Bush’s problematic AIDS plan Wrong Dose

by Adam Graham-Silverman, Spring 2005 IRP Fellow Reprinted with the permission of The New Republic

TETE PROVINCE, MOZAMBIQUE – The boy is 10 years old, but he looks about five. For the past month, he has been taking antiretroviral drugs (ARVs) – medical cocktails that fight HIV – twice a day to keep the virus from attacking his body. He walks three miles on dirt or nonexistent roads to get to school and to pick up his pills. He brings similar drugs to his mother, who is recovering from HIV-induced tuberculosis and is too weak to stand or walk.

The drugs work wonders, but the true miracle is that this family in the middle of nowhere has access to them. The drugs the boy and his mother take are Indian-made generic versions of medicines still under patent in the United States. Mozambique’s government, with the help of the William J. Clinton Foundation, worked out a deal to buy them at below-market prices.

Once they enter the government’s drug-procurement system in India, they travel hundreds of miles to the hospital in Tete, a provincial capital sandwiched between Malawi and Zimbabwe. From there, they make their way into the wilderness, thanks in large part to the international humanitarian group Doctors Without Borders and its network of nurses and community volunteers. But, of the 5.8 million people who need AIDS drugs worldwide, only about 700,000 receive them. Now, as part of President Bush’s global AIDS initiative, the United States Agency for International Development (USAID) is preparing to launch a system for purchasing AIDS drugs and delivering them to two million people by 2008. The contract to run this new system, which could be awarded by the end of the summer, calls for the delivery of up to $7 billion in drugs and related services, which would make it the largest procurement contract in USAID’s history.

That has lured defense contractors, software firms, and shipping giants into awkward bidding partnerships with international nonprofit health and development groups. Privately, most health and development organizations admit that USAID’s approach is not the ideal way to get drugs and other goods to far-flung, hard-hit parts of the world quickly and deficiently. They chafe at the contract’s restrictions on buying cheap, generic drugs and fear duplicating existing work or undermining local efforts, such as those in Mozambique.

And yet, since the U.S. government is writing the checks, these nongovernmental agencies have put their reservations aside. Which is too bad, because, as it is structured, the USAID contract may do more harm than good. Whoever wins the drug-management contract would set up a system to handle purchasing, shipment, storage, and delivery of ARVs and other medical supplies under Bush’s “emergency plan” to fight AIDS. The 15 “focus countries” Bush’s plan targets could use the entire system or just those pieces of it that suit their needs.

At a minimum, the system would allow USAID to monitor drug purchases in each country. After the first two years, it could expand to more countries and open up to use by other organizations, such as the Global Fund to Fight AIDS, Tuberculosis, and Malaria. USAID estimates it will pay the winner of the contract a total of $75 million to manage $500 million in goods over the life of the contract (if all 15 countries used all its parts). The original deadline for bids was October 15, 2004, but drafts of the contract proposal were so riddled with problems that it was pushed back twice – eventually to February 16 of this year. USAID recently notified bidders that it was down to a handful of finalists, but no one in the government will say when the contract will be awarded.

USAID wants to create a model of drug management that can be expanded and copied broadly. But there are several problems with its proposal. For instance, while it talks about the need to work with local groups and build long-term capacity, there are few requirements that the winner actually do so. In fact, the contract provides little room for in-country staff, and it prohibits money from going to build or repair roads, railroads, ports, or other infrastructure that can be critical to drug delivery in the developing world. This approach makes adaptation to a diverse set of countries difficult.

“In some places where there is already capacity to do procurement, there is the real possibility that this U.S. government-centralized system could displace – and so of course undermine – the ability to do procurement in the (local) public sector,” says Rachel Cohen, the U.S. head of Doctors Without Border’s Campaign for Access to Essential Medicines. Mozambique, for example, already has its deal with Indian manufacturers. Or take Kenya, where a nonprofit, faith-based group buys and distributes ARVs to more than 1,000 clinics.

In Botswana, a private partnership between the government, the drug giant Merck, and the Bill & Melinda Gates Foundation has put 36,000 people on ARVs in the past two years. Mark Dybul, the deputy U.S. global AIDS coordinator, says that, if countries think parts of the new USAID system will duplicate their own efforts, they will simply choose not to use them. “It is impossible for (duplication) to occur,” he says. “The countries get to say, ‘This is what we want.’ We would never supplant a system.” But critics note that a large U.S. presence may force government or local groups to work with USAID’s contractors. Moreover, USAID’s attempt to build a system from scratch also overlaps with existing international efforts to build a comprehensive drug-management process.

The Global Fund is developing its own procurement system, known as the Global Electronic Marketplace (GEM), in 138 countries. UNICEF has a similar system in 39 countries, through which is negotiates drug prices with 17 manufacturers. So does the International Dispensary Association (IDA), which supplies almost 200 countries. In fact, the United States already has a procurement system of its own through contractors John Snow Inc. and Management Sciences for Health, parts of which don’t expire until September 2006. (The United States uses this system to procure condoms, which are not allowed to be distributed under the new contract.

