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What is Counted May Not Count for Much

June 3, 2011

By Jeremiah Norris – Senior Fellow, Hudson Institute

On January 24, the AP carried an ominous headline: “Fraud plagues global health fund”. The article went on to claim in its lead-in sentence that the Global Fund to Fight HIV/AIDS, TB and Malaria (the GF) newly enforced Inspector General’s office found that “as much as two-thirds of some grant eaten up by corruption”.

In April, the GF published its official response (see “Results with Integrity”), transparently communicating to the world any finding related “to irregular expenditures at the country level – publicize[ed] to date [at] US $44 million in fraudulent, unsupported or ineligible expenditures by [its] Principal and sub-recipients.”

The report goes on to detail the steps being taken by GF to reinforce its fraud detection and risk-management processes, with particular attention to the role of Local Fund Agents and fraud-prone activities at the country level. The GF’s April response is much more fulsome in its sense of institutional accountability than were the public explanations issued by some of its senior managers and blot advocates in January. A Fund spokesman, Jon Liden, commented that “the messenger is being shot … we would contend that we do not have any corruption problems that are significantly different in scale or nature to any other international financing institution.”  A blog supported stated: “Wall Street would be envious of such low levels of fraud and abuse.

In Section I of the April report, the GF provides background to its $13 billion in expenditures since it was created in 2002, commenting on how it has become “the major international financier of health programs”. These are impressive numbers, including:

  • funding the detection and treatment of 7.7 million cases of TB;
  • distributing 160 million insecticide treated bed nets;
  • maintaining 3 million people on ARVs;
  • supporting 1 million women with treatment to prevent the transmission of HIV;
  • distributing of 2.7 billion condoms;
  • and, providing 31 million episodes of indoor residual spraying to prevent malaria.

In total, then, the GF has provided 2.903 billion units of patient activity over this five year period for an expenditure of $13 billion.

If these units and costs were submitted to an MBA-type Value Analysis to determine value for money to end-users, what would it reveal?  Secondly, would it be a fair way to assess gross units of activity against expenditures?

In the first instance, dividing the total number of units (let’s round it out at 2.9 billion) by total expenditures ($13 billion) yields a Value of $4.48 per unit of costs over the five year period. It would be useless to try and determine annual costs as the GF was at near zero in its first year of operations.

In the second instance, while there are vast differences in costs between the provision of ARV therapy and indoor residual spraying, both require: the writing of international bid proposals; convening Selection Panels;  the cost of shipping, insurance, taxes, duties, and tariffs, storage in ports of entry, wastage, storage and distribution in-country, cost of Local Fund Agents, sub-recipients, and GF/Geneva staff salaries and other overhead expenses (travel, per diem, Board Meetings, etc.), GF evaluations and monitoring.

The cost of management for condoms can illustrate this point. To distribute 2.7 billion condoms over a five year period would mean roughly 540 million condoms per year; or 45 million per month, or 1.5 million per day.  But since GF recipients were just getting started in year one of operations and didn’t ramp-up significantly until, say, year 3, the annual rate of condom distribution would be much higher in the out-years.

If 1.5 million GF recipients are using condoms every day, then one might expect significant reductions in STD infection rates as an outcome. The Results report does mention that HIV infection rates have declined by 25% in 33 countries since 2001 but doesn’t relate it to the condom distribution program. While GF is assured of the distribution rate, how does it monitor the unit use rate and at what cost?  The Results report presents no data on this subject; its concentration is solely on new provisions to reduce fraud in an organization now in its 9th year of operations.

The base line for the denominator of 2.9 billion units is one. This recognizes that ARV treatment for one individual extends over an entire year. Residual spraying is limited to the 31 million houses treated rather than to the family members which are benefiting inside, probably 5.  If the number reported by GF had been multiplied in terms of beneficiaries, the total would have been 155 million people. Instead, for purposes of this Value Analysis, the number 31 million is used.

Whether it is the GF or any other global health institution, their central metric of success over the past five years has been in ‘numbers’, showing donors how they were able to increase the base line of those receiving assistance from one year to the next. In ARV treatment, for instance, WHO estimates that only 50,000 were receiving life-extending drugs in 2004; by January 2011, the number increased dramatically to 5.8 million.

But, no donor reports on what is behind those numbers from a clinical perspective. As a result, we are now in the 9th year of rapid scale-up on AIDS therapy without knowing if

ARV ‘x’ has a higher suppression level than ‘y’; of the initial level of  CD-4 Cell Counts vs. six months afterwards;  of drug resistance levels; of mortality rates for those starting treatment vs. 2 years downstream; of the costs of 1st  line therapies vs. 2nd line—vs. salvage therapies’; of out-patient vs. inpatient costs; or of long term costs to society.

Yet, we are collectively driving the ARV target on a universal coverage number of 9.7 million by 2015!

Still, when any donor can demonstrate that it can deliver more than 2.9 billion interventions of health activity to beneficiaries at $4.48 per unit, this should serve as an exemplar for all other donors and put to rest the notion that health development assistance isn’t cost effective.  The GF may have problems with fraud and abuse, which it is addressing in a forthright manner, but not in providing donors with demonstrable results on value for money.

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