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Many health improving interventions in low-income countries are extremely good value for money. So why has it often proven difficult to obtain political backing for highly cost-effective interventions such as vaccinations, treatments against diarrhoeal disease in children, and preventive policies such as improved access to clean water, or policies curtailing tobacco consumption?
This week, emerging economy governments and multinational pharmaceutical executives announced they have agreed to a new way of working together, which should ensure people in those countries get the medicines they need at affordable prices. I’m glad to see this new framework for better priority-setting become a reality. Agreed to in April in Vietnam, it will allow public healthcare payers, the pharma industry and patients benefit from a more transparent process for deciding what drugs are made available to those who rely on strained public health care systems. While I have some questions and reservations about the agreement, at least it begins to address a chronic problem in global public health.
Emerging economies are booming markets for pharmaceutical companies. Roughly one-third of the global pharmaceutical market is expected to be sourced in emerging economies, and the share grows every year. Most of this growth is related to the economies themselves; as populations grow wealthier, more educated and more urban, more healthcare—more services, more medicines—is demanded. And governments are answering the call, declaring their commitment to ambitiously scale up health services and eligible populations.
Yet these higher expectations run into the reality of still-limited public spending on health. Public spending on health generally grows alongside economic growth; historically about 2 percent per year. Because resources are still so scarce, tough decisions have to be made about the allocation of every dollar amongst multiple medicines and devices that may all generate health benefit. The difficulty is to select those that generate the most health, equity, and financial protection for citizens within the available budget.
This has led to fierce competition and high politics. When one company’s vaccine was selected over another’s comparator for public subsidy in the Philippines, the unsuccessful company went straight to President Aquino to complain, triggering legal investigations. When the Government of Colombia introduced new legislation on fast-track registration of biosimilars, similar to legislation included in the US Affordable Care Act, US Vice President Joe Biden (at the request of PhrMA, the US-based pharmaceutical lobbying group) sent a letter to President Santos of Colombia to complain. Aggressive marketing in China led to accusations of bribery. In several Latin American countries, use of the legal system to obtain public reimbursement for medications not approved is common practice.
All of these market and political pressures are normal in a competitive market, but are aggravated by the fact that many emerging economy payers have relied on ad hoc procedures to decide what will be publicly funded. This results in suboptimal outcomes for both government and industry. The multiple pressures run into informal procedures and institutions, resulting in uncertainty on market shares and prices on both sides. This all culminates in the public sensation that people’s health is last on the list of priorities.
In April, public payers—Colombia, Philippines, Vietnam, Thailand—and pharmaceutical executives—including GlaxoSmithKline CEO Andrew Witty and top executives from Janssen and Eli Lilly, among others—met in Hanoi to discuss more systematic ways for public payers to set expectations about what medicines will be funded, reduce uncertainty on implications of decisions to fund or not, and negotiate competing interests in healthcare purchasing. Efforts for more responsible and ethical promotion and marketing of medicines were also discussed. For example, GSK’s recent decision to eliminate incentive payments to sales representatives for the number of prescriptions written was highlighted as a positive development.
Industry in general has long been engaged though not particularly enthusiastic about health technology assessment (HTA) to determine value for money in pharmaceutical spend, in spite of their ubiquitous presence in all OECD countries except the US. Some companies have pushed back against HTA agencies that analyze the cost-effectiveness and budget impact of new medicines and devices and make recommendations for the use of scarce public budgets, arguing these are simply administrative obstacles to market access.
That view may be changing as the possible benefits of fair, scientifically rigorous and transparent rules of the game come into focus. For patients, clearer information on what treatment is available in case of sickness and an entitlement to receive certain services are game-changers. For public payers, more health for money, greater defensibility, and social acceptability of decisions to include or exclude a medication, and fiscal sustainability are key benefits. For pharma, clearer target product profiles, assured volumes or market share when recommendations are made to cover their drugs, and a more level playing field amongst domestic and international competitors will be hugely valuable.
Still, there are questions and disagreements: How fixed are healthcare budgets year-to-year? Should the budget impact analysis of a new product focused on the previous year’s budget be projected forward or focus on a more aspirational budget? Should economic evaluations include non-clinical or health system costs and benefits? Is conducting a health technology assessment to generate a value-based price inconsistent with reference pricing (i.e., asking for a price that a neighboring country received)?
Patients, health ministries and pharma do have one shared goal: they’d like to see a bigger share of public monies to be allocated to health, and for health to be seen as an investment—in people and as an economic sector. Can they agree to play by the same rules of the game?
