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5 Increase U.S. Financial Commitments to Global Health FINANCE THE GLOBAL HEALTH FUNDING GAP A financing gap contributes to the difficulties that low- and middle-income countries face in addressing the health needs of their populations. New threats such as pandemics and chronic diseases have altered the disease burden of these countries, even as the financial crisis has weakened their economies further. External assistance from donors will be essential if low-income countries are to reach the globally recognized Millennium Development Goals (MDGs) and if the global community is to address the emerging challenges of the twenty-first century. Basic Health Needs of the Global Poor The global community uses one of two benchmarks to quantify the basic health needs of poor countries: (1) the cost of scaling up to meet the health-related MDGs, estimated at $20 billion to $70 billion annually (Wagstaff et al., 2006) or (2) the price estimate of $34 per capita per year for an essential health benefit package, as assessed by the World Health Organization’s (WHO’s) Commission on Macroeconomics and Health (WHO, 2001). While low-income countries bear a large portion of the total disease burden, they contribute only 2 percent of worldwide health spending ($7 billion annually or 5.3 percent of their gross domestic product [GDP]) (Gottret and Schieber, 2006). Low-income country revenues amount to only 18 percent of their GDP (compared to 32 percent in high-income countries), severely limiting their ability to finance essential health services (Gottret and Schieber, 2006). For a country 

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 THE U.S. COMMITMENT TO GLOBAL HEALTH such as Burundi, with a GDP per capita of $341 (World Bank, 2007a, 2007b), revenues are expected to deliver $61 per capita to spend on all public needs such as education, health, and infrastructure. If $34 of this were spent on the essential health benefit package as prescribed by WHO, more than half of government revenue would be consumed by basic health services alone. To meet their basic health needs, low-income countries have been asked to raise an additional 1 to 4 percent of GDP in public revenue (UN Millennium Project, 2006; WHO, 2001). The committee supports the call for increased health spending by low-income countries, but recognizes that revenue performance over the past few years has been disappointing and even stagnant in some regions (Gupta et al., 2004). Increasing spending for public health is made especially challenging by the global economic recession. Countries relying on revenue from commodity exports and foreign direct investment will need external assistance and conces - sional borrowing as export prices plummet and foreign direct investment dries up. With governments unable to maintain critical expenditures on social safety nets, human development, and critical infrastructure, the plight of the poor in low- and middle-income countries is set to worsen. Falling employment and wages further impede households’ ability to pay for essential food and health services (see Box 5-1) (World Bank, 2009b). Without substantial economic development and debt relief, it will be dif- ficult for low-income countries to scale up health spending on their own, at least in the immediate future. Even if low-income countries were able to mobilize an additional 1 to 2 percent of their GDP to finance health, it would amount to only $12 billion to $24 billion, which is insufficient to meet the MDG funding gap. Likewise, if the aim were to deliver the $34 per year benefit package, low-income countries would need to increase their health spending by more than 40 percent, which is an unlikely prospect (Schieber et al., 2007). Low-income countries will clearly not be able to make significant progress in delivering basic health provi - sions to their populations without external assistance (Gottret and Schieber, 2006; UN Millennium Project, 2005; WHO, 2001). Finance the Global Health Funding Gap If low-income countries are to move closer to meeting the MDGs and delivering essential health services, foreign assistance for health from advanced economies will have to increase and be sustained over the coming decade. These countries already depend greatly on external assistance to fund health program - ming. In some 30 African countries, 30 percent of health spending comes from donors and international nongovernmental organizations (Gottret and Schieber, 2006); in Rwanda’s 2008 work plan, this figure was as high as 83 percent and is expected to remain above 67 percent until 2020 (WHO et al., 2008).

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 INCREASE U.S. FINANCIAL COMMITMENTS BOX 5-1 Health and Poverty During Economic Downturns Mobilizing financing for the health sector is especially crucial during economic downturns and subsequently lowered household earnings. The poor in low-income countries are most affected at such times because they pay a large portion of their health care costs out-of-pocket, without the benefit of social safety nets (Gottret and Schieber, 2006; Hopkins, 2006). The health of a country’s population thus significantly worsens during a downturn due to reduced access to health care (Hopkins, 2006; Pongou et al., 2006; Waters et al., 2003) and poor nutrition. The current global economic crisis is dramatically increasing the number of people trapped in poverty in low-income countries. New estimates for 2009 sug- gest that 46 million more people will be living on less than $1.25 a day than was expected prior to the crisis. An extra 53 million will be trapped on less than $2 a day. This is in addition to the 130 million to 155 million people already pushed into poverty in 2008 because of soaring food and fuel prices (World Bank, 2009a). These new forecasts highlight the serious threat to achieving the MDGs by 2015. Sub-Saharan Africa, one of the regions hit hardest by rising food prices, could be further affected if foreign direct investment and aid flows now decline (World Bank, 2008). New research shows that child mortality rates are set to soar if the crisis persists, with preliminary estimates for 2009 to 2015 suggesting an average of 200,000 to 400,000 more child deaths a year (amounting to a total of 1.4 million to 2.8 million deaths) (World Bank, 2009a). Some hard-won advances of the past few years in poverty reduction and health could thus unravel. In today’s market crisis, the financial policies and practices of the high-income nations, including the United States, are seen as the cause of painful economic spillovers in low- and middle-income countries. It is therefore crucial for the rep- utation of the United States that the nation live up to its humanitarian responsi- bilities, despite current pressures on the U.S. economy, and assist low-income countries in safeguarding the health of their poorest members. It is equally impor- tant that the entire global community uphold its commitments and remain focused on the MDGs (UN, 2008). For low-income countries to see significant improvements in health, large grants from external donors will have to be sustained for long periods. A study in Ethiopia and Tanzania found that a doubling of aid as a percentage of GDP would require grant financing for 20 years before these grants could be replaced by additional tax revenue under reasonable assumptions of increased domestic growth (Foster et al., 2003; Gottret and Schieber, 2006). The level of investment needed to deliver individual-level and population-based care, to build institutions and systems, and to conduct health research will require both significant and sus - tained investment by bilateral and multilateral agencies and greater exploration of innovative financing models.

