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Public Health Needs the Private Sector

1/22/2009 --

President of Bill & Melinda Gates Foundation Global Health Program says improving healthcare in the developing world is critical to global prosperity.

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ANN ARBOR, Mich.—The disparity in access to vaccines, drugs, and decent medical care between industrialized countries and developing nations is more than a moral issue for the nonprofit world to handle. The problems arising from that inequity threaten the health, security, and prosperity of the developed world and the private sector has a critical role to play in solving them, said Dr. Tachi Yamada, the president of the Bill & Melinda Gates Foundation Global Health Program.

Yamada, the former chairman of internal medicine at the University of Michigan Medical Center, issued a challenge to Stephen M. Ross School of Business students during his Jan. 20 address at the Blau Auditorium. He asked them, as they lead companies later in their careers, to figure out new business models that can make their products viable in developing countries.

"It can be done without compromising the financial goals of shareholders," said Yamada, who also is the former chairman of research and development for pharmaceutical giant GlaxoSmithKline. Yamada's address was part of the William Davidson Institute's Distinguished Speaker series.

Yamada left GlaxoSmithKline while helping start the company's partnership with the Bill & Melinda Gates Foundation, a nonprofit established by the Microsoft Corp. founder. Yamada oversees grants totaling more than $7 billion for programs directed at applying technology to address major health problems in the developing world. Targets include tuberculosis, malaria, HIV, malnutrition, and maternal and child health.

The problems are daunting. Malaria, TB, and polio, though largely eradicated in industrialized countries, still lead to deaths in the developing world. Most of the new medicines that prevent or treat those diseases aren't available in poorer countries, which Yamada called a "true moral tragedy."

An estimated 10 million babies around the world die each year, Yamada said. Life expectancy in sub-Saharan Africa is about age 50, while it is approaching 80 in the rest of the world.

"The battle against death and misery is stark and real," he said.

If allowed to continue, the situation will create serious problems for developed countries. Eventually the diseases find their way to industrial nations. Yamada cited the scare in the U.S. created by one man who was traveling with what was thought to be drug-resistant TB. He also noted the economic damage done to the Canadian economy during a relatively limited outbreak of severe acute respiratory syndrome (SARS).

Neglect also will create social and political instability. For example, malnutrition, especially in the first two years of life, has lasting consequences, as it hinders lifelong development, creating a permanent underclass.

From an economic perspective, not solving these problems will deprive businesses of a huge market, now and in the future, as mature markets see slower growth.

"If we can't think of this problem in terms of a moral tragedy, we can think of self-interest," Yamada said. "From a commercial standpoint, the emerging world is the emerging market. Real opportunity for industries, stable industries throughout the world, is in the developing world -- south Asia, Africa."

Yamada's own journey in global public health came when he confronted his company at the time, GlaxoSmithKline, over its litigation with Nelson Mandela's government in South Africa over the price of HIV medicine. He made it clear he didn't like the fact people in need didn't have access to critical medicine.

The board asked Yamada what he thought they should do. Yamada proposed setting up a lab to make medicine for the developing world without concern for profit at first.

"I'm happy to say we partnered with the Gates Foundation," he said.

When he visited the Gates Foundation, he was asked to stay, and did.

But he's proud of the change at GlaxoSmithKline, and held it up as an example of what other companies in other industries could do to improve health in developing countries and create a market for themselves.

"GlaxoSmithKline in 2001 probably did more to lower the estimation of pharmaceutical companies in the eyes of the public," he said. "Now they're one of the best partners the foundation has." The company, along with other pharmaceutical firms, is making available new vaccines for malaria, flu, and rotavirus, he noted.

The key for the foundation was to build a model other companies could copy.

"We function like a business," Yamada said. "We're not burdened by a history that keeps us from doing what we need to do. We move freely between the public sector and the private sector." He said the foundation develops a strategy, sets metrics, executes the strategy, and alters it if circumstances require.

For pharmaceutical companies, the foundation helped to create a workable business model for providing medicine in poorer countries that pays for the cost of a factory in the first 10 years.

"We have to be very creative about how we do this, but in the end we need to have examples people can follow," he said.

One big chemical company, Sumitomo Chemical, is following such a model. Sumitomo makes a durable mosquito net -- used in areas to prevent malaria -- that has an insecticide in the fibers that is safe for humans. The company formed a joint venture in Tanzania, providing the technology to its partner, which built a factory.

The net is one of the most simple, effective ways to combat malaria and Sumitomo found a creative way to get it to an area where the need is great but funds are scarce.

"These are the examples we have to hold other industries accountable to," he said.

That's because there are limits to what even well-funded government programs can do. For example, Yamada recently visited a clinic in a remote part of Ghana. It was well-staffed, the professionals were well-educated, and it was fully equipped with medicine. The county has a national health insurance plan. But the clinic was only seeing about 150 people a month, or five a day.

A visit to a nearby village showed him why. The people there said very few of them went to the clinic for several reasons. For one, it took a long time to be seen because of red tape associated with the national health insurance program. If you pay cash, you can be seen right away, but the cost is prohibitive. Second, a medicine seller came by the village every so often. People would report their symptoms and he'd sell them medicine at low prices.

"It tells you the public sector by itself can't do it," Yamada said. "It's necessary, but not sufficient, to deliver care... The delivery channels for care are there for the private sector in a way they're not available to the public sector."

He also said marketing -- sometimes a dirty word in the nonprofit world -- and understanding the customer, or patient, is critical to improving the use of medicines and devices in developing countries. For example, Yamada described a gel that kills microbes and is used to prevent HIV during heterosexual intercourse. The gel and applicator are packaged in paper and other wrappers. Yamada said that's not going to be widely used in an area where there aren't wastepaper cans handy and where others in a small village can see your trash.

"We have to think about the customer, and the customer is the patient," he said, nothing that companies often invest millions in these kinds of products "without thinking for a minute whether anyone would use it."

Yamada also defended critics of the Gates Foundation Global Health Program's approach, some of whom have argued that instead of using technology, the group should focus on more simple approaches such as building clean water wells.

When the March of Dimes was founded to solve the problem of polio, it didn't spend its money building more iron lungs and more hospital wings. Instead, it spent its money on finding a vaccine.

"History is very clear about the outcome of that investment," Yamada said. "We have to invest (our money) in something that will have broad applications. By investing in an E.coli vaccine, the infant diarrhea that results from bad water can be prevented. It's a hard business choice. We feel this is the best way to invest our money."

—Terry Kosdrosky

For more information, contact:
Bernie DeGroat, (734) 936-1015 or 647-1847,