Press Release: About the Clinton HIV/AIDS Initiative (CHAI)

 Who has accessed CHAI prices under the original drug and diagnostic agreements?

As of January 2006, 240,000 people living with HIV are benefiting from medicines purchased under CHAI agreements, following purchases made by 32 countries.

In October 2003 and January 2004, President Clinton announced agreements lowering the prices of the most common first-line antiretrovirals (ARVs), CD4 and viral load tests. At that time, these prices were available to the dozen countries in Africa and the Caribbean where the Clinton Foundation was working. In April 2004, following agreements between CHAI and the Global Fund, the World Bank, UNICEF, the International Dispensary Association (IDA) and others, access to these agreements was extended to additional countries, on a case-by-case basis based on commitment to principles of sound procurement (see below).

Since that time, membership in the CHAI Procurement Consortium has expanded to 50 countries in Africa, Asia, Eastern Europe, Latin America and the Caribbean. Of these 50 countries, 32 have already placed orders under CHAI agreements. Others will do so in 2006 as they purchase additional volumes of drugs and diagnostics.

In addition to these direct beneficiaries, many more people have indirectly benefited from the actions of CHAI partner suppliers. By offering drugs and diagnostics for lower prices, they stimulated greater competition in the marketplace. As a result, prices have fallen.

The credit for the patients on treatment today in developing countries belongs to people in these countries – from Ministers of Health to countless community health workers. The role of donors and international organizations like CHAI is to support their efforts.

Are the prices being paid consistent with CHAI agreements? Are they less than market rates?

Yes. The prices set by CHAI agreements are ceilings at or below which partner suppliers quote when purchasers issue tenders. The prices are in “Free on Board” (FOB) terms, meaning that they do not include applicable shipping and handling charges from the point of export. Actual purchase prices paid for more than 300 million pills sold to date under CHAI agreements are within 2% percent of the original ceilings.

When originally announced, CHAI prices for the most common three-drug regimen represented a reduction of more than 50 percent compared to the lowest-priced, high-quality generic alternatives. While prices in the market have since fallen, CHAI prices remain lower than the market average. According to data collected by the World Health Organization’s (WHO) Global Price Recording Mechanism, the prices of products covered under CHAI agreements are, on average, 1.5 times more expensive when purchased outside these agreements in low-income countries. Market rates in middle-income countries remain more than 2.5 times as expensive.

The diagnostics market has followed a similar pattern. When CHAI announced its diagnostic pricing in January 2004, it represented a discount of more than 80% from market rates (e.g. pricing for CD4 tests ranged between $20-$40 per test and CHAI’s prices ranged between $3-$5).

In Africa, market prices have fallen to within 10% to 20% of CHAI’s price ceilings. In many middle-income countries CHAI’s pricing continues to represent a substantial savings relative to the market price which can still be as high as $20-$30 per test.

In some cases, countries may purchase ARVs or diagnostics at prices that are lower than those specified by CHAI agreements. This is a positive outcome of competition in the market. CHAI agreements do not impede purchasers from benefiting from lower prices, and CHAI welcomes lower prices, so long as these do not reflect predatory pricing that can stymie competition and undermine sustainable supply of drugs and diagnostics.

What has been required of countries buying at these prices?

CHAI purchasers agree to prompt and secure payment terms, and they regularly update and share demand forecasts. In addition, they commit to principles of sound procurement, typically reflected in a memorandum of understanding (MOU) with the Clinton Foundation. These include aggregated national orders; reliance on international quality standards like prequalification by the World Health Organization or U.S. Food and Drug Administration (FDA) approval; expedited national registration based on those standards; secure distribution of product in country (to avoid leakage into high-income markets); compliance with national and international law protecting intellectual property; and movement towards using multi-year tenders and splitting high-volume orders across multiple suppliers.

The procurement process is not cumbersome. National governments maintain autonomy over the procurement process, and CHAI agreements support the practices and preferences of Procurement Consortium members.

Have CHAI’s agreements been consistent with what others, like the Global Fund, are doing?

Yes. In April 2004, CHAI signed memoranda of understanding with several multilateral organizations and procurement agents, including the Global Fund, IDA, UNICEF, the United Nations Development Program (UNDP), the World Food Programme, WHO and the World Bank. The agreements have ensured that CHAI’s agreements with drug and diagnostic manufacturers are consistent with the policies and practices of purchasers and the organizations with whom they partner.