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 THE U.S. COMMITMENT TO GLOBAL HEALTH Increase U.S. Commitments to Achieve Health-Related MDGs In 2002, the United Nations (UN) Millennium Project estimated that total overseas development assistance (ODA) volumes would need to rise to 0.54 percent of high-income country gross national income (GNI) by 2015 if low- and middle-income countries were to meet the MDGs (UN Millennium Project, 2006). Although global ODA directed to health has increased significantly, from 4.6 percent of total ODA in 1990 (Schieber et al., 2006) to 16 percent in 2006 (OECD, 2008a), the overall level of ODA commitment is still too low to meet the MDG funding needs of low- and middle-income countries. Over the last 10 years, U.S. ODA has grown from $8.8 billion to $26 billion (a 196 percent increase) (OECD, 2009). Between 2001 and 2008, U.S. Agency for International Development (USAID) and State Department global health programming grew by nearly 350 percent. As a result, health now makes up a larger portion of both the U.S. foreign affairs and the overall ODA budgets. In 2006, health aid comprised 23 percent of U.S. allocable aid; this is more than the average proportion of spending on health aid by other advanced economies (see Figure 5-1) (OECD, 2008b). President Obama announced the U.S. government Global Health Initiative in May 2009 and requested that Congress support $63 billion in spending on global health between 2009 and 2014; this is an average of $10.5 billion per year over the next six years. Under the initiative, the President’s Emergency Plan for AIDS 40% 36 % 33 % 32 % 30% U.S. % of Donor Total 23 % 21% 20% 19 % 18 % 17% Averag e (16%) 15% 15% 14% 13 % 11% 11% 10 % 10% 10 % 10% 7% 7% 5% 5% 3% 0% xe dom n n a ly Ze l i a g Fi ia C ce ce N ust s es he m k nd Sw ay en d Be en Po n y d itz al d pa A nd ai ad te our ar an Ita an r d lan iu ew ra Sw rtug an e at la w st a Sp ed m Ja rla an re lg Lu ing m al or nl St Au er U mb n i Ir e Fr G er N K d D G et te ni N U FIGURE 5-1 Allocable aid for health 5xf.eps (2006). SOURCE: Committee’s calculations based on OECD, 2008b.

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 INCREASE U.S. FINANCIAL COMMITMENTS Relief (PEPFAR) would receive $51 billion over six years. The proposal calls for an increase in funding from $8.186 billion in 2009 to $8.645 billion in 2010 (White House, 2009). The committee commends the recent increases in spending on global health but finds that an even greater commitment by the U.S. government is required to demonstrate leadership in both global health and global economic and human development. Despite dramatic increases in spending for global health—and in the proportion of ODA allocated to health—over the past decade, the U.S. commitment to overall ODA has been below the efforts of other high-income countries in relative terms. So even though the United States was the largest aid donor in absolute dollars ($26 billion) in 2008, it has one of the lowest levels of net ODA as a percentage of GNI: 0.18 percent (see Figure 5-2). This is well below the UN target of 0.54 percent and the Development Assistance Committee average of 0.45 percent. Even when private giving is included, the United States does not come close to the level of most other high-income countries’ ODA. The U.S. government contributes only 25 cents per day per person, with an additional 10 cents per day being given by private U.S. donors. Sweden and Denmark, by comparison, give $1.00 and $1.07 per day per person, respectively, in public aid alone (Roodman, 2007). If the U.S. government is to meet its obligations to support all of the MDGs, it will need to reach the UN target of 0.54 percent of GNI and commit to spending 0.98 1.0 0.92 0.9 0.88 0.82 0.80 0.8 0.7 0.58 0.6 Millennium Development Goals ( 0.54) As % of GNI 0.47 0.5 Averag e Countr y Ef fort ( 0.47) 0.43 0.43 0.43 0.42 0.41 0.39 0.38 0.4 U.S. 0.34 0.32 0.30 0. 27 0.3 0. 20 0. 20 0.18 0.18 0. 2 0.1 0.0 en g ay k Ir e s Be nd Fi m d n m i t z t r ia Fr d er e y C lia Ze d a Po d G al e ly St n es an ar nd ai te p a ur n an c an ec Ita g iu do ra w at an la ew a n a ed la Sp r tu m Sw us bo m lg rla re ni Ja nl al or er st ng Sw en A m N Au he Ki d G D xe et d Lu N te N U ni U FIGURE 5-2 Net official development assistance (2008). SOURCE: OECD, 2009. 5xg.eps

