Courtesy Reuters

A Few Dollars at a Time

How to Tap Consumers for Development

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Starting in this quarter, hundreds of millions of people will have an unprecedented opportunity to help the world's most unfortunate inhabitants. When purchasing airline tickets through most major reservation Web sites or through a travel agent, consumers will be asked if they want to make a direct contribution to the fight against the world's three deadliest epidemics: HIV/AIDS, malaria, and tuberculosis. Part of a movement called innovative financing, the project is a new kind of aid that could fundamentally change the relationship between the rich and the poor throughout the world, a few dollars at a time.

Awareness about the epidemics that rage throughout the developing world occasionally crests in the international media when there is an outbreak, as there was of the Ebola virus in the 1990s and of dengue fever in the first years of this century. These periodic outbreaks usually subside within a year or two, or at least are contained before they become pandemics. The HIV/AIDS, malaria, and tuberculosis epidemics have shown more staying power, however, and even now, after years of attention and treatment, each of these diseases still causes more deaths in developing countries than any other single disease, according to the World Health Organization. In 2004, the last year for which statistics were available at the time of this writing, together these three diseases caused one in eight deaths in low-income countries.

Part of the reason these diseases are so harmful is that they reinforce one another. Hundreds of millions of people around the world have latent tuberculosis infections. In most cases, tuberculosis never becomes active, but the disease is much more likely to explode into a full-blown infection, and the infection tends to be much more severe, in people who also have HIV/AIDS. Even those without latent tuberculosis are more susceptible to getting the disease if they already have HIV/AIDS. This is partly because HIV/AIDS suppresses the immune system -- which also means that it is harder for people with HIV/AIDS to fight off malaria. And completing the vicious circle, malaria seems to make HIV/AIDS worse: studies by researchers at the Centers for Disease Control suggest that the body encourages HIV to replicate when it creates antigens to fight malaria. Not surprisingly, patients in the developing world -- especially in the tropical zones of Latin America, the Caribbean, Africa, and Southeast Asia -- are often diagnosed with two or three of these diseases. It makes sense, then, to fight all three together.

Why make them a priority? Worldwide, the mortality rate for heart disease and cancer combined is five times as high as the mortality rate for HIV/AIDS, malaria, and tuberculosis combined. But unlike HIV/AIDS and tuberculosis, heart disease and cancer are not contagious. Heart disease and cancer also tend to prey on the aged, whereas HIV/AIDS, malaria, and tuberculosis kill millions of young adults, children, and babies every year. The World Health Organization estimates that HIV/AIDS and malaria together kill more children under the age of five than all forms of cancer and heart disease combined. By contrast, the American Heart Association reports that 83 percent of people who die from coronary heart disease in the United States are 65 or older. Tuberculosis kills across all ages, but the average age at death is dropping in many countries because of the disease's association with HIV/AIDS.

Stopping HIV/AIDS, malaria, and tuberculosis does not just add a few years to someone's life; it adds a lifetime. Moreover, these lifetimes add real value to the world, and not just in moral terms. Every life lost to infectious disease represents lost economic activity and lost economic development. For example, the death of all the world's poorest people -- those destined to earn just $2 a day for 30 working years (with weekends off) -- would mean a loss to the world's future economic output of more than $50 billion every year. And that is not counting the loss to overall economic development in poor countries ravaged by these infectious diseases.

There are economic costs to rich countries, too. Disease-stricken states cannot afford to import as much from wealthier ones as they otherwise would. In addition, the desperation caused by these diseases is a source of instability that can devolve into conflict, sometimes pulling neighboring countries and even global powers into difficult situations. As early as 1987, a CIA report discussed how HIV/AIDS could exacerbate conflict in sub-Saharan Africa. A 2006 study by the Institute for the Theory and Practice of International Relations at the College of William and Mary showed that the prevalence of HIV/AIDS in developing countries was strongly associated with higher levels of civil conflict and more human rights abuses. Recent research by Andrew Price-Smith of Colorado College has suggested that epidemics can distort demographics by reducing the working-age population, weaken governments, and reduce the state's ability to take care of its people, all effects that in turn can breed conflict. If the world could better control these diseases, the benefits -- economic, social, and otherwise -- would be remarkable.

The good news is that HIV/AIDS, malaria, and tuberculosis are completely controllable diseases; successful treatments are available for all three. The hard part is purchasing and delivering the treatments. The United Nations took up this challenge when its members set the Millennium Development Goals and committed themselves to reversing the spread of these three diseases and to making treatments available to everyone who needed them by 2015. In 2002, the UN's members founded the Global Fund to Fight AIDS, Tuberculosis and Malaria as a central source of financing. The deadline is only five years away, however, and the effort is running tragically behind schedule.

