Who's Going to Pay for Global Health?

October 23, 2003

Global strategies for fighting tuberculosis, malaria and AIDS are just now coming together. Especially this year, we've seen a marked difference in international attitudes toward these pandemic diseases – particularly AIDS, which is now considered to be the greatest humanitarian crisis of the 21st century (although malaria and TB infect millions upon millions more individuals than HIV does).

The Bush Administration's $15 billion global AIDS bill represents a stunning commitment to global health initiatives, but it's not the only one. Other national governments have stepped up their financial support, as well. And philanthropic organizations – especially the Bill and Melinda Gates Foundation – have contributed massive amounts of money to R&D efforts on new drugs and vaccines. Other non-government organizations have amassed hundreds of million of dollars to buy medicines, which they then disperse to desperately needy countries.

It's a great start – but that's all it is. Much, much, much more money will be needed to conquer these diseases. Where's it going to come from?

The amazingly swift global response to the SARS outbreak earlier this year demonstrated once and for all that it is possible for countries to join forces and fight epidemics quickly and effectively. So, shouldn't the same apply to the true pandemics – AIDS, malaria and tuberculosis? Indeed it should – but global strategies to fight these scourges are just now starting to come together.

The World Health Organization (WHO) and the United Nations Children's Fund (UNICEF) have been major players on the global health front since the late 1940s, and their influence has been considerable, but it's no doubt the astounding commitment to global health initiatives exemplified by the Bill & Melinda Gates Foundation that's finally mobilized governments and funding agencies around the world.

This year alone, the Bush Administration signed into law a bill committing $15 billion over five years to fight AIDS in Africa and the Caribbean. The governments of the European Union approved a regulation that encourages pharmaceutical companies to sell their drugs for AIDS, tuberculosis (TB) and malaria to African countries for about a third of the original price. The Canadian government announced plans to relax patent laws so generic drug manufacturers can export AIDS drugs to developing nations. And the Japanese prime minister pledged $1 billion in new aid for education and healthcare in Africa.

The Gates Foundation has already distributed nearly $700 million in grants this year – and about $2.3 billion since its founding in 2000. The Global Fund to Fight AIDS, Tuberculosis and Malaria (the Global Fund), which was set up in early 2002 as a financial instrument to channel money to countries in need, recently approved a further $623 million for 50 countries fighting these diseases. Its total commitment to date is $2.1 billion. And the list goes on.

But that's not all. Succumbing to increased social pressure, a number of pharmaceutical companies – and a biotech firm -- have drastically reduced the prices of their AIDS drugs in developing world markets. (See the table below for details.) Eli Lilly and Co. has doubled production of two drugs for multi-drug resistant tuberculosis – which it will sell below cost. Moreover, Lilly has established a technology transfer program to help companies in developing countries make and sell these drugs themselves. And GlaxoSmithKline plc is launching a malaria drug, Lapdap, which it will sell in Africa for 29 cents per course of treatment in adults and about 15 cents in children.

Moreover, the World Trade Organization (WTO) has finally managed to hammer out intellectual property agreements that will allow pharmaceutical companies to retain their IP rights in developed nations while simultaneously creating the means by which generic manufacturers can make these medicines in the developing world without infringing those patents. Importantly, under compulsory licensing provisions, developing countries making the drugs cannot export them except to those least developed nations that can't afford to set up their own manufacturing facilities. (For more details, see the Signals article, "The WTO: Cancun, Doha and IP.")

Some big pharmas have already taken measures to license their AIDS drugs to generic manufacturers. For instance, in 2001, GlaxoSmithKline licensed three of its AIDS drugs (AZT, 3TC and Combivir) to a generic manufacturer, Aspen Pharmacare of South Africa.

And in January 2003, Pharmacia Corp. (since acquired by Pfizer Inc.) licensed its AIDS drug Rescriptor to the International Dispensary Association of The Netherlands (IDA), a nonprofit organization which in turn was tasked with out-licensing the product to generic manufacturers to produce the medicine for use in 78 selected developing countries. The IDA will coordinate the exchange of technical skills, manufacturing expertise and documentation between Pharmacia and the generic manufacturers. As part of this pilot project, the generic manufacturers were prohibited from selling against the patent holder in developed countries. Moreover, the generic versions of the pills will be a different shape and color than the original, making it easier to guard against illegal sales of the drug back into developed-country markets.