What is the CHAI Procurement Consortium? How does a potential buyer join?

The Procurement Consortium refers to the countries eligible to purchase under CHAI agreements. This includes both “partner” countries, where CHAI maintains an ongoing presence to support national efforts to expand treatment programs, and “purchasers” whose relationship with CHAI is largely limited to procurement. As of January 2006, CHAI has partnered with 20 countries; an additional 30 have signed MOUs to access the drug and diagnostic agreements.

Does CHAI provide assistance to buyers to support the procurement process?

Yes. CHAI offers Consortium countries access to its procurement and laboratory experts, who provide assistance as required across the procurement process. These experts support countries in setting procurement policy, developing procurement plans, forecasting, coordinating pooled procurement mechanisms, and establishing an efficient and reliable laboratory network. Procurement Consortium members also have access to CHAI’s procurement tools including analytical forecasting and budgeting models, standard operating procedures, best practice documents and sample procurement plans.

Is CHAI planning to further expand its procurement agreements?

Lowering the cost of second-line drugs is a major priority for CHAI in 2006. It expects to expand its agreements to include additional second-line products. In addition, CHAI is open to expanding to include other high-quality, low-cost companies to ensure a sustainable supply of products over time. It will also include additional raw material suppliers to help its partners alleviate some of the cost pressures they face in the market.

CHAI will also expand its agreements to include other diagnostic products critical to high quality care and treatment such as chemistry and hematology tests and other laboratory products.

What progress has been made on the pediatric and rural initiatives announced in April 2005?

In April 2005, President Clinton announced new initiatives to accelerate the expansion of treatment to children and rural communities. The pediatric initiative aimed to extend treatment to 10,000 children in one year (doubling the number on treatment at that time in developing countries outside of Brazil and Thailand), based in part on a donation of pediatric ARVs purchased from Cipla at prices 50 percent less than market rates. Since then, CHAI has initiated programs with more than 15 countries, which will collectively reach 10,000 children by March 2006. Also, Cipla has offered to extend its negotiated prices for pediatric ARVs to others who are willing to pool their orders with CHAI. Going forward, CHAI has committed to reach an additional 50,000 children by Spring 2007 by continuing to invest in existing programs as well as initiating efforts in additional countries.

The rural initiative aims to accelerate access to treatment in rural areas by establishing replicable models of rural care. In addition, CHAI is helping governments address some of the systemic issues, such as lack of human resources, which limit access to care in rural areas. In Rwanda, CHAI brought Partners In Health to the Rwinkwavu and Kirehe districts. Over the past six months, through a partnership with CHAI, the Ministry of Health and the Global Fund, Partners In Health (PIH) has re-opened an abandoned hospital in Rwinkwavu. It has recruited over 100 Rwandan healthcare workers, refurbished several of the hospital wards and opened a modern infectious disease unit. Using its model of community-based care, PIH is currently providing treatment to over 700 people living with HIV/AIDS. CHAI is helping to establish similar programs in Tanzania, Mozambique, Kenya, Lesotho, Ethiopia and the Dominican Republic.

In addition to its procurement work, what else does CHAI do?

The Clinton Foundation began its work in 2002, responding to requests by national governments in Africa and the Caribbean to develop detailed operational plans for the scale-up of HIV/AIDS treatment and to make treatment more affordable. We set out to be responsive to national leadership and fill gaps in the provision of technical assistance from traditional organizations in the HIV/AIDS community. Initially, we assisted governments in developing national strategies and business plans for scale-up of care and treatment, and helped to get these plans funded through the international donor community. As these plans were developed, adopted, funded and implemented, our role has evolved into providing targeted assistance to address challenges that governments face as they attempt to make treatment more broadly available. Today, we play this role in 20 countries in Africa, Asia, Eastern Europe, and the Caribbean in support of national scale-up efforts.

How many people work for CHAI? Where is it based? How does it support its work?

The Clinton Foundation HIV/AIDS Initiative relies on hundreds of part-time and full-time volunteers. There are presently more than 300 people in developing countries and the U.S. working for CHAI. In the United States, CHAI maintains offices in Quincy, Massachusetts, and in Harlem, New York. Ira C. Magaziner is Chairman of the Initiative. The work of CHAI depends on private financial contributions as well as the time donated by volunteers and pro bono contributions from various organizations and partners. HIV/AIDS care and treatment programs themselves are financed principally by national governments and international donors.

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