For better or worse, there are many lessons other countries can learn from the United States’ experience in health care. For a positive lesson, let’s consider payment disincentives for reducing hospital-acquired conditions. These are preventable complications acquired in the hospital and include issues such as patient injuries, infections from catheters, and “foreign objects retained after surgery.” As seen with the “superbug” obtained through contaminated medical endoscopes earlier this year, these shortfalls in hospital quality are not only painful and risky for patients, they are also costly and wasteful. These issues are highly prevalent: in 2013 one in eight hospital admissions in the US included a patient injury. And matters are worse in poor countries. According to WHO, infection rates among newborns in developing countries are 3 to 20 times higher than in high-income countries.
In the United States, the government has started prodding hospitals to combat these issues by denying payments or imposing penalties when they fail to meet standards of quality care. One powerful tool the government uses to do this is Medicare—the federal government’s insurance program for Americans over the age of 65. In 2008, Medicare stopped paying hospitals for treating conditions that were acquired during hospitalization and could have been prevented. In 2014, Medicare introduced a program that can withhold up to three percent of payments from hospitals with high rates of avoidable readmissions. And in 2015, Medicare went one step further, imposing penalties on hospitals that don’t perform well. Although Medicare is also experimenting with bonus payments for good performance, we can expect one in seven US hospitals to have its Medicare payments reduced by one percent this year—a stark prediction likely to get hospitals across the country to pay more attention to the quality of care.
So what lessons can be learned for developing countries?
First, make use of payment systems and incentives. Health systems in many developing countries are evolving to cope with the growth of chronic illnesses and to introduce and push for universal health coverage schemes. One likely consequence is that hospitals will become more important and there is scope for rethinking current payment systems to target issues like health care quality. The US experience with payment incentives and disincentives could offer useful insights into how best to prevent and remedy quality shortfalls in hospitals. That includes experimentation: some of Medicare’s pay-for-performance “demonstration projects” showed initial promise but didn’t lead to longer-term improvements, whereas the 2008 initiative seems to have generated improvements.
Second, invest in reliable, accurate data. The ability to implement health policies hinges on reliable data—and therefore good information systems and strong verification processes. Medicare’s approach has been to incentivize hospitals for reporting on a rotating set of (well-defined) quality measures. US hospitals have also gotten savvy with using their own data systems to improve quality, partly because of financial incentives. Around the world, there are already calls for improved data and data systems, including for health data. Health care systems in developing countries should leverage these calls and make reliable data a priority—accurate health data can literally save lives and money.
Improving quality of care may be low-hanging fruit that helps patients’ health and government budgets, especially when it comes to clearly harmful and costly issues like hospital-acquired conditions. Settings like the US can offer useful (and successful) examples on how to tackle quality issues by smartly combining incentives and data. Raising awareness of the technical knowledge and adapting these experiences to developing countries could provide great value for money.
The South African government is currently discussing various alternative approaches to the further expansion of antiretroviral treatment (ART) in public-sector facilities. Alternatives under consideration include the criteria under which a patient would be eligible for free care, the level of coverage with testing and care, how much of the care will be delivered in small facilities located closer to the patients, and how to assure linkage to care and subsequent adherence by ART patients.
On Monday, US Secretary of State John Kerry signed an agreement with the African Union to help establish the African Centres for Disease Control and Prevention. Headquartered in Addis Ababa, Ethiopia, the African CDC will take on a role similar to the Centers for Disease Control and Prevention (CDC) in the United States, and work to prevent and respond to future disease outbreaks on the continent. According to the memorandum, the US CDC will provide technical assistance to help support a surveillance and response unit and an emergency operations center at the African CDC. It will also offer fellowships for African epidemiologists who will work at the new institution.
This is all very welcomed and exciting news.
In our increasingly globalized world, infectious pathogens, whether natural like Ebola or manmade like a resistant strain of tuberculosis, can jump international boundaries with a single plane trip. My blogs on the economic impact of Ebola (see here, here, and here) illustrate how the health of each global citizen, whether poor or rich, depends in part on the health of people in the rest of the world. The US CDC works to protect Americans from these threats. However, despite the success and relatively low cost of the US CDC (less than 9 percent of US budget for health care in 2015), it has few counterparts in the rest of the world and until this week had none in developing countries.
I particularly commend the African Union for recognizing this gap well before the outbreak of Ebola and requesting support from donors to create an African CDC. The idea was initially raised at the Special Summit of the African Union on HIV/AIDS, Tuberculosis and Malaria in July 2013. At the time, however, most observers (including some of us here at CGD) disregarded the proposal, perhaps because we thought the World Health Organization was already doing that job.
But the subsequent Ebola epidemic in Africa made it clear that the WHO in general, and its African region in particular, can barely fulfill their core responsibility to set standards and provide technical guidelines. They have neither the funding, the staff, nor the mandate to assure communicable disease surveillance or rapid outbreak response. Non-governmental agencies like Médecins Sans Frontières and Save the Children stepped in to fill the gaps, but were insufficient to hold back the Ebola epidemic. Ultimately, the affected countries looked to experts from the US CDC for core technical public health advice to manage their domestic epidemics. Some of this scrambling could have likely been avoided if an African CDC had existed.