This pilot project, which was described in the Jan. 25, 2003 issue of The Lancet (Friedman et al.), was intended to demonstrate that it is possible for branded drug manufacturers to protect their interests in developed countries while still making essential medicines available at rock bottom prices in the developing world. The model fits nicely into the WTO's declaration on trade-related aspects of intellectual property rights (TRIPS) and public health, as well.

Just the Beginning

All these initiatives represent great strides in the right direction – but they're still woefully inadequate to meet the health needs of developing nations.

For instance, the Bush Administration's $15 billion global AIDS bill, among other provisions, will make antiviral treatment available to about two million HIV-infected individuals. Yet, there are currently 30 million people infected with HIV in Africa alone. And, according to the WHO, 45 million more individuals will be infected by the year 2010 –figures so scary that last month the WHO declared AIDS a global health emergency.

If at least three million people aren't treated by 2005, according to the organization, we will have a catastrophe on our hands. Achieving that goal, said Richard Feachem, the executive director of the Global Fund, will cost about $3 billion per year from all sources.

If it will take $3 billion to treat three million HIV-infected individuals, then by extrapolation it could take $30 billion to treat 30 million patients. And those figures don't even address the costs of treating the far greater number of people suffering from tuberculosis and malaria. (About 300-500 million people have malaria; close to 2 billion are infected with TB.)

Moreover, even drastic price cuts on drugs do not help everyone. Governments and non-government organizations stand to benefit, but patients receiving private health care do not. Plus, it's already been demonstrated that even when medicines are free, many patients don't receive them because medical infrastructures and distribution systems are nonexistent. In fact, some feel that this lack of infrastructure is one of the most difficult problems facing developing nations.

The Elephant in the Living Room

This brings us to the central issue, which few have addressed to date: Despite the billions being poured into global health care initiatives, there is still a massive shortage of funding. And where is the money going to come from to truly alleviate the world's pandemic diseases? This is a huge problem – one that's been there all along, although its presence has been largely ignored or denied until very recently. It's the elephant in the living room.

Who's going to buy the medicines? Who's going to help build effective healthcare infrastructures so that all individuals have access to drugs or vaccines for AIDS, TB and malaria? Who's going to provide the financial backing for prevention and education programs?

These are weighty questions – and they don't even address the drug development side of the equation. For here, too, there's an overwhelming need for cash. The Gates Foundation, the Rockefeller Foundation, the World Bank, a number of national governments (especially the G-8 nations) and other organizations have contributed significant amounts to help fund research on new medicines and vaccines by the various public-private partnerships (PPPs).

These not-for-profit organizations have been set up to coordinate the activities of multiple players (philanthropic organizations, biotech and/or pharmaceutical companies, universities, government agencies in developing and developed countries) in the search for new drugs and vaccines to treat AIDS, TB and malaria. By structuring these partnerships in such a way that the costs of drug development are shared, the PPPs reduce the financial commitment and lower the risk for each partner. (For details on the various PPPs, see the Signals article, "North-South Alliances: Abolishing Pandemics.")

Collaboration, Cooperation, Coordination

But the money PPPs have raised to date is not sufficient to cover expensive late stage clinical trials let alone manufacturing and distribution. Moreover, these organizations' strategic advantage lies with product development, not product delivery. Are there additional funders out there to help cover the costs of clinical trials? If a product is successful in the clinic, who will be responsible for product approval and registration? What about manufacturing and distribution?

To make it all work, experts say, will require an unprecedented degree of collaboration and cooperation among researchers, industry, governments, non-profit organizations, foundations, and international bodies. No one enterprise – not even the Gates Foundation – is equipped to handle such a huge undertaking on its own.

"The fact is, we can't pay for all of it," explained Hannah Kettler, a program officer with the Gates Foundation. It's possible that the foundation could act as a catalyst to help the various players develop an integrated strategy for turning research findings into drugs and vaccines that will actually reach patients. "At this point, there's no leader" in the creative thinking that will be required to turn this system into a functioning process, she said. And in this regard, the Gates Foundation might be able to play a critical role.

A Working Partnership

There are no answers yet, but many groups are now addressing these issues head on. For instance, many of the PPPs are analyzing the issue of what infrastructure is needed to manufacture, approve and deliver drugs and vaccines, but are not in a position to finance these stages, according to the Gates Foundation's Kettler.

