1

The Cost of AIDSand the Role of

Business

J2JXIV International AIDS Conference

Barcelona, SpainJuly 4, 2002

Mark Schoofs

2

Vicious Cycle Poverty causes

disease

and

Disease causes poverty

DISEASE POVERTY

3

Virtuous Cycle:Big bang for the buck

Raising annual per-capita health spending in low-income countries by just $17 could save 8 million lives every year The reason: a third of

deaths in low- and middle-income countries are caused by preventable or easily treatable diseases

HEALTH WEALTH

Per-capita Health Spending in Low-Income Countries

21

38

$0

$5

$10

$15

$20

$25

$30

$35

$40

Current spending Target spending, 2015Source: Macroeconomics and Health: Investing in Health for Economic Development. Report of the Commission on Macroeconomics and Health. World Health Organization, 2001

4

AIDS kills people in their prime Most diseases mainly kill children or the

elderly AIDS mainly kills people who are:

Parents, who leave orphans Teachers and professionals with specialized

knowledge Laborers in factories, farms & mines Subsistence farmers, who provide food for

whole families

5

HIV slows economic growthGrowth Impact of HIV (1990-97) (80 developing countries)

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

0 5 10 15 20 25 30 35

HIV Prevalence Rate (%)

Re

du

cti

on

in

gro

wth

ra

te G

DP

p

er

ca

pit

a (

%,

pe

r y

ea

r)

Source: R. Bonnel (2000) Economic Analysis ofHIV/AIDS, ADF2000 Background paper, World Bank. Slide adapted from UNAIDS: “Socio-Economic Impact of HIV/AIDS in Africa,” presented by Anita Alban and Lorna Guiness, ADF 2000.

6

How AIDS weakens economies Business

Individual workers get sick, lowering productivity

Turnover and absenteeism lower profitability beyond direct loss of productivity

Teamwork—stable relationships among key personnel—is disrupted

Extra people must be hired for each position

Society Health consumes more

of govt budget, leaving less for social investment

Families spend down savings, reducing capital

Tax revenues fall Skilled workers &

professionals die or may flee: brain drain

Foreign investment and tourism decline

Mass orphaning

7

Orphans as a result of AIDS, Zambia

00

200 000200 000

400 000400 000

600 000600 000

800 000800 000

1 000 0001 000 000

1 200 000 Number of orphans1 200 000 Number of orphans

19801980 19901990 20002000 20102010200520051995199519851985 projectionprojection

Source: HIV/AIDS in Zambia, 1997. Slide adapted from UNAIDS: “Socio-Economic Impact of HIV/AIDS in Africa,” presented by Anita Alban and Lorna Guiness, ADF 2000.

8

Rusina Kasongo She lives in Zimbabwe She lost two sons, one

daughter and their spouses to AIDS

Her husband died in an accident

She is raising 10 orphans alone

Studies show orphans are less likely to go to school*

*For example: In the Central Africa Republic, school enrollment rate among orphans was 39%, two thirds of the national rate of 60%. Source: Survey from CAR, UNICEF, 1999, reported in UNAIDS: “Socio-Economic Impact of HIV/AIDS in Africa,” presented by Anita Alban and Lorna Guiness, ADF 2000.

9

The orphan problem only gets worse

In Africa, grandparents usually take care of orphans

Orphans are at higher risk for HIV

When orphans produce orphans, these 2nd-generation orphans have no grandparents so are even worse off

HIV destroys the extended-family support system

S e co n d-g en era tion o rp ha nsT h ey h ave no g ran dp aren ts!

W h o w ill ta ke ca re o f th e m ?

O rp ha ns

P a re n tsKilled by AIDS

G ra nd p are n ts

Source: Geoff Foster, Family AIDS Caring Trust, Zimbabwe.

10

Cloud & Joseph Tineti

They live in Zimbabwe

They are 14 and 11 years old.

