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Search Terms: vaccine W/10 tax credit AND AIDS, House or Senate or Joint

Document 18 of 32.

March 8, 2000, Wednesday

SECTION: PREPARED TESTIMONY

LENGTH: 2931 words

HEADLINE: PREPARED TESTIMONY OF TIMOTHY F. GEITHNER TREASURY UNDER SECRETARY

BEFORE THE HOUSE COMMITTEE ON BANKING AND FINANCIAL SERVICES

BODY:
Introduction:

Thank you, Mr. Chairman and Ranking Member LaFalce, for inviting me to testify at this important hearing about efforts to combat AIDS worldwide. We welcome your hard work, Mr. Chairman, in bringing attention to this issue and in putting forward a creative and ambitious proposal for U.S. leadership in this global health crisis.

I would like to focus my remarks on the broader challenge of diverse health problems in the developing world, and on the Millennium Initiative proposed by the President to help combat infectious diseases, including AIDS. Health issues are not usually considered the province of Finance Ministries, but they should be. In many countries there are no greater threats to economic development, and any strategy that effectively addresses health problems will need to leverage financial resources on a large scale.

In my testimony today I would like to: - First, illustrate the United States' compelling economic interest in combating infectious diseases in the developing world;

- Second, identify the major constraints on progress in this area, and review the lessons of recent development experience;

- Third, outline the main elements of the Administration's initiative to promote the development and delivery of vaccines around the world. The Economic Dimension of the Crisis

The human toll of AIDS is indeed staggering. Fifty million people worldwide have been infected with the HIV virus; more than 16 million have died; and annual AIDS-related fatalities hit a record 2.6 million last year.

So far, the most devastating impact of AIDS has been in sub-Saharan Africa, where 85 percent of all AIDS deaths have occurred. In at least five African countries, over 20 percent of adults are HIV-positive. And the highest rates of new infection are often among young women who will soon be mothers.

Even more frightening is the possibility that other parts of the world will go down the same road as Africa. Infection rates in Asia are climbing rapidly, with several countries on the brink of a large-scale pandemic and needing to take action immediately to forestall the disaster that Africa has suffered. Parts of Latin America and the Caribbean -- our own neighbors - also show high and rising rates of infection. And the former Soviet Union countries and Eastern Europe are vulnerable as well, with Russia experiencing the highest increase in infection rates in the world last year.

At the same time, people around the world continue to suffer from the scourge of other deadly diseases that are centuries old. Tuberculosis accounts for 2.3 million deaths annually, and drug-resistant strains are spreading. Thousands of people who are HIV positive actually die of TB; their damaged immune systems allow active TB to develop, which then can spread to people who are not HIV-positive. Malaria strikes hundreds of millions of people each year and results in more than one million deaths, mostly children.

The more common infectious diseases, diarrhea and respiratory infections, are even more devastating, killing almost 6 million people each year.

Altogether, infectious diseases are the leading cause of death worldwide, causing almost half of all deaths among people under age 45. As a result, over 11 million children worldwide are orphaned each year.

It is often hard for Americans to fathom, but fewer than half of Africa's children are vaccinated against basic diseases like measles and diphtheria - even though such vaccines exist and are one of the most cost-effective ways to improve health. In South Asia, less than three-quarters of the children are vaccinated. The result is that over 8 million children die each year of centuries-old diseases. Millions could be saved using vaccines and medicines available today.

The social and economic impact of this public health crisis is horrific. Life expectancy is declining sharply in many African countries, reversing decades of hard-won gains. In southern Africa, life expectancy is expected to drop from a high of 59 in the early 1990s to 45 within the next 5-10 years - a level not seen since the 1950s. Importantly, life expectancy is falling mainly because of rising mortality among primeage adults. Because research shows that a larger share of working-age adults in a population leads to faster economic growth, the loss of the most productive members of society has disproportionate economic consequences.

Health care budgets and facilities are overwhelmed by the heavy burden of caring for those infected. Families that are already impoverished are forced to liquidate assets and defer expenses for essentials like education in order to pay for costly medical care; this sends them into a deeper spiral of poverty. The death of both parents, which is very common once AIDS strikes the family, has led to an alarming number of orphans - over 11 million worldwide, with all but one-half million in Africa.

In many societies, young women are particularly vulnerable. It is often difficult for them to stand up for themselves and minimize HIV risks, and - once infected - they may face abandonment.

The costs of this humanitarian crisis are not limited to the countries that are directly affected. We are all vulnerable - in part, because infectious diseases do not respect the boundaries of states and geography, and in part because the national economic distress and political instability that inevitably accompany this scale of human loss can cause greater damage to the world economy and to regional stability.

