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

Document 5 of 21.

April 11, 2000, Tuesday

SECTION: PREPARED TESTIMONY

LENGTH: 3706 words

HEADLINE: PREPARED TESTIMONY OF TREASURY SECRETARY SUMMERS

BEFORE THE SENATE APPROPRIATIONS COMMITTEE FOREIGN OPERATIONS SUBCOMMITTEE

SUBJECT - GLOBAL HEALTH FUNDING

BODY:
Thank you, Chairman McConnell, for inviting me to testify on the President's Millennium Initiative to help combat infectious diseases. Let me also thank Senator Leahy for the leadership he has shown on this matter. Along with the leadership of Senator Kerry and Congresswoman Pelosi and others, your support has made a real difference.

Increasingly, as integration proceeds, the world is confronting a broad class of problems that cross borders and defy easy solution by individual governments and markets. Whether it is money laundering and financial crime, climate change or reductions in global biodiversity - the solutions to these problems will be global public goods, requiting concerted global cooperation.

The proposals that the Administration has put forward in its Millennium Initiative seek to catalyze a global response to one of the most urgent and morally compelling of such problems: the scourge of infectious diseases that hit hardest the countries that are least able to cope. Today I would like to address the three points that form the basis for the President's Initiative. First, the development and delivery of vaccines and effective treatments for infectious diseases is now one of the effective investments that we can make in successful economic development in the poorest countries. Second, both the lessons of recent development experience and the advance of scientific discovery have put us in a position to have a real impact on the global spread of these diseases. Third, public-private cooperation, both at the national and international level, is needed to achieve this - and elements of the President's Initiative provide the most effective means of setting the right kinds of cooperation in train.

Combating Infectious Diseases as a Moral and an Economic Imperative

It might seem surprising that the Treasury Secretary is devoting so much attention to the goal of preventing and controlling disease in the developing world. But, as Treasury Secretary, I am constantly aware of the enormous national economic, humanitarian, and security stake that the United States has in the successful development of the poorest countries.

A more global prosperity will produce better trading partners for the US: time and again, as poor countries grow richer, they become the fastest growing markets for US goods and services. Already, developing countries account for some 42 percent of US exports. A more global prosperity will also promote peace: from Bosnia to East Timor, from Rwanda to the Middle East. It will also promote human freedom. Nations that succeed economically are much more likely to become democratic. And a more global prosperity will help us to meet the profound challenge of protecting the global environment. Environmental degradation spawned by dire poverty is a global concern.

Today, it does not overstate the case to say that the greatest single obstacle to human development in these countries and to a more inclusive global prosperity is the specter of disease.

The spread of HIV/AIDS in recent years has been swift and particularly brutal: 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 2.5 million last year.

- In sub-Saharan Africa, where 85 percent of all AIDS deaths have occurred, life expectancy is now declining sharply in many countries, reversing decades of hard-won gains. In at least five African countries, over 20 percent of adults are HIV-positive. In southern Africa, life expectancy is expected to drop from a high of 59 in the early 1990s to 45 within the next 510 years - a level not seen since the 1950s. And the highest rates of new infection are often among young women who will soon be mothers. Most worrisome is the rate at which HIV/AIDS is spreading, and the very real danger that what is happening in Africa is about to happen elsewhere. 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, it bears emphasis millions of the world's people still fall prey to diseases that are centuries old. Tuberculosis accounts for over 2 million deaths annually, and drug- resistant strains are spreading. Indeed, 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. Diarrheal and respiratory infections are even more devastating, killing almost 6 million people each year. And millions die of diseases for which cheap vaccines are available today. Fewer than half of Africa's children are vaccinated against basic diseases like measles and diptheria - even though such vaccines are one of the most cost-effective ways to improve health. And in South Asia, less than three-quarters of the children are vaccinated.

