November 03, 2011

Bill Gates and saving millions of lives every year by altering the economics of Vaccines

Forbes - The metrics of success that Bill Gates is concerned about now are lives saved, kids who aren’t crippled.

Bill Gates’ vaccine-based giving is closing in on $6 billion to fight measles, hepatitis B, rotavirus and AIDS, among others—is part of the largest, most human-driven philanthropy in the history of mankind.

“A 23-cent vaccine,” he says, “and you’ll never get measles,” a disease that “at its peak was killing about a million and a half a year; it’s down below 300,000.” Gates rattles off milestones in the history of global health and the prices of vaccines down to the penny, but blanks on the name of one of his favorite vaccine heroes, John Enders, the late Nobel laureate, or Joe Cohen, a key inventor of the new malaria vaccine Gates helped bankroll.

He is using his the reputation, resources and determination to stamp out infectious disease. “I’d be deeply disappointed,” says Gates, if in the next 25 years he can’t lower the death toll by 80%. Otherwise, “we’re just not doing our job very well.”

Bill Gates’ plan to eradicate disease stems from a bold concept: The demographic theories of Thomas Malthus, generally accepted for the past two centuries, are wrong. Specifically, that subsistence eventually translates into population growth, and population growth eventually translates into misery.

In 1997, when he and Melinda first ventured into public health—their eponymous foundation would come into being in two years—they focused on birth control, funding a Johns Hopkins effort to use computers to help women in the developing world learn about contraception. The logic was crisp and Bill Gates-friendly. Health = resources ÷ people. And since resources, as Gates noted, are relatively fixed, the answer lay in population control. Thus, vaccines made no sense to him: Why save kids only to consign them to life in overcrowded countries where they risked starving to death or being killed in civil war?

They had an epiphany for their public health philanthropy. Bill’s dad had set up a dinner at Seattle’s posh Columbia Tower Club with the Program for Appropriate Technology in Health (PATH). While the meeting started with birth control—among other efforts, PATH taught Chinese condom makers to test their products before shipping them—Gates began consuming data that startled him. In society after society, he saw, when the mortality rate falls—specifically, below 10 deaths per 1,000 people—the birth rate follows, and population growth stabilizes. “It goes against common sense,” Gates says. Most parents don’t choose to have eight children because they want to have big families, it turns out, but because they know many of their children will die.

“If a mother and father know their child is going to live to adulthood, they start to naturally reduce their population size,” says Melinda.

In terms of giving, Gates did a 180-degree turn. Rather than prevent births, he would aim his billions at saving the kids already born. “We moved pretty heavily into vaccines once we understood that,” says Gates.

he vaccine epiphany just unlocked an entirely new set of problems. Yes, he could use his money to save lives through original research. Gates’ munificence has resulted in vaccines for meningitis and malaria. And yes, he could keep increasing the efficacy of those vaccines by creating a so-called cold chain—a storage and distribution system within host countries. He’s done that, too.

But again he ran into the scale problem, one inherently market-based. How do you encourage Merck, Pfizer, GlaxoSmithKline and other pharma giants to produce enough expensive vaccines for children who need them most but can afford them least? The answer, Gates increasingly believed, lay in making Adam Smith’s invisible hand more visible, giving the newly formed market a benevolent shove in the direction of free enterprise.

Here’s the truest definition of power: When you have the ability to not just solve a problem but also to create a sustainable market that addresses it. “There was nobody you could a write a check to,” remembers Gates, who stood ready a decade ago to buy billions of vaccine doses. In the 1980s Unicef had tripled the percentage of children who got basic vaccines for polio, diphtheria, tetanus and other diseases by corralling public funds, negotiating on price with other aid agencies and deploying thousands of aid workers to deliver them. But those efforts still fell woefully short of the need, and new medicines hitting the U.S. market faced an intolerable 15-to-20-year lag before reaching the kids of Tanzania or Nicaragua. “The chance of death from those diseases is 50 times greater in poor kids than in rich kids!” says Gates, his voice rising.

GAVI set out to do things differently in two ways. First, buy-in: It forced ­developing countries to cofinance vaccination programs, even at the nominal amount of 20 cents a dose. And second, accountability: It required clear record-keeping to ensure the vaccines were getting to children and to establish a sustainable delivery system. This clarity—a well-financed effort with partners on the ground—created a lasting market for big pharma that wouldn’t cost them their shirts. To further goose competition, increase supply and bring down prices, GAVI encouraged drugmakers from developing nations like China and India to bid on contracts.

The payback has been dramatic. Over the past seven years the price for the standard five-germ inoculation (including diphtheria, tetanus and whooping cough) has dropped 40%. The cost of a hepatitis B shot to prevent liver cancer has plunged 68% over a similar period, allowing millions of kids to be vaccinated. GlaxoSmith­Kline’s Rotarix, to prevent rotavirus, a leading cause of diarrhea and death, has gone from $102 a dose to $2.50, and Indian upstarts like Bharat Biotech are bidding to drive that cost down to as low as $1.

With newer, more-expensive offerings, like Pfizer’s Prevnar for pneumonia, the biggest-grossing vaccine in the world, GAVI has gone a step further. By promising to buy a certain number of doses, it guarantees the pharma company massively efficient volume. In exchange GAVI sets a ceiling for what it will pay long term—Prevnar, for example, goes for $114 in the U.S. but will cost no more than $3.50. Gates and his peers subsidize losses during the ramp-up. The math can be staggering: To deliver pneumococcal and rotavirus vaccines to 250 million children, GAVI raised more than $3 billion from various governments, including the U.K., Norway and the U.S., and Gates kicked in the final $1 billion to make it all work. The results have been equally massive: 3.4 million lives saved from hepatitis B, which causes liver cancer, 1.2 million lives from measles, 560,000 from the Hib bacteria, 474,000 from whooping cough, 140,000 from yellow fever and 30,000 from polio. In the past year the new initiatives have prevented another 8,000 deaths from pneumonia and 1,000 from diarrhea.

World Health Organization - Child mortality declined at 2.7% per year since 2000, twice as fast as during the 1990s (1.3%). Mortality among children under five years fell from 12.4 million in 1990 to 8.1 million in 2009.

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