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 THE U.S. COMMITMENT TO GLOBAL HEALTH approximately $81 billion per year on development assistance by 2012. Given that three of the eight MDGs are directly related to health (Goals 3, 4, and 5), a portion of any increase in development assistance should be allocated for health programs and research activities. Within this greater commitment to foreign assistance, the committee recommends that the U.S. government investment in global health match the average proportion of ODA for health (16 percent in 2006) for countries belonging to the Organisation for Economic Cooperation and Development (OECD). By 2012, the President and Congress should commit to spending a minimum of $13 billion annually on development assistance for health in support of the health-related MDGs. (This number is the product of the UN goal of 0.54 percent of GNI; the estimated GNI for the United States in 2012 [$15 trillion]; and the average proportion of ODA for health [16 percent] in OECD countries in 2006.) This level of spending, although still below the capacity of the United States and the overall resources needed for health, is justified on the basis of international norms and commitments.1 Balance the Traditional Portfolio of U.S. Investments in Global Health Increased finances would provide an opportunity to balance the portfolio of U.S. government investments in global health to reflect the breadth of the health- related MDGs. Allocations over the last eight years have been heavily skewed in favor of HIV/AIDS, which received more than 70 percent of USAID and State Department global health funds in 2008 (Salaam-Blyther, 2008). Between 2004 and 2008, projects to combat HIV/AIDS, tuberculosis (TB), and malaria received $19.7 billion, far outpacing support for other health programs. This dramatic increase was a result of new commitments to the Global Fund to Fight AIDS, Tuberculosis, and Malaria (the Global Fund) and PEPFAR. During the same period, USAID programs for children and women’s health received only $4.6 billion, representing little or no increase in real terms (see Figure 5-3) (Salaam- Blyther, 2008). The committee strongly recommends that Congress balance the traditional portfolio of global health aid while pursuing the goal of $13 billion per year for the health-related MDGs. The U.S. government should fulfill its implied commit - ments under PEPFAR reauthorization to global AIDS programs ($7.8 billion per year), malaria ($1 billion per year), and TB ($800 million per year). The remain - ing $3.4 billion per year would roughly double current spending levels for pro- 1 Beyond reaching the goal of 0.54 percent of GNI by 2012, it is important to note that in a 1970 General Assembly Resolution, UN Member States declared a minimum target of 0.7 percent of each economically advanced country’s national income for ODA to developing countries. The 0.7 percent target was reconfirmed by all countries in the 2002 Monterrey Consensus, of which the United States was a signatory (UN, 2003).

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 INCREASE U.S. FINANCIAL COMMITMENTS 8000 7000 6000 5000 US $ (in millions) 40 00 3000 2000 1000 0 2001 2002 2003 2004 2005 2006 2007 2008 Year Maternal and Child Health Family Planning and Reproductive Health Other Infectious Diseases HIV/AIDS FIGURE 5-3 State Department Global HIV/AIDS Initiative (GHAI) and USAID spend- ing on global health (2001-2008). 5xe.eps SOURCE: Committee’s calculations based on Salaam-Blyther, 2008. grams in support of health systems strengthening, children and women’s health, nutrition, family planning and reproductive health, and neglected diseases of poverty, all of which have been severely underresourced during the past decade. The U.S. government should also adopt health goals that support the targets of the health-related MDGs to guide the allocation of the recommended $13 bil- lion in funds. Expenditures should include the scale-up of proven clinical and public health interventions and policies to reduce avoidable deaths, as well as research efforts to explore new technologies and identify improved methods for delivering existing tools. Where feasible, funding should support multilateral efforts aimed at addressing the MDGs, such as the Global Alliance for Vaccines and Immunization, the Safe Motherhood Initiative, and the Global Fund.

