Man of the World: The Further Endeavors of Bill Clinton (25 page)

Well before Clinton approved the project that became CHAI, a brilliant Indian chemist named Yusuf Hamied had told the world that he would provide life-saving AIDS medications at a per-patient/per-year cost of no more than $350, selling to groups that served indigent people in the developing world. As the Western-educated chairman of Cipla, a generics manufacturing giant founded by his father in 1935, Hamied possessed the scientific credibility as well as the industrial capacity to deliver drugs at this new “humanitarian price,” which he had announced at a February 2001 meeting in Brussels.

The son of a Muslim father and Jewish mother, Hamied was a maverick billionaire who had fought the branded drug manufacturers for decades. In the AIDS crisis he saw an opportunity not only to do good but to best his old adversaries. But the flood of orders that Hamied expected after his announcement didn’t materialize, even though other generic firms in India soon followed his pricing initiative with reductions of their own.

The institutional barriers to reforming the market for antiretroviral drugs were formidable. Despite Hamied’s good intentions, the countries that needed his products were chronically disorganized, plagued with corruption, and lacked sufficient funding and health infrastructure. The orders didn’t come in, and the generic companies didn’t seek them out. There was no prospect of sufficient volumes or timely payment from those governments, so the generic firms simply didn’t pursue their business.

The Indian manufacturers, notably including Hamied, soon received personal letters from Clinton introducing CHAI and urging them to talk with his representatives about a new regime for sales of antiretroviral drugs in developing countries. No doubt his restoration of good diplomatic relations with India as president and subsequent work with Indian American business moguls on disaster relief there were helpful. But as he later said, “They got it. These guys got it . . . That’s what generics are about, is volume. Once they realized that I could organize volume for them and get them paid on time, then they were interested in our plan.” If anyone had the credibility to engage the Indian manufacturers, it was Clinton—and he was going to ask them to take some risks.

Among Magaziner’s
newest recruits was Kate Condliffe, almost fresh out of college, who had worked for a couple of years at A. T. Kearney, another global management consulting firm. Impressed by her willingness to volunteer, he hired her to run CHAI’s Drug Access Program. With Condliffe overseeing a small group of young analysts from McKinsey, Magaziner entered into a long series of visits, negotiations, and consultations at Cipla’s headquarters in Bombay—and simultaneously made contact with its Indian competitors Ranbaxy Laboratories, Ltd., and Matrix Laboratories, Ltd., and with Aspen Pharmacare Holdings, Ltd., in South Africa.

Yusuf Hamied and his colleagues were intrigued because, as he later explained, “This is the first time a group has come forward with predictable volumes.” He got along well with the respectful Magaziner and welcomed the CHAI team into his factories and laboratories.

What ensued was an extraordinary process of mutual education and cooperation that had few parallels in corporate business and especially in the secretive sphere of drug manufacturing—where ingredients, methods, costs, contracts, and commercial relationships are traditionally held very closely. At Cipla as well as the other companies, executives taught Magaziner and his colleagues about the manufacturing of the most widely used AIDS medications, such as nevirapine and AZT, revealing vast troves of information, both chemical and financial, that would normally be kept secret.

Over a period of nearly six months, Condliffe and a few other CHAI business volunteers traveled back and forth to India, visiting plants operated by Cipla, Ranbaxy, and Matrix to learn the details of the making of AIDS drugs. Their purpose was to understand and analyze the cost structure and variables so that they could make recommendations for savings and determine a reasonable pricing schedule.

Looking at the process in the simplest terms, making large volumes of drugs could mean significant savings. If the vessels used to heat pharmaceutical ingredients were larger and needed to be washed out less often between cycles, for example, that would reduce the cost per capsule produced. So would simpler packaging, and a host of other small improvements that added up. None of this was news to Hamied and the other generic executives. But it helped Magaziner to model a new, high-volume approach to pricing.

“
Making a pharmaceutical, you’re heating stuff, you’re cooling stuff, you’re mixing stuff,” he explained years later. “The economics are very scale-intensive. If you have a large enough volume, you have a dedicated production line for one drug and save a fortune.”

Hamied also urged Magaziner to approach the chemical manufacturing companies, mostly located in China, that produced the “active pharmaceutical ingredients,” or API, in the AIDS medications. (To ensure stability and add bulk, the manufacturers combined the API with other inactive ingredients, known as excipients or fillers.) Those chemicals, derived from both natural and synthetic sources, accounted for most of the cost of making AIDS drugs, he said. Again, Hamied disclosed what would otherwise be considered the most sensitive trade secrets, putting Magaziner and his team in direct contact with the Chinese chemical firms. As one of the generic manufacturers told him, their formulations only accounted for 20 percent of the value added in the AIDS medications. The key to making a deal was to persuade the suppliers of APIs to agree to volume discounts.

The CHAI team moved on to China and Korea, bringing the same promise of higher volumes to those companies—all of which stood to increase profits if their Indian clients bought much greater quantities of their chemicals. At sufficient volumes, two of the API suppliers agreed to discounts of up to 50 percent.