They have no adult living with them

The second generation of orphans will likely be in a similar predicament

11

Solution: Keep the parents alive

360

66

$0$50

$100$150$200$250$300$350$400

Invest

ment

in H

ealt

h

Eco

nom

icG

ain

Investing $66 billion in health (including AIDS) per year by 2015 yields a 6-fold return: $360 billion in direct earning of individuals and faster economic growth

$66 billion = $13 extra per person per year in poor countries, and this money saves 8 million lives annually

Plan: Poor countries invest extra 2% of GDP, rich countries invest 0.1%

USD, billions

Per-capita Health Spending in Low-Income Countries

21

38

$0

$5

$10

$15

$20

$25

$30

$35

$40

Current spending Target spending, 2015

Poor- country share: $28 bn

Rich-country share: $38 bn

Economic gain

Source: Macroeconomics and Health: Investing in Health for Economic Development. Report of the Commission on Macroeconomics and Health. World Health Organization, 2001

12

Russia: the next crisis?

Overall HIV adult prevalence is still below 1%

But between 1996 and 2001, new infections rose 5000%

13

Drug use drives the current Russian HIV epidemic

Most current HIV infections are in injection drug users (IDUs), who often end up in the institutions least able to deal with AIDS: overcrowded, underfunded jails where addiction treatment is scarce and needle-sharing is common.

In Russia, sexually-transmitted disease (STD) rates are high. Will HIV stay in drug users or spread?

Sources: Russian Federal AIDS Center. Ministry of Justice.

14

Russia’s demographics Russia’s population is declining, even

without HIV African countries show population growth

despite HIV adult prevalence rates of up to 30% HIV exacerbates Russia’s population decline

A declining population slows economic growth HIV mainly kills young people, so fewer

productive Russians will be alive to generate income for social security systems (such as pensions and health care)

Source: Ruehl C., Pokrovskiy V., Vinogradov V., “The Economic Consequences of HIV in Russia,” The World Bank Group, 2002, www.worldbank.org.ru

15

Modeling the economic effect

17 key variables, such as:

Rate of transmission among IDUs and from IDUs to the general population via sex

Cost of antiretroviral treatment

Economic parameters such as the share of the labor force with HIV, the share of govt revenues used for public investment, & minimum budgetary expenditures

Cumulative HIV optimistic 1.23 2.32 3.64 5.36(millions) pessimistic 2.24 5.25 9.61 14.53GDP level baseline 10.88 13.5 16.42 19.61(rubles, tillions) optimistic 10.88 13.5 16.33 19.37

pessimistic 10.69 13 15.27 17.54optimistic 0 -0.15 -0.55 -1.22

pessimistic -1.75 -4.14 -7 -10.6GDP growth baseline 4.71 4.09 3.7 3.42(percent) optimistic 4.7 4.05 3.6 3.26

pessimistic 4.23 3.55 3.02 2.55optimistic -0.21 -0.98 -2.7 -4.68

pessimistic -10.19 -13.2 -18.4 -25.4

%change (compared to baseline)

%change (compared to baseline)

World Bank Model for HIV in Russia

available at www.worldbank.org.ru

Source: Ruehl C., Pokrovskiy V., Vinogradov V., “The Economic Consequences of HIV in Russia,” The World Bank Group, 2002, www.worldbank.org.ru

16

Modeling the economic effect

17 key variables, such as:

Rate of transmission among IDUs and from IDUs to the general population via sex

Cost of antiretroviral treatment

Economic parameters such as the share of the labor force with HIV, the share of govt revenues used for public investment, & minimum budgetary expenditures