All told, infectious diseases are the leading cause of death worldwide, causing almost half of all deaths among people under the age of 45. The end result is not merely a humanitarian crisis, but a broader social and economic crisis. Life expectancy is falling mainly because of rising mortality among prime age adults and research has shown that economic growth depends importantly on the share of the population that is of working-age. A recent World Bank study estimates that AIDS is likely to subtract about I percent a year from GDP in 30 sub-Saharan African countries. The burden of coping with these diseases further reinforces the poverty that allowed these diseases to take root. Health care budgets and facilities are overwhelmed by the heavy burden of caring for those who are infected. And families that are already impoverished are forced to liquidate assets and defer expenses for essentials such as education in order to pay for costly medical care - thus sending them into a deeper downward economic spiral. AIDS, alone, has orphaned an alarming number of children - over 11 million worldwide, with all but one-half million in Africa.

The implications of this crisis are global: Because infectious diseases do not respect the boundaries of states and geography - as we have seen with HIV/AIDS, with the resurfacing of tuberculosis in parts of the United States, and with last year's outbreak of West Nile encephalitis in New York. Because if these countries do not develop they cannot contribute to the broader global growth in which we have such a stake, at a time when already, more than 40 percent of our exports already go to developing countries. And because the national economic distress and political instability that inevitably accompany this scale of human loss can cause greater damage to the global system as a whole. For all of these reasons, support for the development and delivery of vaccines and effective treatments for infectious diseases is one of the most cost-effective investments we can make both in successful economic development in these economies, and in the prosperity and stability of the global economy as a whole.We believe this is fundamentally a humanitarian imperative. It is also a national economic and security imperative. And it is an imperative that global experience and the pace of scientific discovery have now put us in a much stronger position to address.

II. The Ability to Make a Real Difference

We cannot sit back and wait for these critical discoveries. We must deal now with the ongoing and immediate impact of infectious and other diseases of poverty.

The record of past international efforts to combat infectious disease suggests that there are no easy, simple solutions to this problem. But we are in a much stronger position today than we were even a few years ago to help countries make concrete progress, for three reasons.

First, because of the rapid growth in relevant scientific understanding.

Clearly, one reason for 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. But, as one pharmaceutical executive said at a recent meeting on this subject with the President, this is a "golden age" for research and implementation. Important recent advances are being made on malaria, pneumococcus, and AIDS. As I will describe in a few moments, we believe that public policy can provide a critical boost to private research efforts in this area.

Second, because we have new tools for potentially channeling significant internal and external resources toward this effort.

A sheer lack of financial resources relative to the cost of even the most basic investments in health is clearly an even greater obstacle to improving health outcomes in these countries. On average, the poorest nations in the world spend just $15 per person on health care each year - less than it costs to fully vaccinate a child against nine basic diseases including polio, measles, and tetanus. In the United States, we spend thousands of dollars per person on health care each year. In the poorest developing countries, there are only 14 doctors and 26 nurses on average for every 100,000 patients, compared to 245 doctors and 878 nurses in the United States. And 800 million people live on less than $1 a 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.

We cannot hope to eliminate the relative gap in countries' economic resources. But in the Heavily Indebted Poor Countries Initiative we do have a tool for increasing the funds they have available - and ensuring that they are channeled to core human development priorities such as basic healthcare.The HIPC Initiative, created in 1996 and further enhanced last year, has already helped some of the poorest nations in the world free up precious resources for human development that would otherwise have been spent on servicing debt. Fully funded and implemented, the enhanced HIPC initiative has the potential to be an even more powerful tool for helping countries devote more resources to combating infectious disease.

Third, we have greater understanding of the importance of- and pre- requisites for - effective delivery of vaccines and treatments.

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 education to prevent the spread of HIV/AIDS.

These problems have often been important obstacles to international efforts to combat heart diseases in the past. However, the tight linkages between different aspect of health care are now well understood in the development community and are being successfully put into practice. As I will note in a few moments, this is reflected in both the President's Millennium Initiative and plans now being developed by the World Bank, which focus on shifting significant resources to improving the delivery of basic health services including vaccines and medicines.

We also understand better that this is not a problem of money alone - but also competence and enduring commitment. Specifically, developing country governments need to commit themselves to specific targets for improving health care delivery and health outcomes. And donor countries, international organizations, and non-government entities in developing nations need to cooperate to find solutions that will work best for the country in question. And applying these principles is yielding concrete results. For example: In Uganda and Thailand, recent innovative programs supported by the international community have begun to reverse HIV infection rates of high-risk groups. And in Senegal, an early investment in prevention programs has helped to keep HIV infection rates low. In Bangladesh, which can spend only $4 per person per year on health, the World Bank, USAID, and other donors have supported the development of networks of non-physician personnel fanning out to thousands of villages and urban slums, which have helped to reduce the infant mortality rate from 132 to 75 between 1980 and 1997.

