When World Aids Day was first observed in 1988, there was no truly effective treatment for what was almost always a deadly disease. Today the biggest problem in caring for those with AIDS is no longer mainly a medical or scientific problem. The crisis is access to affordable drugs. Despite medical breakthroughs, AIDS drugs cost way too much for way too many to afford. Fortunately, there is a promising solution. We must break the link between rewards for research and the prices charged for new drugs.
There have been tremendous scientific advances, but AIDS has not gone away. The U.S. Centers for Disease Control and Prevention estimates that there are more than 1.1 million persons living with HIV/AIDS in the United States, and that 56,000 persons are newly infected every year. Globally, the numbers are more staggering. The World Health Organization says more than 33 million persons are living with HIV/AIDS, and 2.5 million are infected each year. Ninety percent of HIV+ persons live in developing countries, some 29 million persons. Only 6 million of those receive the most effective treatment for AIDS, the antiretroviral drugs known as ARVs.
Matters are likely to get worse. The United States is backing off its commitment to the successful Global Fund to Fight AIDS, Tuberculosis and Malaria. Other countries are following suit. Just last week, the Global Fund announced that it will not be able to reach more people suffering from these devastating diseases until 2014.
The problem with access to affordable care is not only a third-world concern. It's a problem right here at home. A three-drug regime like ATRIPLA costs less than $200 to make but sells for $24,000 per patient per year in the U.S. Some newer combination therapies are even more expensive. Funding shortfalls for federal- and state-subsidized AIDS drug assistance programs, however, have caused waiting lists to grow. A list that was whittled down to 361 people a year ago grew to 6,595 people in 12 states as of last month. Many more are simply being thrown off the waiting lists due to stiffer eligibility requirements.
The big winners under the current system have been the pharmaceutical companies. The lucrative incentive for drug makers to invest in research and development is a 20-year monopoly on a profitable new invention. Many people thought this approach was necessary to stimulate R&D. It's not. There is a better way. Many economists, in fact, are now questioning the costs and benefits of old-fashioned pharmaceutical monopolies and look to a new model as a way to reward innovation and make affordable medicine available to millions more people.
I introduced a bill in the Senate that would test this new approach on drugs developed to treat one disease: HIV/AIDS. The measure (S. 1138) would eliminate legal barriers to generic competition for HIV/AIDS drugs, and reward innovation directly, through a $3 billion a year prize fund. It would unleash unprecedented advances in medical innovation in decades to come by also requiring that at least 5 percent of the prize money go to any individual, business or non-profit organization that openly shared information, data, materials or technology that contributed in a positive way to the development of new drugs.
The prize fund approach recognizes that we need to foster and reward medical innovations, but separates the market for innovation from the market for the drugs themselves. This approach has many benefits, dramatically lower prices being the most obvious. Experts estimate that the $10 billion U.S. market for AIDS drugs can be supplied at generic prices for anywhere from $500 million to $1.5 billion. So, even after spending $3 billion per year on the prize fund, there will be a huge overall savings.
Saving money isn't the only reason this is a good idea. The prize fund also will stimulate innovation. It will give larger rewards for drugs that improve health care outcomes, and smaller or no rewards for duplicative, "me-too" drugs that are medically insignificant. It also would eliminate incentives to engage in wasteful marketing activities. Prize fund rewards will be based on evidence that drugs actually work, and work better than alternatives.
The prizes would be funded by the federal government and private health insurers in an amount proportionate to their share of the HIV/AIDs drug market. Insurance companies and self-insured employers should welcome the new model. The cost of the prize fund would be considerably less than the cost of buying drugs at monopoly prices.
From the beginning, the HIV/AIDS pandemic has presented very difficult challenges. The current challenge is to make access to treatment sustainable for more than a million persons in the U.S. and tens of millions of people in developing countries. The prize fund model reconciles innovation and access. If the U.S. can transform its domestic market for HIV/AIDS drugs, it will certainly transform the world market, and make HIV/AIDS drugs more affordable for everyone, everywhere.