We face a humanitarian imperative, but also an economic and a strategic imperative, in doing what we can to address these challenges.

The Complexity of the Challenge and The Lessons of Experience

The causes of the health crisis in developing countries are complicated and formidable. The record of past international efforts to combat infectious disease suggests that there are no easy, simple solutions to this problem. Nevertheless, we have learned a lot from experience, and we know the concrete steps that need to be taken to improve the health and economic situation in poor nations.

One problem contributing to the high incidence of infectious diseases is the remaining gaps in our scientific knowledge about those diseases. The development of vaccines and medicines simply cannot exceed the frontiers of available basic science.

Yet, our scientific understanding is growing daily. As one pharmaceutical executive said at last week's meeting with the President, this is a "golden age" for research and implementation.

Important recent advances are being made on malaria, pneumococcus, and AIDS. Public policy can provide a critical boost to private research efforts, and I will describe later some of the channels of public-private cooperation that we intend to strengthen. A second obstacle to improving health in poor nations is their lack of resources relative to the cost of even the most basic health interventions. On average, the poorest nations in the world spend $15 per person on health care each year - less than it costs to fully vaccinate a child (for polio, diphtheria, pertussis, measles, tetanus, hepatitis B, TB, yellow fever, and rubella). In the United States, we spend thousands of dollars per person on health care each year. The poorest developing countries have only 14 doctors and 26 nurses on average for every 100,000 patients, compared to 245 doctors and 878 nurses in the United States. Roughly 800 million people in these countries live on less than a dollar per day. The harsh reality is that the cost of caring for patients with AIDS the way we do in the United States far exceeds the per capita income of most developing countries.

Once again, however, we know how we can reduce -- but obviously not eliminate -- this problem. The HIPC debt initiative provides a powerful and effective tool for increasing the resources available to the poorest countries -- and for ensuring that these resources are used where they are most needed. Aiding the broader process of development will also help these countries generate more internal funds that can be used to improve health.

A third obstacle to good health in developing nations is the difficulty of delivering basic health services when and where they are needed. Clearly, it does no good to ship vaccines and medicines to the ports of poor nations if they do not end up in the throats or arms of the people who need them. Just as clearly, it does little good to administer vaccines and medicines to people who do not receive basic tools for maintaining health (such as nutritional interventions like vitamin A and iron) or preventing disease (such as bed nets for malaria, and condoms and sex education for HIV/AIDS).

However, the tight linkages between different aspect of health care are now well understood in the development community. The President's Millennium Initiative and the plans being developed by the World Bank focus squarely on this problem by shifting significant resources to improving the delivery of basic health services including vaccines and medicines.

But this is not a problem of money alone. It is also a matter of competence and enduring commitment. The governments of developing nations need to commit themselves to specific targets for improving health care delivery and health outcomes. At the same time, donor countries, international organizations, and non-government entities in developing nations must work cooperatively with those nations' governments. Such commitment and cooperation have achieved demonstrated success. In Uganda and Thailand, innovative programs have begun to reverse HIV infection rates of high-risk groups. In Senegal, an early investment in prevention programs has helped to keep HIV infection rates low.

In sum, poverty and runaway infectious disease reinforce each other to produce economic and social problems that may seem insuperable. Yet, despite the scale of the crisis and the complexity of the constraints, experience points to specific actions we can take that will dramatically improve the lives of millions of people.

The President's Millennium Vaccine Initiative

In January of this year, the President outlined a new initiative to build on existing approaches to combating HIV/AIDS and other infectious diseases. This initiative has the following principal components.

First, we need to rapidly mobilize additional international resources to help the poorest countries vaccinate children and deal with the heavy cost of AIDS prevention and treatment.

- The President has proposed in his FY 2001 budget an additional $100 million for HIV prevention and AIDS treatment in Africa and Asia. We can make crucial headway against HIV and AIDS by providing clear information on prevention strategies, supplying condoms, and treating sexually transmitted diseases. We are calling on other countries to join us in committing money for these purposes.

- The President has also proposed a $50 million contribution to the Global Alliance for Vaccines and Immunization (GAVI) to purchase vaccines for children. This contribution should help catalyze significant contributions from other countries and foundations. It will also add critical credibility to the international community's commitment to provide a market for new vaccines, including vaccines for AIDS, when they are developed. Further, the President has helped to catalyze commitments from the pharmaceutical industry to donate hundreds of millions of dollars worth of vaccines.

