Senate Hearing: James Love Testimony on the High Cost of High Prices for HIV/AIDs Drugs and the Prize Fund Alternative

Ed Note: On Tuesday, 10:00 a.m., the US Senate Subcommittee on Primary Health and Aging will hold a hearing on the high costs/prices for HIV/AIDs Drugs and the Prize Fund Alternative.  The hearing will be carried on CSPAN 3; view here.

With the costs of treating HIV/AIDS exploding from patents and anti-competitive drug pricing, there is a need for alternative means to support R&D while lowering the costs of treatment.  One alternative proposed by Senator Sanders is a Prize Fund.  Witnesses include Harvard Law’s Lawrence Lessig (see testimony here) as well as KEI Director James Love, Joseph Stiglitz and others.  Below are excerpts from the first half of prepared testimony of James Love. The full text with tables is available here (pdf).

The de-linkage of R&D costs and drug prices through the Prize Fund for HIV/AIDS will cost less, expand access, accelerate and improve innovation, and replace an incentive system that is expensive, inefficient and unsustainable

Testimony of James Packard Love

My name is James Packard Love. I am pleased to testify today in support of S.1138, the Prize Fund for HIV/AIDS.

I am the Director of Knowledge Ecology International (KEI), a non-profit organization that is concerned with the management of knowledge and human rights.    A significant part of our work focuses on the development of and access to new medicine technologies, including in particular new medicines, vaccines and diagnostic devices. . . .

Since 1994, I have worked on both domestic and international aspects of these issues.    Since 2000, I have been a consultant, advisor or expert for the World Bank, the United National Program on Development (UNDP), the World Health Organization (WHO), UNITAID, the UN Human Rights Council, the World Intellectual Property Organization (WIPO), the Global Fund for HIV/AID, Tuberculous and Malaria (TGF) , regional intergovernmental bodies including the European Parliament, the European Patent Office (EPO), the African Union (AU), and several national governments and NGOs.    I am the U.S. Co-chair of the Trans Atlantic Consumer Dialogue (TACD) Policy Committee on Intellectual Property, the Chairman of Essential Inventions, the Chairman of the Union for the Public Domain, and a member of a number of committees, and task forces, such as the 2.3(c) Committee (to implement paragraph 2.3c of the WHO Global Strategy on Public Health, Innovation and Intellectual Property). . .

The Current and Looming Crisis in the Market for New Drugs for HIV/AIDS

My earliest work on treatments for HIV/AIDS drugs was focused on the pricing of AIDS drugs in the United States, including cases where the United States government had played an important role in funding the research and development. One insight was that the pricing of drugs invented with extensive public support was at least as aggressive as the pricing of products developed without such support, and indeed, often the government supported inventions were more expensive.    Another insight was that the pricing of a product had almost no relationship to actual private sector outlays on research and development for that product, or to its costs of manufacturing.    In the absence of competition, typically due to some type of government enforced monopoly such as the exclusive rights associated with patents, orphan drug designations, pediatric testing, or regulatory test data reliance, prices were set according to the seller’s perception of the patient’s willingness to pay. . . . In the United States, after 1996, when effective three drug antiretroviral therapy (ART) was first introduced, the number of AIDS related deaths plummeted.    With fewer deaths and but thousands of new infections each year, there was a steady rise in the number of persons living with HIV, which today the Centers for Disease Control and Prevention (CDC) estimates to be more than 1.2 million persons in the United States.

[Table omitted]

At present, CDC estimates there are roughly 50 thousand new infections per year, many of them relatively young, and 16 thousand AIDS related deaths.    Depending upon assumptions regarding deaths from other causes, the number of persons living with HIV continues to grow by several thousand per year.

The Cost of Antiretroviral Drugs 

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