That’s why I applaud the Obama administration’s commitment to support the creation of an African CDC, and I call on other donors to join in. Essential elements of the new institution must be strong, collaborative relationships with the US CDC as well as with the WHO in Geneva and OECD public health surveillance and control agencies. The African CDC needs surveillance capability not only against episodic outbreaks, but especially against the emergence of resistant strains of HIV, tuberculosis, malaria, and nosocomial (hospital-birthed) infections. Like the US CDC, it must also have a rapid response capability, including an arm similar to the US CDC’s storied Epidemic Intelligence Service. And I hope to see the US support conditioned on the new agency’s insulation from the patronage and corruption that have crippled the WHO Africa branch.
Creating and maintaining strong African Centres for Disease Control and Prevention can be expected to cost the US much less each year than the $5.4 billion it has spent this year on Ebola. And by knitting together the world community to address a threat to global public health that no country can adequately address alone, such an institution arguably contributes to international trust and collaboration on other more strategic topics.
But the action plan remains oddly cautious in tackling antibiotic use in livestock, despite the fact that American cows, pigs, and chickens consume most of the antibiotics used every year in the United States. And American farmers frequently use the drugs to promote growth and prevent disease in healthy animals—ideal conditions for drug resistant bacteria to thrive. US livestock producers have long fought restrictions on antibiotic use for fear that would reduce their profits. But there is a growing body of evidence that their concerns are overblown. Indeed, many meat suppliers are voluntarily moving away from the routine use of antibiotics because of consumer demands.
European Meat Exports Survive Antibiotic Restrictions
The European Union banned the use of antibiotics for growth promotion in farm animals almost a decade ago and many European countries have gone further in restricting antibiotic use in livestock. Denmark and the Netherlands have been among the most aggressive in slashing antibiotic use, yet they remain major meat exporters. Data from across European countries shows wide variation in antibiotic use and no correlation between antibiotic use and export success.
Modern Management Practices Reduce the Need for Routine Antibiotic Use
Sweden was the first country to restrict antibiotic use in farm animals in 1986. It did so at the behest of livestock producers who were concerned about negative reactions from consumers to reports about the heavy use of antibiotics in animals. The Perdue poultry company is phasing out antibiotics, except for the treatment of disease, and several major chains, including McDonald’s and Chick-fil-A, are requiring their suppliers to reduce antibiotic use. At the end of 2014, the six largest US school districts—Chicago, Dallas, Los Angeles, Miami-Dade, New York City, and Orlando County—announced they would demand antibiotic-free chicken when they renew contracts with meat suppliers.
President Obama Should Be Bolder
Despite these movements in the market, however, the President’s new action plan does little more than affirm the voluntary policy guidance that the Food and Drug Administration issued two years ago to phase out antibiotic use for growth promotion in livestock. This is disappointing. The European experience, reviewed in my paper, shows that simply banning antibiotic growth promoters is not enough. The Danish and Dutch governments both found additional steps were necessary to ensure that antibiotic use in livestock actually declined. The administration’s action plan calls for programs to educate farmers and veterinarians about antibiotic stewardship, but it does nothing to ensure the incentives they face are aligned with the goal of reducing use.
As I’ve written here and here, there are still important loopholes in the administration’s approach to reducing antibiotic use in livestock. Unfortunately, the new action plan falls short of sufficiently changing that.
In July, countries will gather in Addis Ababa to adopt an agreement on Financing for Development (FFD). A recently issued “Zero Draft” for an Addis Ababa Accord lays out a framework that goes beyond looking at funding sources to reaffirm the goals, principles, challenges, and policies that are required to meet the Sustainable Development Goals (SDGs).
Yet the one financing source that meets all of the FFD’s aspirations has so far been left off the table: tobacco taxation.
Omitting tobacco taxes is a big mistake because it addresses key aspirations stated in the Zero Draft to improve health and mobilize more domestic revenues. Raising tobacco taxes also addresses the document’s other proposals related to efficient regulations; official development assistance for improved tax administration; and protecting public health measures from abuse of trade agreements.
On health, the draft supports funding modalities that “guarantee social protection and essential public health services” (para. 11) as well as calling to “guarantee access to essential health care” (para. 31). Tobacco taxes are themselves an essential public-health service because they reduce the incidence of smoking-related diseases. In turn, this reduce demands on health-care systems, making it easier to address other illnesses.