III. The President's Millennium Vaccine Initiative

The President's Millennium Vaccine Initiative, outlined in his State of the Union address, draws on both of these realities: the scale and urgency of the problem, and the greater scope that we have today for launching an effective global response.

In these efforts, we are building on the support of the private sector, including pharmaceutical companies that can provide the research and development that is so necessary to developing the fight vaccines; we are also drawing on the commitment of the non-profit sector, including organizations like the Gates Foundation that has contributed so generously to the fight against disease, and we are utilizing the expertise of government so that it can act as a catalyst to ensure that these efforts are expanded on an international scale.

The President's initiative has four basic components.

First, mobilizing additional international resources to help the poorest countries purchase existing vaccines for their children.

Many poor countries often cannot afford to buy vaccines. To help address this problem: The President's FY2001 budget proposes a $50 million contribution to the Global Alliance for Vaccines and Immunization (GAVI) to purchase existing 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 existing vaccines.

Second, shifting 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: First, because 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. And second, because one crucial part of the problem is that there is not a visible market for new treatments and vaccines in many of the countries worst affected. And the World Bank and other institutions can do much to create a market, through its lending programs and the policies they support.

As I noted earlier, the Administration is also using the enhanced HIPC debt initiative to support our efforts on infectious diseases. The HIPC countries will be developing Poverty Reduction Strategy Papers, 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 HI/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.

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. I would note here that for FY2001 we are requesting a total of $1.6 billion for Treasury international programs, of which by far the largest share is taken up by commitments to the MDBs - some of them required to clear arrears'- and appropriations to enable us to play our part in funding HIPC. It will be very important to the overall success of this Initiative that these requests are passed.

Third, intensifying the search for more effective ways of treating and preventing diseases that widely afflict developing countries especially HIV/AIDS, malaria and tuberculosis.

The President's FY2001 budget for the National Institutes of Health also 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 has also proposed an additional $100 million for HIV prevention and AIDS treatment in Africa, Asia and other developing countries. We can make crucial headway against HIV and AIDS by providing clear information on prevention strategies and treating sexually transmitted diseases. We are calling on other countries to join us in co .remitting money for these purposes.

Fourth, harnessing the scientific and technological skills of the private sector in the development of new vaccines and medicines for infectious diseases.

While important progress is being made, it is widely recognized that the market does not provide sufficient incentive for pharmaceutical companies to develop vaccines and medicines for diseases that disproportionately affect developing nations. Indeed, the WHO estimates that only perhaps 10 percent of the $50-60 billion spent worldwide each year on health research is directed towards diseases that afflict 90 percent of the world's population.

To start to address this problem: The President is proposing a new tax credit for sales of vaccines against malaria, tuberculosis, FHV/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 2020, 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. In addition, the Administration has expressed its willingness to support a tax credit for qualified clinical testing expenses for certain vaccines, similar to the existing orphan drug tax credit. The credit would be for 30 percent of the expenses for human clinical testing of vaccines for the diseases targeted by the President's initiative. This credit will provide an additional incentive for drug manufacturers to undertake research on new vaccines and accelerate their development.

IV. Concluding Remarks Mr. Chairman, the sheer magnitude and complexity of the challenge of combating infectious diseases, 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.

However, in Uganda, Thailand, Senegal and elsewhere. We have now seen compelling examples of concrete progress. And we have seen in the past well-coordinated global efforts can have an enormous impact. One need only consider the eradication of smallpox; the nearly complete campaign against polio - and the remarkable global effort to combat river blindness (onchocerciasis), which has halted the transmission of that disease has been halted in eleven African countries and prevented 1 $5,000 who were already infected from going blind.

As I have said, we believe that we now have a historic opportunity to make headway against the other killer diseases that today exact such a toll on the developing economies. What is crucial is that we act not to catalyze a broad international effort to address the problem at its root. 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. Thank you. I would now welcome any questions that you might have.

END

LOAD-DATE: April 12, 2000

Document 5 of 21.


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