Can reducing health commodity costs (i.e. the cost of HIV drugs or malaria bed nets) save millions of lives worldwide? Can it invigorate increased giving at a time when donor countries are struggling to tighten their belts and balance their budgets?
Recent news indicates that the answer to both of these questions may be a resounding and increasingly urgent "yes."
The June anniversary of the 30th year of the global AIDS epidemic was marked by both celebration of the progress that's been made on treating the disease, and great concern about how to afford treatment for the estimated 9 million individuals still in need. With aid money flat-lining and many millions more still in need of life-saving health interventions, the debate on how to increase "value for money" of aid dollars is intensifying.
Fortunately, a few key financiers of health globally are leading the charge to ensure every dollar achieves the largest impact possible. The Global Fund to Fight AIDS, Tuberculosis and Malaria (the Global Fund) is among the most important of these. With its funding, the institution supports nearly half of all AIDS patients on antiretroviral (ARV) treatment in the world. It has committed $7 billion to the purchase of health commodities globally.
Ensuring sustainable, quality treatment for the millions of patients the Global Fund supports is of the utmost importance. With this in mind the Global Fund approached the Results for Development Institute (R4D) in early 2011. The Global Fund commissioned R4D to develop strategies that would better use its enormous buying power to allow markets -- specifically the ARV drug market -- to operate more efficiently, leading to financial savings and ultimately increasing patient access to life-saving treatment.
To illustrate the magnitude of the challenge encompassed within the ARV market, consider that today -even with recent and enormous price reductions -- HIV/AIDS drugs cost approximately $150 USD annually per-patient in the developing world. There are approximately 14.6 million people eligible for treatment in low and middle-income countries, while projections show that the number of HIV-infected people will only continue to grow over the next 20 years.
Reducing commodity costs by a mere 5-10 percent can represent hundreds of millions of dollars in savings for the global community. In turn these savings translate into millions of more patients who can receive access to life-saving treatment.
For this important work with the Global Fund, R4D adopted a "Market Dynamics" approach. This involved taking a 360-degree view of all levels of the marketplace -- including ARV suppliers, countries that purchase these products and global public health actors (financiers, NGOs, regulatory agencies, etc.) -- to identify ways to improve the efficiency of the market. Desired outcomes included more affordable drug prices, improved availability and ongoing innovations in treatment.
R4D assembled a diverse expert team led by Kanika Bahl. The team was comprised of a mix of business, pharmaceutical and clinical thought leaders, working under the auspices of the Global Fund Market Dynamics Committee (MDC). The MDC included leading actors in the health arena, including numerous country representatives from Africa, Asia and Latin America; donor representatives from USAID, the Gates Foundation, UNITAID and DFID; and key technical agencies such as UNICEF, the Clinton Foundation, WHO and others.
To develop strategy recommendations for the Global Fund, R4D first had to conduct an in-depth assessment of the ARV marketplace. We interviewed 59 stakeholders in 23 public and private organizations, and extensively reviewed existing analyses.
Based on this we developed a set of targeted interventions to address key market issues, with increasing access and lowering costs as top priorities. Taken together, our recommended market strategy could result in savings of $520 million for the global community over five years. Put in context, this could mean that 3.5 million additional patients could have access to a year of life-saving HIV treatment.
As an example, "Product Selection" was a key opportunity identified to allow the global community to achieve higher value for money. There are a number of ARV drugs available. In some cases there may be two drugs that are approved by the World Health Organization (WHO) and have similar safety and efficacy profiles, but one is $100 cheaper per patient per year. We proposed that the global community first develop clear international guidance on cost-effectiveness of various WHO-approved treatments, and then align financial incentives in order for countries to procure the most cost-efficient products.
One may ask why this approach is important or particularly novel. While it may seem straightforward, barriers to cost-effective decision-making are persistent and the mechanisms to enable it are often not in place. Today, countries frequently procure the more expensive of two clinically similar drugs, at an additional cost of hundreds of millions of dollars to the international community.
The reasons for this vary. In some cases there are local preferences for the more expensive drug because physicians are more familiar with it, while in other instances clinical decision makers are simply unaware of the cost differential. While clinical guidance on product selection has long been available to the global community, this groundbreaking approach represents the first time that global cost-effectiveness guidance could be made accessible to those most in need.
R4D worked closely with the Global Fund MDC to present this -- among several other Market Dynamics recommendations -- in an MDC report to the institution's Board of Directors. In May 2011 at the 23rd Global Fund Board Meeting in Geneva, Switzerland, the Board voted to approve the recommended market strategy for the institution.
Global health commodities are multi-billion dollar markets and low- and middle-income countries spend a significant amount of their public health dollars on the purchase of these necessary products. As the world faces tough economic decisions, it is more important than ever to ensure that each dollar is used as efficiently as possible.
In DFID's recent multi-lateral aid review, the Global Fund was praised as a high value for money organization, with ongoing efforts to ensure that every dollar translates to the greatest number of lives saved. Further exploring ways to ensure cost-effectiveness, in ARVs and beyond, will play an increasingly important role in achieving this urgent global imperative.
David de Ferranti is President of Results for Development Institute. The co-author of this blog, Kanika Bahl, is Managing Director at Results for Development Institute.