One of those is The Global Alliance For TB Drug Development (TB Alliance), which was formed in October 2000 to build a portfolio of TB drug candidates and manage their development through a series of outsourced projects. Last year, the TB Alliance signed a deal with Chiron Corp., under which it received exclusive worldwide rights to develop Chiron's preclinical product PA-824 (a nitroimidazole-related compound) and its analogues as drugs for treating TB. This compound, which is different from traditional TB drugs, had already demonstrated in vitro activity against both drug-sensitive and multi-drug resistant strains of TB, making it a very promising development candidate. In fact, in the studies performed on PA-824 to date, the compound has "met all the standards any drug needs to meet," explained Maria Freire, CEO of the TB Alliance. If it continues to perform well, "we may be in man in 18 months."

The TB Alliance will contract out the clinical trials – to be conducted in disease-endemic countries -- although Chiron has the option to bring the product back in house under certain circumstances, she continued. The biotech firm also has a grant-back option for manufacturing and commercialization of the product in developed markets.

The TB Alliance has several other programs underway, as well – including a two-year project in South Korea. Launched in April 2003, the TB Alliance will fund efforts by researchers at the Korean Research Institute of Chemical Technology to synthesize and optimize novel quinolone compounds as first-line therapies for TB, a strategy that would shorten and simplify the treatment regimen. (Quinolones, a family of broad-spectrum antibiotics, are currently used as second-line therapies for drug-resistant TB.)

Infrastructure is Key

These are still early-stage programs, but once new drugs do emerge from the pipeline, how will they be distributed to patients? Well, in the case of TB, the infrastructure is already in place: A practice was instituted a decade ago, whereby healthcare workers directly observe patients taking their medications. This is part of the international treatment and control strategy, Directly Observed Treatment Short course (DOTS), promoted by the WHO. "Our strategy takes into consideration the access channels already in place for TB," explained Freire.

Moreover, the TB Alliance is part of a larger movement, the Stop TB Partnership, which was set up in 1998 to mobilize public, international, philanthropic and non-government organizations in the fight against TB. The partnership secretariat is hosted by the WHO and supports a wide range of advocacy and coordination activities worldwide. "All the constituents [of Stop TB] have banded together with donor countries and health ministers of endemic countries," she said. That way it's possible "to keep very close tabs on what's happening with TB."

But even this network isn't perfect: DOTS is currently available for only 27 percent of all TB patients. And drug shortages in many parts of the world have slowed efforts to expand the DOTS program.

Stop TB also established a Global Drug Facility, which is a donating program that purchases TB drugs in bulk and then gives them to countries in need. And current DOTS drugs are cheap, Freire said, about $11-$25 per treatment regimen (a four-drug combination therapy delivered over a 6-9 month period). Going forward, the TB Alliance has to keep these price constraints in mind. "If we develop a drug that is $11 per pill, we can assume that we will not be able to integrate it into DOTS," she explained. Affordability is a major consideration. "We keep this issue in mind when we decide to bring a drug candidate into our portfolio."

Not only must any new TB drug be affordable and accessible, but also it has to be acceptable, she said. "The best way to ensure our ultimate goal of getting better treatment to patients is to have physicians fully embrace a new treatment regimen."

Vaccine Challenges

Unlike the situation for TB drugs, the path for distribution of drugs and vaccines for AIDS and malaria is anything but straightforward. For in these cases, very little, if any, infrastructure exists today. And, while manufacturing issues for drugs seem to have been resolved – at least from a legal perspective – by the WTO's TRIPS declaration, vaccines are a different story. As mentioned earlier, the way is now clear for generic manufacturers to produce AIDS (and other) drugs, and a handful of big pharmas have already licensed those products to generics firms. Plus, there are already a number of generic drug manufacturers in developing nations (India and Brazil, for instance) capable of making these chemical entities.

But no such system exists for vaccines. In fact, it's been said that there's not enough capacity to even manufacture the vaccines that now exist – much less the experimental ones. "The expertise for making biologics and vaccines is not found in very many places in the developing world," explained Melinda Moree, the director of the Malaria Vaccine Initiative (MVI), another PPP funded by the Gates Foundation. "There are only a handful of companies that supply vaccines to WHO."