Cumulative HIV optimistic 1.23 2.32 3.64 5.36(millions) pessimistic 2.24 5.25 9.61 14.53GDP level baseline 10.88 13.5 16.42 19.61(rubles, tillions) optimistic 10.88 13.5 16.33 19.37

pessimistic 10.69 13 15.27 17.54optimistic 0 -0.15 -0.55 -1.22

pessimistic -1.75 -4.14 -7 -10.6GDP growth baseline 4.71 4.09 3.7 3.42(percent) optimistic 4.7 4.05 3.6 3.26

pessimistic 4.23 3.55 3.02 2.55optimistic -0.21 -0.98 -2.7 -4.68

pessimistic -10.19 -13.2 -18.4 -25.4

%change (compared to baseline)

%change (compared to baseline)

World Bank Model for HIV in Russia

available at www.worldbank.org.ru

Decline in Russian GDP Growth due to HIV

-30

-25

-20

-15

-10

-5

0

2005 2010 2015 2020

Optimistic Pessimistic

Source: Ruehl C., Pokrovskiy V., Vinogradov V., “The Economic Consequences of HIV in Russia,” The World Bank Group, 2002, www.worldbank.org.ru

17

Effect of HIV Prevention

16

17

18

19

20

2020

Russian GDP:4 Prevention

Scenarios

No HIV

Pessimistic

Effective prevention

Reducing drug use

Effective prevention (cutting HIV transmission four-fold) results in modest GDP gain

Key reason: Drug use, with negative impact on economic productivity continues

Reducing drug use, which would also slow the spread of HIV, results in much larger improvement

Could this data be misused to stigmatize drug users and to justify not implementing needle exchange? If so, HIV could spread more rapidly to general population

GDP (in rubles, trillions)

Source: Ruehl C., Pokrovskiy V., Vinogradov V., “The Economic Consequences of HIV in Russia,” The World Bank Group, 2002, www.worldbank.org.ru

18

Effect of antiretroviral treatment

At Western prices, $9000 per patient per year, treating with antiretrovirals (ARVs) actually lowers GDP.

It would also consume more than 80% of the Russian federal government budget

At $3000, plausible with negotiation, using ARVs boosts GDP.

At $333, close to the current lowest price, GDP improves and ARVs consume only slightly more of the govt budget than treating AIDS without ARVs

16

16.5

17

17.5

18

Russian GDP:4 ARV Cost Scenarios

No ARVs (pessimistic)

ARVs at $9000

ARVs at $3000

ARVs at $333

GDP (in rubles, trillions)

Source: Ruehl C., Pokrovskiy V., Vinogradov V., “The Economic Consequences of HIV in Russia,” The World Bank Group, 2002, www.worldbank.org.ru

19

Who can take action? Governments NGOs Individuals Business

Multinationals definitely have the resources

Mid-size firms usually have the resources 20,000 South Africans are on ARVs paid

by their companies’ medical schemes Often neglected by the press

20

Coca-Cola & Anglo American Coke (beverages)

Offered marketing expertise to help frame prevention

Offered ARVs to its workers in Africa

But only to its 1,000 directly employed workers, not to the 100,000 workers employed by its bottlers

Anglo (mining) Offers good TB

and OI treatment & prevention

2001: Committed to run a feasibility study of ARVs on its mines

2002: Anglo back-tracked, despite 20% of its African workers having HIV

21

Migrant labor spreads HIV Mines needed cheap

labor

Housed men in crowded “hostels” and didn’t allow families. This system still exists.

Hard and dangerous work

Prostitution spreads STDs

22

Conclusions Disease causes poverty

But relatively small investments in health can save lives and bolster economies

HIV kills the most productive people, adults in their prime, which hurts all economies But local factors matter: Russia & Africa have

different epidemics, demographics & economies Hold business accountable

Are companies shouldering their responsibilities? Do labor practices promote health or illness?

23

Acknowledgements Gabriel Rugalema, United Nations

Development Programme Joint United Nations Programme on

HIV/AIDS (UNAIDS) The World Bank Group in Russia Laurie Garrett, Newsday, & Omololu

Falobi, Journalists Against AIDS Nigeria Bob Meyers & Nena Uche, National Press

Foundation The Wall Street Journal and The Village

Voice