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 THE U.S. COMMITMENT TO GLOBAL HEALTH Allocate Additional Funding for Noncommunicable Disease and Injuries Although the recommended $13 billion per year for global health would support the health-related MDGs, additional resources will be required to meet the global burden of disease for the twenty-first century. Even though chronic diseases account for nearly half of the disease burden in low- and middle-income countries (Beaglehole et al., 2007), virtually no USAID programs address chronic or noncommunicable diseases (Greenberg et al., 2005). Injuries, which accounted for an additional 16 percent of deaths in 2001, also receive little U.S. attention (Lopez et al., 2006b). When comparing the disease allocations in U.S. govern - ment global health spending as estimated by the Kaiser Family Foundation for 2008 (Kates et al., 2009) to the top seven causes of death in low- and middle- income countries for those under age 70 (Lopez et al., 2006a), the lack of atten - tion to noncommunicable disease and injuries is striking (see Figure 5-4). Preventive and low-cost treatment measures specially tailored to low-resource areas can help reduce the burden of chronic disease and injuries (Beaglehole et al., 2007; Lagarde, 2007), which threatens to overwhelm health systems in these countries (Adeyi et al., 2007; Norton et al., 2006). Cost-effective strategies—such as higher tobacco taxes, reduction of salt in processed foods, and the administra - tion of a multidrug regimen to treat and prevent cardiovascular disease—hold the promise of averting 32 million premature deaths from noncommunicable diseases in these countries (Asaria et al., 2007; Lim et al., 2007). The committee finds that an additional $2 billion to expand the U.S. port- folio to address noncommunicable disease and injuries would be appropriate. Federal executive branch agencies and departments—particularly the Centers for Disease Control and Prevention (CDC), the National Institutes of Health (NIH), and USAID—should work with Congress to identify specific ways to respond to the contemporary challenges of noncommunicable disease and injuries. The U.S. government should adopt clear health goals, such as lowering deaths from smoking or reducing injuries from domestic violence and accidents, to guide the allocation of the recommend $2 billion in funds. Expenditures should include the scale-up of proven interventions and policies to reduce avoidable deaths, as well as research efforts to translate existing knowledge (often individualized treat - ment) into population-based interventions that are cost-effective in low-resource settings with large at-risk populations. Address PEPFAR and Long-Term AIDS Strategy Concerns have been raised that PEPFAR commitments have already created a new global “entitlement” that could prevent an increase in funding for other initiatives. This entitlement exists in the form of an open-ended commitment to provide AIDS treatment in countries receiving PEPFAR money that would be very difficult to halt. (Treatment costs are themselves set to escalate, mainly

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HIV/AIDS Total = $ 9.6 billion Injury 8% 13 % Other Infectious Other Diseases Other HIV/AIDS Noncommunicable 13 % $1,039 million $4,978 million Diseases (11%) (52%) 13 % Avian Flu $115 million (1%) Cancer Global Fund $841 million Water 9% Malaria ( 9 %) $738 million Maternal and Child $495 million (8 %) Health and Nutrition (5%) TB Family Planning and Repro Health 27% Cardiovascular $162 million $467 million Maternal and Child Health Disease (2 %) (5%) $806 million 17% (8 %) FIGURE 5-4 Left: Top seven causes of death below age 70 in low- and middle-income countries (2001). Right: U.S. government funding for global health by major subsector and for the Global Fund, FY 2008. SOURCES: Left: Committee’s calculations based on Lopez et al., 2006a. Right: Committee’s calculations based on Kates et al., 2009. 5xh.eps landscape 

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0 THE U.S. COMMITMENT TO GLOBAL HEALTH due to three factors: antiretroviral [ARV] drugs have successfully prolonged the lives of AIDS patients who now require lifelong treatment; new HIV infections continue to outpace the number of people receiving treatment, due to inadequate prevention; and many of those on first-line drugs, for which dramatic price reduc- tions have been attained, will require more costly second-line therapies as they become resistant to first-line treatments [Over, 2008].) PEPFAR provided 77 percent of declared external AIDS funding in 2005 to 15 countries and is responsible for the large majority of increases in AIDS fund - ing since 2004 (Over, 2008). By 2006, PEPFAR money constituted 62 percent of HIV/AIDS resources in Zambia, 78 percent in Uganda, and 78 percent in Mozam- bique, 3 of the 15 countries that receive PEPFAR funding (Oomman et al., 2008). With PEPFAR usually providing more than three-quarters of the total external AIDS spending, and presumably at least as large a share of treatment spending in any recipient country, AIDS treatment entitlements are incumbent upon the United States more than on any other donor or group of donors (Over, 2008). It is unlikely that even relatively well-off countries with high HIV prevalence rates will be able to absorb the costs of universal or widespread ARVs. Among the 15 PEPFAR countries, “South Africa is the only one to fund a sizable share of the costs of its AIDS interventions from its own budget” (Over, 2008). In the meantime, the importance of HIV prevention—as both a public health and a fiscal imperative—cannot be overemphasized. The U.S. government should maintain funding for ARV treatment for individuals already supported by PEP - FAR, but it should also act diligently to ensure that the program prevents as many HIV infections as possible, especially among young women in Africa (who are three times more likely to be infected than men of the same age in many high- burden countries) (UNAIDS, 2008). The committee supports the 2007 Institute of Medicine (IOM) committee findings on PEPFAR implementation, which state that in order to help countries make gains against the HIV/AIDS epidemic, PEP - FAR will need to emphasize effective, evidence-based prevention with the same urgency and intensity it has focused on treatment (IOM, 2007). Without a stron - ger focus on prevention, PEPFAR costs could crowd out other equally important global health initiatives (Over, 2008). Provide Incentives for Better Health To ensure that global health financing in all areas—HIV/AIDS, maternal and child health, and health systems strengthening, among others—is contribut - ing to significant, measurable, and sustainable health gains, the U.S. government should consider novel approaches to delivering aid that is effective. Results-based financing—one of several routes to improving health outcomes and systems per- formance—relies on a government or donor providing material rewards when, and only when, particular results are achieved. Ideally, these extrinsic incentives are offered as an add-on at the margins to complement reliable resources for basic service delivery and are introduced in ways that reinforce good perfor-

