The Cost of AIDS

and the Role of

Business
J2J
XIV International AIDS Conference
Barcelona, Spain
July 4, 2002

Mark Schoofs
1
Vicious Cycle
 Poverty causes
disease
and
DISEASE
POVERTY  Disease causes
poverty

2
 Virtuous Cycle:
Big bang for the buck
 Raising annual per-capita
health spending in low-
HEALTH income countries by just
WEALTH $17 could save 8 million
lives every year
 The reason: a third of deaths
Per-capita Health Spending in low- and middle-income
in Low-I ncome Countries
countries are caused by
$40
$35
preventable or easily treatable
38
$30
$25
diseases
$20
$15 21
$10
$5
$0

Current spending Target spending, 2015

Source: Macroeconomics and Health: Investing in Health for Economic

Development. Report of the Commission on Macroeconomics and Health. World
Health Organization, 2001
3
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

4
 HIV slows economic growth
Growth Impact of HIV (1990-97) (80 developing countries)
0

-0.2
Reduction in growth rate GDP
per capita (%, per year)

-0.4

-0.6

-0.8

-1

-1.2

-1.4

-1.6
0 5 10 15 20 25 30 35

HIV Prevalence Rate (%)

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.

5
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
6
 Orphans as a result of
AIDS, Zambia
1 200 000 Number of orphans

1 000 000

800 000

600 000

400 000

200 000

0
projection
1980198519901995 200020052010
Source: HIV/AIDS in Zambia, 1997. Slide adapted from UNAIDS: “Socio-Economic Impact of HIV/AIDS in Africa,” presented by Anita Alban and Lorna 7
Guiness, ADF 2000.
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.
8
 The orphan problem only
gets worse
 In Africa, grandparents
G r a n d p a r e n t s
usually take care of
orphans
 Orphans are at higher

P a r e n t s risk for HIV

K i l l e d b y A I D S  When orphans produce
orphans, these 2nd -
generation orphans
O r p h a n s
have no grandparents
so are even worse off
S e c o n d - g e n e r a t io HIV
n odestroys
r p h a the
n s
T h e y h a v e n o g r aextended-family
n d p a r e n t s !
W h o w ill t a k e c a r e support
o f t hsystem
e m ?

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

9
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

10
 Solution: Keep the parents
alive
 Investing $66 billion in
$400 health (including AIDS)
360
USD, $350 per year by 2015 yields a
billions $300 6-fold return: $360 billion
$250
$200
in direct earning of
 Poor- country
$150 individuals and faster
share: $28 bn
$100 66 economic growth
 Rich-country
$50  $66 billion = $13 extra per
share: $38 bn
$0 person per year in poor
 Economic gain
I nvestment

Economic

countries, and this money

in Health

saves 8 million lives

Gain

annually
Per-capita Health Spending
in Low -I ncome Countries
 Plan: Poor countries
$4 0
$3 5
38
invest extra 2% of GDP,
rich countries invest 0.1%
$3 0
$2 5
$2 0
$1 5 21
$1 0
$5
$0

C u rre n t sp e n d in g T a rg e t sp en d in g , 201 5

Source: Macroeconomics and Health: Investing in Health for Economic Development. Report of 11
the Commission on Macroeconomics and Health. World Health Organization, 2001
Russia: the next crisis?
 Overall HIV adult
prevalence is still
below 1%

 But between 1996

and 2001, new
infections rose
5000%

12
 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?

13
Sources: Russian Federal AIDS Center. Ministry of Justice.
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 14
 Modeling the economic
effect
 17 key variables, such
World Bank Model for HIV in
Russia as:
available at www.worldbank.org.ru
C u m u la t ive HoIVp t im is t ic 1 . 2 3 2 . 3 2 3 . 6 4 5 . 3 6  Rate of transmission
(m illio n s ) p e s s im is t ic 2 . 2 4 5 . 2 5 9 . 6 1 1 4 . 5 3 among IDUs and from
G D P le ve l b a s e lin e 1 0 . 8 8 1 3 . 5 1 6 . 4 21 9 . 6 1 IDUs to the general
(ru b le s , t illio nosp)t im is t ic 1 0 . 8 8 1 3 . 5 1 6 . 3 31 9 . 3 7 population via sex
p e s s im is t ic1 0 . 6 9 1 3 1 5 . 2 71 7 . 5 4  Cost of antiretroviral
% c hange o p ti m i sti c 0 -0 . 1 5 -0 . 5 5 -1 . 2 2
treatment
(c o m p a re d t o
b a s e lin e ) p e ssi m i sti c-1 . 7 5-4 . 1 4 -7 -1 0 . 6
 Economic parameters
G D P g ro w t h b a s e lin e 4 . 7 1 4 . 0 9 3 . 7 3 . 4 2 such as the share of the
(p e rc e n t) o p t im is t ic 4 . 7 4 . 0 5 3 . 6 3 . 2 6 labor force with HIV, the
p e s s im is t ic 4 . 2 3 3 . 5 5 3 . 0 2 2 . 5 5 share of govt revenues
% c hange o p ti m i sti c -0 . 2 1-0 . 9 8 -2 . 7 -4 . 6 8 used for public
(c o m p a re d t o investment, & minimum
b a s e lin e ) p e ssi m i sti-1c 0 . 1 9-1 3 . 2 -1 8 . 4 -2 5 . 4 budgetary expenditures