Second, we must shift existing international resources toward building infrastructure in poor countries that can deliver vaccines and medicines and provide essential basic health services.

- President Clinton has called on the multilateral development banks to shift an additional $400 million to $900 million annually of concessional resources into basic health care. Of course, an essential element of such care is prevention and treatment of infectious diseases, including AIDS. These banks are the right institutions for investing in health infrastructure and health care: these activities fall clearly within the poverty reduction and development mandate of the banks, and no other institutions can bring to bear the funding and policy dialogue on the scale needed for the task.

- The Administration is also using the enhanced HIPC debt initiative to support our efforts on infectious diseases. A key principle of this initiative, designed to reduce substantially the crushing debt burdens of the world's poorest countries, is the requirement that resources freed up by debt relief be used for poverty reduction.

- Therefore, HIPC countries will be developing Poverty Reduction Strategy Papers (PRSPs), in a participatory process with civil society and donors, to establish comprehensive plans with monitorable targets. We have already requested that our Embassies and USAID missions in these countries stress the use of debt-reduction savings for bolstering basic education and health, including the fight against infectious diseases. We expect that all PRSPs that are prepared by HIPC candidates will discuss the adequacy of budget resources and policy reforms devoted to basic health care.

- The early evidence from HIPC beneficiaries is encouraging. Last year, the Ugandan government saved $45 million in debt service under the original HIPC program. Its expenditures on health and education increased by $55 million, including a major effort to combat the HIV/AIDS epidemic. Immunization rates for children in Uganda are expected to increase from 55 percent in 1996 to 60 percent in 2002. One of the key priorities for health spending in the future, which would be facilitated by enhanced HIPC debt relief, is to extend HIV/AIDS education outreach, particularly to rural communities. Another instructive example is Bolivia, which saved $77 million under the original HIPC initiative last year and increased social sector spending by more than $80 million.

- This redirection of resources supports the Administration's overall strategy for global development, which emphasizes poverty reduction and gives a central role to "global public goods" -- like health or the environment -- in which positive actions taken in one country benefit other countries is well. Because of the interconnection between poverty and health, funds for fighting infectious diseases should not be diverted from spending on other basic social programs such as education and health care.

- These measures do not require additional budget commitments. However, our influence within the multilateral development banks and on HIPC depends on our ability to meet our existing commitments. Third, we need to harness the scientific and technological skills of our nation and others to accelerate the development of new vaccines and medicines for infectious diseases. Because poor countries often cannot afford to buy vaccines, the market provides little incentive for pharmaceutical companies to develop vaccines for diseases that disproportionately affect those countries.

- The President's FY 2001 budget for the National Institutes of Health includes a significant increase in research critical to creating vaccines for deadly diseases that afflict primarily developing countries. Funding for AIDS vaccine research will increase substantially in FY 2001 and will have more than doubled since FY 1997.

- The President is proposing a new tax credit for sales of vaccines against malaria, tuberculosis, HIV/AIDS, or any infectious disease that causes over one million deaths annually worldwide. Under the proposal, the seller of a qualified vaccine could claim a credit equal to 100 percent of the amount paid by a qualifying nonprofit organization (such as UNICEF) that received a credit allocation from the U.S. Agency for International Development (AID). The tax credit would match the purchaser's expenditures dollar-for-dollar, thereby doubling its purchasing power. For 2002 through 2010, AID could designate up to $1 billion of vaccine sales as eligible for the credit. This credit would provide a specific and credible commitment to purchase vaccines for the targeted diseases once they become available. The President is calling on other governments to make similar purchase commitments, so that we can ensure a future market for these critically needed vaccines.

Conclusion

The sheer magnitude and complexity of these problems, and their resistance to the efforts of the past, have a tendency to overwhelm hope with a sense of futility. Around the world, infectious diseases - including AIDS - are killing millions of children and weakening and killing tens of millions of prime-age adults. The devastating human and economic consequences are clear.

Yet there are compelling examples of impressive progress toward resolving these problems, including the successes in Uganda, Thailand and Senegal that I mentioned earlier. And there are other success stories from well-coordinated global efforts: the hugely successful eradication of smallpox; the nearly complete campaign against polio; and the remarkable efforts that turned the tide on river blindness.

We believe that this is an important moment to try to catalyze a broad international effort to deal with the linked challenges of health crises and oppressive poverty. We look forward to working with the Congress to try to mobilize the necessary resources and shape the incentives and strategies that can contribute to enduring solutions.

END

LOAD-DATE: March 9, 2000

Document 18 of 32.


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