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 INCREASE U.S. FINANCIAL COMMITMENTS mance. Applied at the highest level, donors link the release of additional funds to improved health-related indicators, based on ex ante agreements negotiated with the recipient government around a set of shared goals. At a lower level, rewards can be granted to districts, health facilities, or even individual health workers, based on performance. At the microlevel, mothers (or others who make household-level decisions about health care) are rewarded on the basis of docu - mented health-related behaviors, such as taking children for well-child visits for vaccinations or maintaining prolonged treatment for conditions such as TB. For example, under a currently operating USAID-funded scheme in Haiti, nongovernmental health providers agree to reach certain targets such as the proportion of children fully immunized, the proportion of new mothers with assisted deliveries, and the proportion of pregnant women receiving prenatal care. Ninety percent of the payment to the health providers is fixed, but the remainder is made on the condition of good performance. In the seven years of operation, the program has achieved remarkable improvements in key health indicators. Nongovernmental health providers now reach about one-third of the population (3 million people), providing essential services in a complicated environment of violence, poverty, and limited government leadership. Full immunization cover- age has increased by 13 percent per contract period, and assisted deliveries have increased by 19 percent (Eichler and Levine, 2009). The results measured are usually expressed in terms of outputs, such as the number of health workers trained or immunizations delivered. However they can also be assessed from the wider perspective of health outcomes, such as a program’s impact on saving lives or reversing the trend of malaria infections in its target population. Results-based financing is thus a tool to address persistent problems or bottlenecks in the functioning of a health system, including inadequate services or low utilization of services, particularly by the poor, while also increasing the total amount of resources available for service improvement. A broad sectoral understanding of the causes of such problems is essential to determining whether results-based aid will work in a particular context. An assessment of institutional arrangements, such as mechanisms for the flow of funds, is also important in judging whether these can facilitate or impede “paying for results.” Design and operational considerations for such programs include, but are not limited to, careful choices about the targets, indicators, incentives, contractual details, and information sources. Strong information systems, complemented by credible verification and validation mechanisms, are critical to these programs. To date, results-based aid has mostly been tried in two types of contexts: first, in fragile or post-conflict states such as Haiti and Afghanistan, where donors make results-based arrangements with nongovernmental organizations, some - times through the contracting units of health ministries; and second, in states such as Rwanda and Zambia, where results-based financing is a part of major reforms in health financing and organization to change the way business is done and accelerate progress toward health goals. Demand-side incentives have been

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 THE U.S. COMMITMENT TO GLOBAL HEALTH used in a wide range of settings, from Latin America to the former Soviet Union to Bangladesh (Eichler and Levine, 2009). Increasingly, interest in results-based approaches is being expressed by national and local governments. The World Bank and other agencies report quick responses from governments to their requests for proposals, participation in work- shops, or information. Apart from the expected interest among donor partners and recipient country officials, an independent trend in support of performance incentives can also be seen among thought leaders in low-income countries. Evidence from results-based financing suggests that these programs have led to important improvements in health and health system functioning. The process of negotiating a common set of indicators to assess performance (and appropriate incentive payments) has the effect of rallying participants around a larger agreed-upon objective and presents opportunities for several important benefits: (1) integrating “vertical” donor funding streams that are focused on one specific disease, such as HIV/AIDS, to adopt a more comprehensive approach to health care; (2) aligning the priorities of government, target community, and donor; and (3) harmonizing donors in a country by avoiding duplication of their efforts and capitalizing on synergies. As this agenda goes forward, important operational questions remain about how performance-based programs can be made more cost-effective and how certain risks can be mitigated—for example, undue attention directed toward the rewarded services, participants attempting to game the system, and erosion of the integrity of information systems (Eichler and Levine, 2009). Be Open to Innovative Financing Innovative finance for health offers new opportunities for multilateral financ- ing of global health initiatives and includes new or newly applied financial instru- ments as well as the institutions developed to implement them. Many of these initiatives are partnerships between funding and recipient countries, industries, intergovernmental organizations, and foundations that allow for donor coordi - nation and harmonization, as well as long-term predictability (Ferranti et al., 2008). Within the last decade, several innovative finance mechanisms have been developed to counteract the current trend of unpredictable, volatile, and short- term aid. Innovative finance initiatives are proposed solutions that may be applied to various goals such as increasing access to existing vaccines and medicines by creating procurement funds or creating incentives for the development of new technologies (Ferranti et al., 2008). UNITAID, for example, is an international drug purchase facility that is funded primarily by a revolutionary tax on air travel. The predictability of airline travel and the continuous upward trend in fares provide a constant source of fund- ing for UNITAID that allows the purchase of bulk medicines and contributions to the Global Fund. In 2006, France enacted the airline solidarity tax, followed