15
Source: Ruehl C., Pokrovskiy V., Vinogradov V., “The Economic Consequences of HIV in Russia,” The World Bank Group, 2002, www.worldbank.org.ru
 Modeling the economic
effect
 17 key variables, such
World Bank
Decline Model
in Russian for HIV in
GDP
Growth
Russia
due to HIV as:
available at www.worldbank.org.ru
C u m u la t ive HoIVp t im is t ic 1 . 2 3 2 . 3 2 3 . 6 4 5 . 3 6  Rate of transmission
(m illio n2005
s) p e s 2010
s im is t ic 2 .2015
2 4 5 . 2 5 92020
.61 14.53 among IDUs and from
0
G D P le ve l b a s e lin e 1 0 . 8 8 1 3 . 5 1 6 . 4 21 9 . 6 1 IDUs to the general
(ru
-5 b le s , t illio nosp)t im is t ic 1 0 . 8 8 1 3 . 5 1 6 . 3 31 9 . 3 7 population via sex
p e s s im is t ic1 0 . 6 9 1 3 1 5 . 2 71 7 . 5 4  Cost of antiretroviral
-10
% c hange o p ti m i sti c 0 -0 . 1 5 -0 . 5 5 -1 . 2 2
treatment
(c o m p a re d t o
-15
b a s e lin e ) p e ssi m i sti c-1 . 7 5-4 . 1 4 -7 -1 0 . 6
 Economic parameters
G D P g ro w t h b a s e lin e 4 . 7 1 4 . 0 9 3 . 7 3 . 4 2
-20 such as the share of the
(p e rc e n t) o p t im is t ic 4 . 7 4 . 0 5 3 . 6 3 . 2 6 labor force with HIV, the
-25
p e s s im is t ic 4 . 2 3 3 . 5 5 3 . 0 2 2 . 5 5 share of govt revenues
% c hange
-30 o p ti m i sti c -0 . 2 1-0 . 9 8 -2 . 7 -4 . 6 8 used for public
(c o m p a re d t o
Optimistic Pessimistic
investment, & minimum
b a s e lin e ) p e ssi m i sti-1c 0 . 1 9-1 3 . 2 -1 8 . 4 -2 5 . 4 budgetary expenditures

16
Source: Ruehl C., Pokrovskiy V., Vinogradov V., “The Economic Consequences of HIV in Russia,” The World Bank Group, 2002, www.worldbank.org.ru
 Effect of HIV Prevention
 Effective prevention (cutting
Russian GDP: HIV transmission four-fold)
4 Prevention results in modest GDP gain
Scenarios
 Key reason: Drug use, with
20
negative impact on economic
GDP productivity continues
19
(in
18 rubles,
 Reducing drug use, which
17 trillions) would also slow the spread of
16
HIV, results in much larger
2020 improvement
No HIV
Pessimistic
 Could this data be misused to
Effective prevention stigmatize drug users and to
Reducing drug use justify not implementing needle
exchange? If so, HIV could
spread more rapidly to general
population
17
Source: Ruehl C., Pokrovskiy V., Vinogradov V., “The Economic Consequences of HIV in Russia,” The World Bank Group, 2002, www.worldbank.org.ru
 Effect of antiretroviral
treatment
 At Western prices, $9000 per Russian GDP:
patient per year, treating 4 ARV Cost
with antiretrovirals (ARVs) Scenarios
actually lowers GDP.
 It would also consume more 18
than 80% of the Russian 17.5
federal government budget GDP
17
 At $3000, plausible with (in rubles,
16.5 trillions)
negotiation, using ARVs
boosts GDP. 16

 At $333, close to the current No ARVs (pessimistic)

lowest price, GDP improves ARVs at $9000
and ARVs consume only ARVs at $3000
slightly more of the govt ARVs at $333
budget than treating AIDS
without ARVs

18
Source: Ruehl C., Pokrovskiy V., Vinogradov V., “The Economic Consequences of HIV in Russia,” The World Bank Group, 2002, www.worldbank.org.ru
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

19
Coca-Cola & Anglo
American
 Coke (beverages)  Anglo (mining)
 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
 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
20
 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

21
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?

22
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
23