This is largely for lack of money. In 2007, according to the Organization for Economic Cooperation and Development, 22 wealthy countries on its Development Assistance Committee gave $118 billion in direct aid to the developing world but earmarked only $5.3 billion of this for health programs. (Much greater sums went to education, infrastructure, industrial assistance, and debt restructuring.) At the beginning of 2007, according to the World Health Organization, more than five million HIV-positive people in developing countries needed antiretroviral treatment but were not receiving it. To treat all of them every day for a year with just the most basic regimen of drugs would have required raising global aid for health by 20-30 percent. To treat them with the latest generation of antiretroviral drugs would have required more than doubling health-related aid -- and that would have been for just HIV/AIDS. There is an enormous gap in the funding for the fight against infectious diseases. The pressing question of how to close it is a matter of life or death for hundreds of thousands of people every year.

A PENNY FOR YOUR TICKETS

One of the most promising methods for closing the gap is innovative financing. The goal of this kind of development aid is to harness markets in an intense effort to quickly raise hundreds of millions, perhaps even billions, of dollars -- the kind of money that can make a real difference in the development, purchasing, and delivery of life-saving treatments. Starting big and front-loading investments creates incentives for researchers to look for new treatments, encourages pharmaceutical companies to design the resulting drugs so that they are easy to distribute and administer in poor countries, and reduces the drugs' prices by guaranteeing bulk orders.

A handful of such programs have sprung up in the past several years. For example, the International Finance Facility for Immunization, a charitable corporation set up in 2006 under the auspices of the British government, issues bonds guaranteed by the governments of wealthy countries to raise hundreds of millions of dollars a year for vaccines. The governments repay the bonds over time. So far, the International Finance Facility for Immunization has collected $1.6 billion in up-front cash. Another initiative, (Red), collects donations from companies that sell goods and services under its (Product) Red brand, which is advertised to consumers as a charitable endeavor. Participating brands include household names such as American Express, Apple, Converse, Gap, and Hallmark. Together, they have raised $130 million in three years.

And then there is UNITAID. The program, under the auspices of the World Health Organization, stands apart for collecting money directly from consumers and businesses through the worldwide market for airline tickets. The idea is to share a tiny fraction of globalization's enormous economic gains with sick people in poor countries. UNITAID does not require consumers to buy any particular brand. In 13 countries, whenever consumers purchase an airline ticket, a small tax -- sometimes as little as $1 -- is set aside for the fight against the three major epidemics. With this simple model, UNITAID raised $1.2 billion in the first three years of its existence. And it has begun to finance the antiretroviral treatments of three out of four children who receive treatment for HIV/AIDS, help treat over one million people for tuberculosis, buy 20 million bed nets to protect against malaria-carrying mosquitoes, and more.

Innovative financing sprang from the recognition by former French President Jacques Chirac, Brazilian President Luiz Inácio Lula da Silva, and former Chilean President Ricardo Lagos that the Millennium Development Goals could not be met with official aid alone. A commission of academics and policy experts established by Chirac to investigate other options released scores of ideas in late 2004. The one that grabbed Chirac's attention called for collecting revenue from a tiny tax on transactions in some major industry -- currency exchange, carbon-emissions trading, cars, air travel -- and committing it to one or more of the Millennium Development Goals.

The three leaders eventually settled on the idea of an airline-ticket tax, and one of us, Philippe Douste-Blazy, then the French foreign minister, proposed that he and his staff turn the idea into reality. The genius of the tax was not only that it would be a tiny levy on a very broad base but also that it would not significantly affect the flow of travelers to the countries that instituted it. If the French government implemented the tax, for example, it would apply only to tickets purchased in France. As a result, French people might be marginally discouraged from flying, but not foreigners traveling to France, unless they bought their tickets in countries that also had the tax. It would be the first time in modern history that countries would be levying a tax on their own citizens exclusively for the benefit of citizens of other countries.

The French and Chilean governments began collecting the tax within a year. South Korea and nine African countries soon followed suit. Before Chirac left office in 2007, the program was housed at the World Health Organization under the name UNITAID, derived from the French "tous unis pour aider" (everyone united to help). The board of UNITAID was composed of representatives from its founding countries -- Brazil, Chile, France, Norway, and the United Kingdom -- with additional seats for representatives from Africa, Asia, international health groups, and nongovernmental organizations, including patients' rights groups.

Soon, the organization began to receive direct contributions from a few European governments and from the Bill and Melinda Gates Foundation. These were motivated not just by UNITAID's pioneering role in innovative financing but also by its novel approach to spending. UNITAID's board remains committed to financing programs that will have a major impact on HIV/AIDS, malaria, and tuberculosis all at once: creating the first child-sized doses of antiretroviral medicines, lowering the prices of the most cutting-edge malaria treatments to match those of old-fashioned quinine pills, and commercializing the first child-specific drug for tuberculosis. It has also undertaken to finance these treatments as long as the patients need them, something that governments, which allot foreign aid on a yearly basis through an onerous political process, can rarely do. UNITAID can achieve these things because its immense spending power allows it to purchase hundreds of millions of dollars' worth of treatments. Pharmaceutical companies thus have an incentive to reformat medicines -- creating, for example, pediatric doses and transforming difficult-to-measure syrups into pills -- and to reprice them for underserved populations in the developing world.

