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PIP: Gateway to Funding Universal Coverage by an Extraterritorial Tax Authority

Jeremiah Norris

WHO is promoting a Pandemic Influenza Preparedness (PIP) plan. It estimates that $2.283 billion over a ten year period, mainly for interventions in 52 of the poorest countries in the world, would be required. The two major sources recommended for financing PIP are through a ‘subscription fee’ on manufacturers’ sales–in addition to their in-kind donations, and governments. In the World Health Report for 2010, subtitled “The Path to Universal Coverage”, WHO recommended similar financing methods, including: tax private enterprises and individuals for global health assistance programs.

The Millennium Declaration on Access to Medicines was adopted by the UN General Assembly in September 2000. The Secretary-General stated that it was to be conducted “in cooperation with pharmaceutical companies”. Subsequently, responsibility for policy development was delegated to WHO. In 2002, it recommended that “pharmaceutical companies should set aside 1% of their major market promotional and advertising budgets. If companies were unwilling to participate voluntarily, legislative or regulatory approaches could be explored”. WHO went on to recommend: “reduction/elimination of pharmaceutical companies’ advertising practices which are aimed at maximizing profits”.

WHO’s recommendations did not come to pass. In the interim, U. S. pharmaceutical companies donated during the period 2004-2009 a total of $33 billion in medical supplies and drugs, which expanded poor patients’ access to medicines, while at the same time providing ministries of finance a windfall of income from taxes, duties and tariffs.

WHO documented this inflow of funds in a 2006 report to the World Health Assembly. In an extensive two-year research effort on the fees levied for products, WHO found that:

  • “taxes and duties levied on medicines, as well as the mark-up applied, frequently contributed more to the final price than the actual manufacturers’ price;
  • in Indonesia’s public sector, patients paid 11 times the procurement price”.

During the WHA in May 2010, WHO presented a Resolution to raise “tens of billions of dollars that would be used to radically reorganize the research, development, production and distribution of medicines around the world … [in order to fund the path to Universal Coverage] through:

  • taxes on the Internet, broader based value-added taxes, and on air line tickets;
  • global arms sales, other income and wage-based taxes;
  • and financial transactions”.

Although the Resolution failed to pass, the Assembly authorized a new consultative working group to examine the issue and report back at the 2012 WHA.

Is there such a shortage of funds in the international health community to warrant granting of extraterritorial powers to WHO? In a November 2010 report by the Institute for Health Metrics and Evaluation (IHME) at the University of Washington, funded by the Bill & Melinda Gates Foundation, it documented:

  • $5.66 billion in development assistance for health in 1990;
  • rising to $27 billion in 2010;
  • but, the countries that have seen the most substantial increases in health aid are also the ones that have seen declines in domestic spending on health programs.

The increases were particularly significant when measured against those of 2000. They were $10.5 billion at that time, they almost tripled in the ten year period to 2010.

The IHME figures do not include contributions from religious organizations, many NGOs, on-line donations, cause-related giving, and off-shore corporations. Total development health aid in 2010 was in the $33-$34 billion range, not counting the value of donated medicines and drugs. Whether a developed or developing country, neither ever have sufficient health funds, yet none have grown as quickly over time as has the collective in global health aid.

WHO itself has been a major beneficiary of non-dues income from Member States. Its Regular Budget from dues is $495 million annually. Its Other Budget from special contributions via OECD/Gulf State countries, corporations and foundations is more than 3x its income from dues. A former Director-General of WHO expressed his growing anxiety for use of the Other Budget, saying: “these funds are usually earmarked, the choice of activities is determined by the donor and not by Member States”.

If WHO were to succeed in obtaining the necessary funds for PIP, either the funds would reside in its Other Budget or WHO would have authorities to use them wherever in the UN system they would be placed as an escrow account in the event of a pandemic.

An account of this magnetite is a sterile use of capital for one potential disease, most especially when there is a virtual pandemic of NCDs in the developing world. The IMHE report stated that only 0.12% of development health aid was dedicated to NCDs.

If 1000 people a day died of Avian flu, an epidemic of major proportions would be declared and the entire global health community would be mobilized against it. Yet, cancer claims 20x that many lives daily, enough to fill five fully loaded 747s crashing into the sea. Often they die in prolonged and agonizing pain, which can be palliated inexpensively. But leadership in the global health community does nothing about this, save propose an extraterritorial taxing system.

Meanwhile, the emergence of NCDs in the developing world continues apace, an inevitable consequence of their populations having passed through the demographic and into the epidemiological transition. WHO may remain confident in its denial of this transition, yet ministries of finance are slowly coming to the grim realization that their frail economies face a tsunami of unfunded liabilities due to unaddressed NCDs.

PIP may seem a minor inconvenience for industry and developed countries to fund through an involuntary subscription fee. It is, though, a gateway through which WHO can cite precedence for being granted a status as an extraterritorial tax authority to fund Universal Coverage of NCDs.

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