Several bidders said it would be easy to add condoms to the distribution system, but a government source overseeing the contract said they were excluded due to “political sensitivity” – in other words, because of concerns from conservatives that condoms encourage promiscuity and that the plan should stress abstinence instead.)

Compared with existing delivery systems, the new USAID program would be more expensive and centrally operated, and, rather than give a country drugs to manage and thus build a local system, it envisions the ability to deliver ARVs directly to clinics within countries. USAID’s insistence that countries can opt in once this system is built, and its demand for complete modularity – so that countries can pick and choose the components that they need – raises another question: How do you craft a bid for a system if you don’t know who will use it?

The difficulty of meeting such broad specifications has reduced the chances that the system ultimately built will be as efficient as possible. “All these contracts are going to have a huge amount of overhead and huge disbursement of money inside of Washington, as opposed to investing in systems that are up and running inside of countries or other international systems that could be improved on,” says Paul Zeitz, executive director of the Global AIDS Alliance.

The contract would also more deeply cement a key barrier to wider use of ARVs: a requirement that the Food and Drug Administration (FDA) approve any international generics distributed through it. The World Health Organization (WHO) already runs an approval system that most countries and international groups, such as the World Bank and UNICEF, support. But this wasn’t good enough for the United States, which, citing concerns about drug safety, decided it needed its own approval process. In just over a year, the FDA has approved five drugs through an expedited review process, but none like the one-pill, twice-a-day regimen that the Mozambican boy uses. Most drugs purchased under U.S. programs are U.S. drugs still under patent – meaning they cost two to four times what generics do.

” It’s part of a continuing effort to keep generics out of the market and, at the same time, reward the multinational (drug companies),” says Bill Haddad, chairman of the International Association of Generic AIDS Manufacturers.
And these are hardly the only problems with the USAID contract. Its size has led to the creation of some strange bidding alliances, but several groups have abandoned their bids after concluding that they couldn’t make enough money from the contract. This, in turn, has raised doubts about the system’s long-term viability and led some to question whether the contract will have to be restructured.
For example, Northrop Grumman, the nation’s number three defense contractor, formed a partnership with John Snow Inc. and Management Sciences for Health, but it dropped out just before the proposals were due in February. Though Northrop Grumman would not comment on its decision, several other large groups gave up after concluding there was little profit in the contract. Chemonics International, which works almost exclusively for USAID and is one the Agency’s biggest contractors, initially did studies in each of the 15 target countries and put together a strong consortium without defense companies. “We were the consortium to beat – the face of development, not of defense. But we couldn’t make money,” says a member of that group, which also included Cardinal Health, UPS, and Oracle. (Like many people interviewed for this story, the source requested anonymity because the contract award is still pending.) The American Red Cross and Accenture are among others who looked at the contract but decided not to bid. Left in the hunt for the contract are two consortia, one led by IBM and the other by consulting firm BearingPoint.
One bid member said that $75 million is an arbitrary number that will make the work – and profit – impossible. It means a winner gets a flat fee, no matter whether the goods cost $500 million or $7 billion. Unlike some USAID contracts, the winner of this one can’t charge a markup on drugs and supplies. “You’re looking at some people who don’t understand the size, scope, and complexity of this program or are setting it up for failure,” the source says. Dybul says that USAID did its homework about the costs and that many bidders had no problem with the $75 million proposed payment.
To be sure, the program’s critics all say that, despite their philosophical disagreements, they are reserving judgment until the contract is awarded and the specifics are revealed. Supply-chain management is a serious problem in developing countries, particularly now that the Bush initiative, the Global Fund, and other programs are pumping money into them. Several bidders and observers of the process credit USAID for its emphasis on accountability. “I need somebody to move stuff and to get stuff, and to get it to people who need it the most,” says the government source overseeing the contract. ” I don’t care if Mary Poppins does it.”
But, if developing countries are ever to stand on their own feet against AIDS or other threats, BearingPoint and Mary Poppins will not do. Working with UNICEF, IDA, or Global Fund systems would help ensure that individual countries retain local control and build local infrastructure. Limited technical support tailored to each country would bring along those who are far behind on drug delivery and fine-tune the efforts of those with some existing capacity. Also, it would have been better if the United States had agreed to WHO approval process that many African nations reject.
In 2004, the United Nations and many other international groups endorsed the “three ones,” the idea that each country fighting AIDS should have a single system to evaluate its efforts. In public, the United States strongly supports this idea, but the USAID contract would seem only to undermine it. If the new USAID system were in action now, odds are that the boy in Mozambique and his mother would not get ARVs. Or, if they did, the medicine would be part of a regimen requiring more pills. In an area without clocks or running water, chances are high that they would fail to follow it. It’s something that this family, Mozambique, and the developing world shouldn’t have to swallow.