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Economics and Aids

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Economics of AIDS


Economics is about resource generation, allocation, and use. A general goal is to maximize the value obtained from the interplay of these factors. Doing this requires some means of assessing value and of providing access to the resources necessary to tap that potential value. Among experienced HIV providers in the highly active antiretroviral therapy (HAART) era, this means, to a large extent, mobilizing resources to enable proper use of pharmaceuticals. Understanding the current situation with respect to these issues requires some understanding of the history of HIV economics, the relevant analytic tools, and recent findings obtained using those tools.

Early economics of HIV

Early in the epidemic, HIV was catastrophic for both patients and the healthcare system. Patients usually presented when hospitalized for AIDS-defining opportunistic infections, and survivors typically required 3 or more hospitalizations per year.[1] Early cost estimates were shocking at $147,000 per patient (in 1985 dollars) over an average life expectancy of only 13 months, with hospital costs dominating overall costs.[2] At the same time, a cycle of undercompensation was established: Patients were often uninsured, they tended to spend down to poverty levels, and those with private insurance lost it as they became more ill.[3]

The situation improved with the 1990 passage of the Ryan White CARE Act, which was designed to help alleviate the need for funding beyond that available from traditional sources.[4] The CARE Act provided several overlapping types of grants. Title I grants are directed to highly affected centers, while Title II grants go to states to support a number of activities, including emergency provision of pharmaceuticals under the AIDS Drug Assistance Program (ADAP).[5] However, ADAP, like Medicaid, is not a fixed program but one in which the threshold for qualifying and the size of the formulary vary. In poorer states, eligibility can be quite limited and formularies are quite restricted with respect to the number of covered drugs and the circumstances in which they can be used. Titles III and IV provide direct grants for various programs, including the Title III-funded clinics.

Current Economic impact

The economics of the third and current phase are driven by the pervasive effects of powerful combination antiretroviral treatments. The newer drugs were dramatically effective[6] but were associated with high acquisition costs and were used only in combination with existing drugs. The rapid adoption of HAARTÐ'--by the end of 1996, 60% of all HIV-infected adults in the United States who were in care and had CD4+ cell counts < 500 cells/mm3 had received one of the newer drugsÐ'--was thought to augur exploding expenditures (Figure 1).[7] However, over the short term, introducing HAART into a clinic actually lowered the total cost of care.[8,9] The explanation is that the increased drug costs were more than offset by lower costs managing opportunistic complications. These savings were shown to be important nationally, as the direct cost of care across all HIV-infected adults in the United States declined from about $1800 to less than $1400 per patient per month during the first 36 months of care after the introduction of HAART (Figure 2).[10]

Just as important as the overall savings were changes in the components of cost. Prior to the HAART era, hospital costs represented the largest category of expenditures. After HAART, hospital costs rapidly declined as a proportion of all costs, ie, HAART substituted for and saved resources spent on hospital and other care for complications of HIV. Of interest, among traditionally underserved groups such as persons of color, injection-drug users, and the underinsured, overall costs did not change during the initial phases of the HAART era, and hospital rather than pharmaceutical expenditures continued to be the largest component of cost (Figure 3).[10] This finding shows that poor financing of drug therapy and other causes of poor access have economic as well as clinical consequences.

After a short time, the initial declines in total clinic budgets seen shortly after the introduction of HAART reversed, and the cost of operating clinics as well as total expenditures by payers began to increase.[11] Increases in clinic budgets were largely due to increased numbers of patients in care (Figure 4) who were using increasing amounts of pharmaceuticals. These increases were generally driven by increasing life expectancy among patients treated with HAART, rather than increases in the number of new entrants into care. That is, the success of HAART in prolonging life was relatively greater than its success in reducing monthly per-patient costs and thereby resulted in an increase in the total lifetime cost of care, including disproportionate increases in pharmaceutical expenditures.

Financing the costs

Financing has generally not kept up with the shifts and increases in cost. In part, because they are a separate and easily identified element of cost, pharmaceuticals have been an obvious target for cost-containment measures. Essentially all private and government health plans have restrictive formulary-based guidelines in place, either directly or through a pharmaceutical benefits manager, and government programs may have direct caps on enrollment. (A formulary is a list of drugs that are covered or available to enrollees, generally accompanied by a set of rules or guidelines for their use. The guidelines indicate whether the drug should be in a category that may define special copayments, coverage limitations, or clinical use guidelines, such as whether the new drug or indication should be assigned a priority or step category higher or lower than others in the same class.) According to the National Alliance of State and Territorial AIDS Directors (NASTAD), 9 states have ADAP waiting lists, 7 have capped enrollment, and 10 planned new restrictions in FY2004.

The clinical consequences of restrictive drug policies have been highlighted by models showing that giving all states an ADAP program at the level of the most generous program would reduce mortality and clinical disparities.[12] At the state level, models showed that giving all states an ADAP program at the level of the most generous program would result in a decrease in the monthly cost of HIV care over the short term (Figure 5).[13] Moreover, employment of patients would increase, thereby increasing productivity and generating new offsetting tax revenue. The latter effect is known as reducing the indirect or hidden costsof



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