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 INCREASE U.S. FINANCIAL COMMITMENTS by Chile, the Republic of Korea, and several African countries. The concept of the tax is flexible, and each government determines the details of its own tax. For example, the tax can be applied to domestic flights, international fights, or both, and the tax can vary depending on the class of service. Opponents argue that the tax may affect the market for airline travel or force consumers to contribute to a cause they may not feel passionately about. Supporters of the tax praise the idea as the first progressive tax to target a global public good and note that the cost of the tax is low compared to the price of an airline ticket. A recent opinion poll of the American public found that 57 per- cent thought the United States should join these countries and would support charging an additional $1 to $2 on international flights to support UNITAID (WorldPublicOpinion.org, 2009). While U.S. academics and institutions have been the intellectual drivers behind many of these innovative funding models, such as Advance Market Com- mitments and Affordable Medicines Facility-Malaria, the U.S. government has been reluctant to fund these endeavors. Congress and federal executive branch agencies should be open to supporting these mechanisms as an opportunity to address long-term funding needs and work in collaboration with the private sector. Where it finds a lack of evidence to warrant a full commitment to any particular funding model, the U.S. government should fund pilot projects that could provide a proof of concept. Recommendation 5-1. The President and Congress should commit to invest- ing $15 billion in global health by 2012, with $13 billion of this directed to the health-related MDGs and an additional $2 billion to the challenges of noncommunicable diseases and injuries. (A) While pursuing the goal of $13 billion per year for the health-related MDGs, federal executive branch agencies should work with Congress to create balance in the traditional portfolio of global health spending that reflects the breadth of the health-related MDGs. (1) Congress should fulfill its implied commitments under the PEPFAR reauthorization to global AIDS programs ($7.8 billion per year), malaria ($1 billion per year), and tuberculosis ($800 million per year). (2) The U.S. government should use the remaining $3.4 billion per year to support programs such as health systems strengthening, children and women’s health, nutrition, family planning and reproductive health, and neglected diseases of poverty, all of which have been severely underresourced during the past decade. (3) Given concerns that PEPFAR costs could crowd out other equally important global health initiatives, the U.S. government should main- tain funding for ARV treatment for individuals already supported by

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 THE U.S. COMMITMENT TO GLOBAL HEALTH PEPFAR but should also act diligently to ensure that the program prevents as many HIV infections as possible. (B) Federal executive branch agencies and departments—particularly CDC, NIH, and USAID—should work with Congress to identify specific ways to respond to the contemporary challenges of noncommunicable diseases and injuries and commit to investing $2 billion for this purpose by 2012. (C) The U.S. government and the private sector, including industry and philanthropy, should continue to support and further explore novel incen - tives and innovative funding mechanisms to ensure sustainability for (1) research and product development for neglected conditions and diseases that disproportionally affect poor populations, and (2) procurement and delivery of these products. ADDRESS THE GLOBAL HEALTH RESEARCH FUNDING GAP Given the reality of limited funds, a difficult balance must be struck between investing in the improved uptake of existing knowledge and practices and invest- ing in research that could lead to new interventions—and even scientific discov- eries—in the future. Investments in the health of people today (through better delivery of existing approaches) and in the health of people tomorrow (by making new discoveries to understand and combat disease) are both needed; the appro - priate mix of health spending for care delivery and research should be weighed against the urgency of combating a particular disease and the unique health needs of a local population. However, excluding research from health assistance can prove short-sighted and limit its effectiveness. Provide More Adequate Funding for Health Research to Benefit the Global Poor While investments in research have saved, improved, and prolonged lives even in the most impoverished settings in the world, governments and the com- mercial sector—the two largest funders of health research—spend relatively little on solutions for conditions of the global poor. For example, biomedical research and development to combat infectious diseases that infect people living in low- and middle-income countries represented only about 1.6 percent of worldwide investments in health research.2 2 One study estimated that just over $2.5 billion was invested into research and development of new neglected disease products in 2007 (Moran et al., 2009). The Global Forum for Health Research estimated that the global expenditure on health research was $160.3 billion in 2005. Therefore, an estimated 1.6 percent of global expenditure on health research was devoted to diseases and conditions that primarily affect low- and middle-income countries.

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 INCREASE U.S. FINANCIAL COMMITMENTS This low allocation to address diseases that disproportionately affect the poor is driven by two factors: (1) market failure and (2) the lack of resources or political will within low-income countries to invest public funds in health research. There are inadequate commercial incentives for the private sector, in any country, to undertake research on diseases whose cures will have little or no viable financial market. In the absence of lucrative sales for drugs, vaccines, and diagnostics for such diseases, the pipeline for any new interventions has virtu - ally dried up during the past three decades (Trouiller et al., 2002). Two studies of drugs developed between 1975 and 2004 found that tropical diseases and TB accounted for only slightly more than 1 percent of new products (Chirac and Torreele, 2006; Trouiller et al., 2002). In the United States, there are similar market failures for diseases that do not have a viable commercial market. However, the U.S. government provides finan- cial incentives to invest in these diseases through the Orphan Drug Act of 1983, which encourages pharmaceutical companies to develop drugs for rare conditions affecting fewer than 200,000 people by offering tax incentives and allowing sales without competition for seven years. While low- and middle-income countries have limited financial capacity to offer such incentives to the commercial sector, investments by governments are crucial in the absence of market incentives to reward health research. Although low- and middle-income countries increased spending on health research by 42 percent between 1998 and 2005 (GFHR, 2008), their contribu- tion amounted to just 3 percent of the global funding for health research in 2005 (Schneegans, 2008). Research undertaken by the emerging economies has gone some way toward reducing the asymmetry in knowledge generation between wealthy and less wealthy nations. In November 2008, representatives from 62 countries met in Bamako, Mali, and committed to spending 2 percent of govern- ment health budgets on health research in the Bamako Call to Action (Bamako Call to Action, 2008). The committee endorses the recommendation that all countries devote some significant portion of public funding for health research—especially research that benefits underserved populations—and include health research in their over- all national strategic health and poverty reduction plans, but it also recognizes the limitations faced by low-income countries in allocating significant sums for health research. For now, research to benefit the global poor remains primarily the realm of high-income-country public and philanthropic donors. According to a study conducted by the George Institute, around 90 percent of global biomedical R&D funding for neglected diseases in 2007 was financed by public and philanthropic donors. Four out of the top five funding organizations contributing to biomedical research for neglected diseases that affect low- and middle-income countries were based in the United States (NIH, the Bill & Melinda Gates Foundation, the U.S. Department of Defense, and USAID) (see Table 5-1). After the Gates Foundation