On Revenue Mobilization, the draft calls for countries to raise at least 20 percent of GDP for public goods and equity-promoting policies that form the core of national sustainable development strategies (paras. 17–20). Tobacco taxes generate proportionally more health benefits for the poor than for the rich, while most of the revenues come from the rich instead of the poor. Currently, countries generate US$145 billion each year from tobacco taxes — mostly in the OECD — and spend barely US$1 billion annually on tobacco control efforts. Increasing tobacco taxes by 50 percent would raise an additional US$101 billion. Countries such as Brazil, the Philippines, and South Africa already demonstrate the health and revenue benefits of higher tobacco taxes.
On efficient regulation, the draft commits governments “to regulate harmful activities and incentivise behavioral change” (para. 15). The measures that 180 countries have endorsed in the Framework Convention on Tobacco Control are perfect examples of coherent and cost-effective measures that would fulfill this commitment — if countries were to adopt them more comprehensively.
On tax administration, the draft calls upon countries to improve the fairness of taxes and to strengthen tax administration (para. 20). It also calls for international cooperation to combat tax evasion (para. 25) and for using overseas development aid to help countries improve tax administration (paras. 19 and 58). Poor tax administration and enforcement is the only real obstacle in the way of making tobacco taxes an effective instrument for reducing smoking-related diseases and raising revenues. Harmonizing tobacco taxes regionally and strong enforcement make smuggling less attractive and give tobacco taxes more punch.
On trade policies, the draft calls for a range of measures to facilitate trade. But the document also indirectly acknowledges that some corporations try to abuse international agreements and infringe on domestic policies that address social and environmental protections. The Zero Draft calls for “governments to support and assist WTO members who use flexibilities in these agreements” to assure access to medicines and respond to climate change (para. 78). The possibility that corporations will abuse intellectual property protections and investor-state dispute settlement mechanisms is nowhere more apparent than in the anti-social behavior of tobacco companies, and the draft should specifically add tobacco control measures under the FCTC as worthy of supporting through flexible provisions.
The one place in the Zero Draft that mentions tobacco taxes places them in a category of innovative modalities (which they are) but also within a list of international taxes (which until now they have not been). Increasing participation in taxes on international financial transactions, carbon emissions, and transportation fuels (para. 62) are good ideas; but tobacco taxes should be treated as their own innovative modality — something set by domestic policies but coordinated and supported internationally.
If I could have my fondest wish, it would be for a new paragraph to be added to the Addis Ababa Accord, stating:
Recognizing that, without concerted action, tobacco consumption will lead to 1 billion premature deaths in this century; that 180 countries are parties to the Framework Convention on Tobacco Control; that proven cost-effective measures exist to reduce the prevalence of tobacco use; and that tobacco taxes are a financial instrument which is extremely effective at reducing tobacco consumption while mobilizing revenues for public action to address health and other social needs; we commit to support and assist countries in raising inflation-adjusted specific excise taxes to at least double the price of tobacco products by 2020.
But I would be happy with even a few smaller changes such as those below (additions are indicated by bold lettering; deletions are in brackets):
Para 62: We encourage additional countries to voluntarily join in implementing the agreed mechanisms and to help develop and implement additional innovative modalities, including a widening of countries participating in a financial transaction tax, carbon taxes or market-based instruments that price carbon, or taxes on fuels used in international aviation and maritime activities [or additional tobacco taxes]. We further commit to support and assist countries in raising inflation-adjusted specific excise taxes to at least double the price of tobacco products by 2020.
Para 78: “We support and will assist WTO members to take advantage of the flexibilities in the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) to further the public interest in sectors of vital importance for sustainable development, including public health, in particular to provide access to affordable essential medicines and vaccines for all [, ] and implement tobacco control measures, and responses to climate change. All countries should ensure that they provide these flexibilities in their bilateral trade and investment agreements as well.”
Para 25: “We thus commit to a global campaign to substantially reduce international tax evasion through more concerted international cooperation. We agree to work together to strengthen transparency and adopt pending policy innovations, including: public country-by-country reporting by multinational enterprises; public beneficial ownership registries; regional agreements to raise tobacco taxes in neighboring countries; and multilateral, automatic exchange of tax information, with assistance to developing countries, especially the poorest, as needed to upgrade their capacity to participate.
Para 58: An important use of ODA is to catalyze additional resource mobilization from other sources, public and private. ODA can support improved tax collection — including from taxing “bads” like tobacco and carbon — and help strengthen domestic enabling environments.
What better way to demonstrate the commitment to good governance and rational policies that promote human welfare on a global scale while generating the very resources needed to sustain that future? Yes! tobacco taxes are the perfect fit for the Addis Ababa Accord!
Donors play a significant role in funding medicines and other commodities in global health. Of the approximately US $28.2 billion spent by donors in 2010, approximately 40% went towards medicines, vaccines and other health commodities, mainly in sub-Saharan Africa. The efficiency of this spend is therefore of great concern, given the large variability in supply chain costs.