But, she added, "We will see that change over the next 10 years." For instance, the Serum Institute of India is currently the largest supplier of measles vaccine to UNICEF. "There's no doubt it can perform high-quality manufacturing. And we're starting to transfer the technology [for making other vaccines] into the Institute… In the future, it will be very well positioned to take on development and manufacturing."

But what about vaccine manufacturers in the developed world? What inducements do they need in order to make a vaccine for malaria, for instance? Since these firms aren't already geared up for it, they would have to build new manufacturing capacity – a difficult idea to sell, especially when they don't see a profit in it. However, there may be a way.

Inducements and Incentives

The Center for Global Development (CGD), a think tank located in Washington, D.C., has established a working group that is examining how guaranteed purchase contracts can be used to encourage such companies to develop vaccines and drugs for malaria, TB and AIDS. These are so-called "pull contracts," which would essentially assure a market for a particular product.

According to Ruth Levine, a senior fellow at CGD, "from both an academic and practical perspective, there is a lot of interest" in the concept of pull contracts. "They will guarantee a future price for a vaccine or they will guarantee both the price and the quantity [to be purchased]."

The working group is currently concentrating on model contracts for two different vaccines – for rotavirus (which causes severe diarrhea in children and has a market in industrialized countries, too) and malaria. For rotavirus, the model contract is intended to "influence [manufacturers'] decisions on manufacturing capacity" so that there will be enough to respond to the need and demand for a vaccine. For malaria, on the other hand, the model contract "tries to influence decisions on how much to invest in R&D." But the CGD is "not the right group to take this forward," so once the model contracts are finalized (perhaps by February 2004), it will "hand them off" to other organizations for implementation. It is already working in collaboration with the Gates Foundation to identify potential sponsors, including bilateral aid agencies, UNICEF, WHO and others.

"The developing world represents a high volume, low margin market," MVI's Moree said, "but that doesn't mean somebody can't make money off it… If the right kind of incentives are in place, companies will go for it." Just look at what happened when the U.S. government allocated $6 billion to project BioShield, an initiative that emphasizes bioterrorism countermeasures. Among other things, it assured potential manufacturers that if they can create a safe and effective product, the government will purchase it. BioShield also provided the upfront cash for companies to develop smaller margin products, Moree said, which they can use to build their internal capacity. "We learned some important lessons from that," she added. Even if the economics of creating medicines for the developing world don't make sense, the appropriate incentives will make it an attractive undertaking.

"The hope is that the industrial sector, whose skills are so needed, will become sufficiently engaged to do its part," according to Lita Nelsen, the director of MIT's technology licensing office. "We can't expect to do it philanthropically."

Nelsen, who chaired a session at a recent Gordon Research Conference on Global Aspects of Technology Transfer, added that it probably won't get done at all without the PPPs, which are becoming more powerful and play an increasingly important role in the development of new medicines for pandemic diseases. "PPPs are a necessary force to keep the focus on the issues."

The International Perspective

Of course, the governments of industrialized nations as well as those of developing countries have a critical role to play, too. But how?

Well, there's no answer yet, but the OECD (Organization for Economic Cooperation and Development), for one, is "beginning to look at what OECD member countries [which are advanced, industrialized nations] could do to facilitate access to medicines [by developing countries]," explained Bénédicte Callan, administrator, Science and Technology Policy/Biotechnology at OECD. "We have to get beyond the issue of patents and look more specifically at initiatives that developed countries could put forth."

However, at this point, "there is no consensus among the advanced countries as to what they could be doing. Most discussions so far have concerned tiered pricing [of medicines], how the pricing will work and evidence that there will be no flowback of [discounted] drugs into advanced markets," Callan said.

In time, the industrialized nations will surely come up with ways to resolve these issues, but there's a larger problem: "What is the likelihood that OECD countries can dramatically increase aid for health purposes? Development assistance is already $60 billion, with $10 billion from the U.S. Honestly, it won't happen. These countries can barely deal with their own health budgets. We need a greater impetus," she said.

And that's the crux of the matter: To really accomplish the goal of eradicating pandemic diseases and improving the health prospects for all individuals on the planet, it's going to take an extraordinary financial commitment from all concerned parties – as well as a highly creative strategy that will facilitate and integrate the process of developing and delivering medicines to those in need.