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 THE U.S. COMMITMENT TO GLOBAL HEALTH TABLE 5-1 Top 12 Organizational Funders of Neglected Diseases Organization Amount (U.S.$) Percent U.S. National Institutes of Health 1,064,859,791 41.6 Bill & Melinda Gates Foundation 452,102,715 17.7 European Commission 121,366,882 4.7 U.S. Department of Defense 86,914,578 3.4 U.S. Agency for International Development 80,600,336 3.1 Wellcome Trust 59,985,371 2.3 U.K. Medical Research Council 51,716,968 2.0 U.K. Department for International Development 47,565,987 1.9 Dutch Ministry of Foreign Affairs 33,951,646 1.3 Institut Pasteur 31,617,540 1.2 Irish Aid 24,271,557 0.9 Swedish International Development Agency 21,529,014 0.8 Subtotal top 12 funders 2,076,482,385 81.1 Total R&D funding 2,560,068,749 100 SOURCE: Moran et al., 2009. and NIH—representing 59.3 percent of the total investment made by the top 12 funders in global health research—the third-largest funder of biomedical R&D on neglected diseases was the private sector, providing 9.1 percent of funding (Moran et al., 2009). The majority of global biomedical research and development funding (76.6 percent) for neglected diseases is focused on the big three: HIV/AIDS, malaria, and TB. Other diseases have received less attention, even though they pose a significant disease burden (Moran et al., 2009). U.S. Government—The Largest Investor in Biomedical Research on Neglected Diseases The U.S. government provided nearly three-quarters of global public spend - ing on neglected disease biomedical research, with an investment of $1.25 bil - lion. While NIH is a significant contributor to global health research, the agency spends less than 1 percent of its budget to fund research that tackles parasitic and bacterial diseases, such as malaria, sleeping sickness, leprosy, and lymphatic filariasis (NIAID, 2008), which are virtually unknown in the United States but are among the most common infections for the world’s poorest billion people (Hotez et al., 2007). The exact amount that the U.S. government devotes to global health research is unknown because it is difficult to isolate funds dedicated to global health from domestic health research investments. For example, issues arise when counting research on diseases that are shared by the United States and low- and middle-income countries, such as AIDS and noncommunicable dis -

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 INCREASE U.S. FINANCIAL COMMITMENTS eases, or when counting basic research, which may not be related to any par- ticular disease. Beyond biomedical R&D, the U.S. government and foundations invest in other forms of research that benefit health, such as economics, social and behav - ioral sciences, and public health. To the committee’s knowledge, no studies have been conducted to quantify the level of commitment in these areas, although it is reasonable to believe that the investment is significantly smaller due to the dif - ference in cost between biomedical and nonbiomedical research. As a result, the total government expenditure applied to research relevant to all the health problems of low-income countries cannot be estimated with any meaningful degree of accuracy. Nonetheless, the committee finds that the invest - ment by the United States in global health research is important, even though it represents a miniscule fraction of the overall research budget for domestic health research. Public-Private Product Development Partnerships—Significant Recipients of Research Funding Notably, a significant portion of this research (23 percent) is managed by public-private product development partnerships (PDPs) (Moran et al., 2009). The benefits of this investment in PDPs are starting to be realized. Several prod - ucts are in the pipeline with some entering late-stage clinical trials. It has been estimated that $1 billion per year over the next 10 years will be required to put the experimental treatments and vaccines currently in the PDP pipeline through large human trials and file them with regulators (Herrling, 2009). While this is more than the nearly $600 million that was invested in PDPs in 2007 (Moran et al., 2009), several innovative public-private financing proposals are now under consideration. For example, FRIND—the Fund for R&D in Neglected Diseases—would pool money from governments, foundations, and other sources to finance the movement of potential treatments through the pipeline. Donors would only fund drugs through one stage of the pipeline at a time, requiring regular feedback before providing further money. In exchange for funding, the originator of the drugs would grant exclusive licensing to the fund to use his or her product to treat neglected diseases; such products would be priced affordably for low- and middle-income countries. The originator would also hold a patent, retaining the right to use compounds or elements of the discovery for different drugs in the future (Herrling, 2009). Continue Strong U.S. Commitment to Fund Global Health Research The Bamako Call to Action urged international development agencies and major funders of global health activities to allocate 5 percent of health devel -