One by one, countries began adopting the tax. By the end of 2007, 17 states had passed a law that would implement it and 17 more were considering doing so.

GOOD TRAVELS

But there was limited enthusiasm in the world's biggest market for airline tickets, the United States. And so it seemed clear that if UNITAID was to become truly global, it would need a complementary approach: voluntary contributions. This idea was the brainchild of Jean-François Rial, a French entrepreneur who heads Voyageurs du Monde, France's leading tourism agency. Realizing that only three companies (Sabre, Amadeus, and Travelport) controlled the reservation systems for two billion plane tickets issued each year -- roughly 80 percent of the world's total -- he reasoned that if those three companies incorporated a voluntary-contribution mechanism into their reservation software, travelers around the world would have a chance to directly fund the fight against HIV/AIDS, malaria, and tuberculosis.

After two years of development, the mechanism is expected to launch on all three systems this quarter. Travelers from any country who book a trip with Expedia, Opodo, or Travelocity, among many other Web sites, will be asked during checkout whether they would like to contribute two dollars, two euros, or two pounds to save the lives of poor people. The prompt will be seamlessly integrated into the booking experience -- a pop-up window on the computer screen, a box for the travel agent to check. Within weeks, it will become a routine part of life for millions of travelers around the globe -- a routine with the potential to help save as many as three million lives every year and prevent the loss of tens of billions of dollars annually in new economic activity, increasing opportunities for growth in poor countries and limiting some of the causes of instability and conflict. The contributors will also have a chance to interact with one another and possibly with the people they are helping through an associated online social initiative called Massive Good. Such communication will enable participants to make the program even more effective: they will be able to encourage businesses where they live to opt for the voluntary contribution when those businesses book travel, and they will be able to check that the treatments arrived at their destinations.

A preliminary study conducted by McKinsey & Company in 2007 suggested that the new mechanism could raise $1 billion in its first four years, almost doubling UNITAID's budget from the airline-ticket tax and other contributions. With this money, UNITAID is now helping manufacturers of generic drugs roll the various medicines needed to treat an epidemic into a single pill. To achieve this, UNITAID is trying to persuade the pharmaceutical companies that developed those medicines to pool their intellectual property and offer it as a package to generic-drug manufacturers. Creating a single pill would greatly simplify the treatment of all three major epidemics -- an unprecedented move in public health. UNITAID also hopes to launch a satellite tracking mechanism so that contributors can follow the journey of the treatments they purchase from the factories to the patients, thereby reinforcing solidarity between the world's rich and the world's poor.

SUPPLEMENTS, NOT REPLACEMENTS

Voluntary contributions come with some downsides, however. Most notably, if the program succeeds, the governments of wealthy countries might feel less obligated to send official aid overseas. This possibility could become especially likely during an economic downturn, when governments might be looking for excuses to cut foreign aid -- even as they hand out hundreds of billions of dollars to save their troubled banks and insurance companies. Conversely, if the voluntary-contribution scheme were to founder, these governments might take that as a popular verdict against the Millennium Development Goals and use it as a pretext to reduce their official aid.

Some of the nongovernmental organizations that fight HIV/AIDS, malaria, and tuberculosis also might have reason for concern. These groups depend on official aid, in addition to private donations, for a large part of their funding, and they might resent seeing heads of state celebrate the launch of a voluntary-contribution scheme while they freeze or trim that support. Because UNITAID and the other innovative financing mechanisms channel most of their spending through a few big delivery organizations, such as UNICEF and the Clinton HIV/AIDS Initiative, they cannot replace the efforts of hundreds of smaller groups working on locally targeted programs.

This concern is of paramount importance for all innovative financing mechanisms, which were intended as supplements, not replacements, to help close the gap between official aid and the huge sums necessary to turn the tide against the three big epidemics once and for all. If governments invoke these financing schemes as substitutes for official aid, then those funds' very purpose will be defeated. To avoid this, the Millennium Foundation for Innovative Finance for Health, which is a UNITAID partner, and other independent or quasi-independent entities will have to hold governments to account, by shaming them publicly for cutting aid budgets when they do and by holding them to their promises that they will increase aid at least enough to keep up with inflation. The backers of innovative financing mechanisms, such as UNITAID, have two main responsibilities: to help fight diseases through novel ways of raising money and also to ensure that their success does not undermine the existing efforts they set out to strengthen.

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