it’s the same kind of thing.  You’ve sort of got to convince people.  So it’s a bit of a funny concept, I think, with some of these diseases.

Vance Serchuk:  Roger, last word.

Roger Bate:  I had absolutely no involvement with this at all, but what I can say is that the times that I have been involved with large groups trying to look at large numbers of data, the fact that they relied on a 2004 report for something being published now certainly would not cause ripples in any multilateral organization anywhere in the world.  And I struggle to get around to read anything that was relatively new, so I’m sure they will take it onboard. 

The other thing is that where I have experience on malaria, we have seen at times very, very bad performance of people within multilateral agencies, including USAID, WHO, World Bank, saying that they approve of a drug, then not following the main market text, which is going out and buying it.  And I know for a fact Novartis is saying, well, we make a loss on most of these drugs that we’re selling - Artemether and Coartem, which is their ACT – and you’re asking us to provide 200 million doses next year - and we’re making a loss?  We’re going to make even more of a loss if you don’t actually come through and buy it.  So I think, at least in the one market that I know, it’s been a huge problem.

Vance Serchuk:  All right, thank you, Roger, and thanks to all of our panelists for coming.  Please join me in offering a round of applause.  We hope to have everyone back again soon.  Thank you.

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