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 THE U.S. COMMITMENT TO GLOBAL HEALTH opment assistance toward health research (Bamako Call to Action, 2008). The appropriate allocation of foreign aid to care delivery and research depends on the unique characteristics of particular diseases and their existing treatment and prevention mechanisms, as well as the health needs of particular populations. For example, in areas such as child survival, many interventions to prevent premature death and disability already exist (Jones et al., 2003), but health systems research is needed to determine how best to scale up and sustain delivery of these inter- ventions (Bryce et al., 2003). Designating a portion of health aid to fund health systems research, along with impact evaluations, is important for improving the delivery of existing interventions. In some areas such as TB, however, health outcomes would benefit from greater attention to finding novel tools and interven- tions appropriate for improving care in low-income settings. Research breakthroughs to address the needs of the world’s poorest popula- tions can be promoted in several ways, most of which can be classified under two complementary categories: “push” and “pull” mechanisms. A push mechanism is the traditional mode of encouraging research, using direct funding to accelerate the development of a vaccine, drug, or diagnostic by reducing the risks and costs of R&D investment. Most of the U.S. government investment in global health research is through push mechanisms, particularly through the NIH, and to a lesser extent, through contributions to public-private PDPs. A pull mechanism is a more novel mode of funding, in which the purchas- ing power for particular types of vaccines, diagnostics, and drugs serves as an incentive for commercial pharmaceutical firms to invest in the R&D required to produce it. Pull mechanisms thus provide a market incentive for the same result as a push mechanism, but with money being paid out only when a product has been developed. Together, if designed in a coordinated fashion, the push through NIH and the Department of Health and Human Services budgets can act in syn- ergy with the pull provided by a donor to produce a vaccine or other product. Existing support for global health research should be maintained, and as investments in health research increase, so should investments in research that has a global impact. In the spirit of the Bamako Call to Action, the committee recommends that funding of research also be conducted through the Foreign Operations budget—because it supports improvements to health in low- and middle-income countries. This level of flexibility would allow the U.S. govern - ment to leverage two types of approaches—push and pull mechanisms—to fund global health research. One way to do this is through a formal Advance Market Commitment (AMC), such as the pilot AMC that has been developed for a vaccine against the strains of pneumococcal disease prevalent in Africa and Asia. Although, in the past, donor aid programs did not procure patented products on a large scale and the low- and middle-income-country pharmaceutical market was not commercially attractive, in recent years, donors have been willing to procure patented products (ARVs, vaccines, antimalarials) at prices far higher than the pennies-per-dose customary

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 INCREASE U.S. FINANCIAL COMMITMENTS in earlier donor programs. This trend has served to accelerate the introduction and uptake of cutting-edge medical products, bringing with it an opportunity to use procurement strategy as a commercial incentive to encourage research into new tools to address global health. Other pull mechanisms could also be developed as a way to use development assistance for health to “prime” the pharmaceutical market, by providing credible signals to potential developers and manufacturers about the volume and prices to be paid for new and effective products. In one attempt to stimulate R&D for neglected diseases, the U.S. Food and Drug Admin - istration (FDA) developed a priority review voucher for neglected diseases. The FDA will award a priority voucher to a company that wins FDA approval for a drug for a neglected disease. The vouchers are intended to stimulate R&D for neglected diseases by creating an incentive for pharmaceutical companies to bring drugs in late-stage development to the market. Like AMCs, the priority vouchers do not require upfront investment by the government, but the ultimate costs of the vouchers are uncertain. A voucher can cut in half the time it takes to get a new drug approved, which can result in hundreds of millions of dollars in profits for a company with a blockbuster drug—these profits ultimately come from the pur- chasers of the drugs, both private consumers and governments (Waltz, 2008). Recommendation 5-2. Federal executive branch agencies and departments should work with Congress to design a coordinated approach to funding global health research that leverages research subsidies through the Depart - ment of Health and Human Services budget and innovative funding mech- anisms for novel vaccine, drug, and diagnostic procurement through the foreign affairs budget. REFERENCES Adeyi, O., O. Smith, and S. Robles. 2007. Public policy and the challenge of chronic noncommuni- cable diseases. Washington, DC: The International Bank for Reconstruction and Development and the World Bank. Asaria, P., D. Chisholm, C. Mathers, M. Ezzati, and R. Beaglehole. 2007. Chronic disease prevention: Health effects and financial costs of strategies to reduce salt intake and control tobacco use. Lancet 370(9604):2044-2053. Bamako Call to Action on Research for Health. 2008. Global Ministerial Forum on Research for Health. Bamako, Mali, November 17-19. Beaglehole, R., S. Ebrahim, S. Reddy, J. Voûte, and S. Leeder. 2007. Prevention of chronic diseases: A call to action. Lancet 370(9605):2152-2157. Bryce, J., S. El Arifeen, G. Pariyo, C. F. Lanata, D. Gwatkin, and J. P. Habicht. 2003. Reducing child mortality: Can public health deliver? Lancet 362(9378):159-164. Chirac, P., and E. Torreele. 2006. Global framework on essential health R&D. Lancet 367(9522): 1560-1561. Eichler, R., and R. Levine. 2009. CGD Brief. Performance incentives for global health: Potential and pitfalls. Washington, DC: Center for Global Development.

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