The promise of the plan outlined by Magaziner was enticing for the generics companies, but they had heard similar promises in the recent past, when the World Health Organization and the Global Fund had talked about pooling demand from poor countries ravaged by AIDS—and nothing had happened. To enter negotiations with CHAI required them to take what more than one generics executive later described as “a leap of faith.”

“If we had been the Joe Smith Foundation coming in to have these discussions, [the generics manufacturers] would have been leery of that,” said Magaziner with typical understatement. “But it was Clinton, so they thought there might be something there.”

By late summer 2003, Magaziner was again commuting between India and Africa, immersed in quiet negotiations with executives at the four generic companies. For several weeks they worked on the draft of a pathbreaking agreement that promised drastic price reductions for five
of the most widely used AIDS medications, including the “triple cocktail” of nevirapine and AZT. The agreement would set a ceiling price on the drugs based on “dynamic costing” and “forward pricing.” Under this agreement, the buyers group of African and Caribbean countries organized by CHAI would issue “tenders,” or requests for bids—and any of the generic firms could bid on any contract, so long as they offered terms at or below the ceiling price.

At $139 per patient per year, that new price was far lower than the current lowest cost of $500.

When Clinton announced the agreement in Harlem, it made worldwide headlines. The story broke in the
Wall Street Journal
on October 23, 2003, with a front-page story by Mark Schoofs, a correspondent based in Johannesburg who had won a Pulitzer Prize for his reporting on AIDS in Africa:

Former President Bill Clinton announced Thursday a landmark program that attacks two of the toughest obstacles to treating AIDS in the developing world: high drug prices and low-quality health infrastructures.

The Clinton Foundation HIV/AIDS Initiative has clinched a deal with four generic-drug companies, including one in South Africa, to slash the price of antiretroviral AIDS medicine.

Engineered by longtime Clinton adviser Ira Magaziner, the agreement will cut the price of a commonly used triple-drug regimen by almost a third, to about 38 cents a day per patient from an already cut-rate generic price of about 55 cents. The lowest available price for the same regimen using patented versions of the drugs in developing nations is $1.54. For a key drug, nevirapine, the price will be cut by almost half. . . .

Under the supervision of Mr. Magaziner, the Clinton Foundation HIV/AIDS Initiative also helped several Caribbean states and three African countries prepare detailed government-approved plans for rolling out the drugs nationwide, instead of just in selected regions. The plans aim to improve the entire health-care system by preparing budgets for hiring and training nurses and doctors, building and upgrading laboratories and clinics, developing patient-information systems, and improving drug warehousing and delivery. . . .

The
Journal
article emphasized two aspects of this heartening story that had eluded most other news outlets. Schoofs pointed out that the South African government had recently named CHAI as “its main advisory group on HIV treatment,” despite past resistance by the government of President Thabo Mbeki to deal with the overwhelming impact of AIDS in his country, the very epicenter of the pandemic.

And in an almost casual aside, Schoofs noted: “Mr. Clinton vehemently denies any partisan motivation, but his efforts threaten to steal some thunder from President Bush. Months after Mr. Clinton began working on his initiative, Mr. Bush called for $15 billion over five years to fight AIDS in poor nations. That proposal still hasn’t cleared the congressional budget-authorization process.”

Indeed, nine months after Bush proposed PEPFAR, the program remained in limbo on Capitol Hill, belying the urgency of his State of the Union message. Without a budget, the White House appointees running PEPFAR couldn’t accomplish much, even as Clinton moved forward to launch his ambitious treatment plan. But the Bush officials at PEPFAR were watching CHAI—and evidently they didn’t much like what they saw.

Within weeks after the leaders of Tanzania, Rwanda, and Mozambique each signed a “memorandum of understanding” to work with CHAI, Magaziner and Clinton agreed that they should next approach South Africa, which was estimated to have more AIDS victims than any other country in the world—and whose government was notoriously reluctant to act on their behalf.

President Thabo Mbeki, the leader of the African National Congress and successor to Nelson Mandela, had publicly expressed personal doubts that the disease was caused by the human immunodeficiency virus, or HIV, and had encouraged the proliferation of conspiracy theories about its true origins, even in official investigations by his government. His Moscow-educated minister of health, Mantomba
zana Tshabalala-Msimang, went even further than Mbeki, telling anyone who would listen that AIDS was in fact the consequence of plotting by the Central Intelligence Agency and the multinational drug companies. She also advocated consumption of garlic, potatoes, olive oil, and lemon juice as effective AIDS therapy.

In policy terms, these delusions paralyzed the Pretoria government and left hundreds of thousands of people to die without care, even as Mbeki and his minister mused about “alternative” treatments for the pandemic. Although Mbeki’s cabinet voted in 2002 to affirm the scientific fact that HIV causes AIDS, curtailing any further speculation on the matter by the president or his subordinates, the health ministry continued to take no positive action to obtain effective medications or to seek financial assistance for treatment. By early 2003, after more than three years of such official malfeasance and neglect, fury was simmering across South Africa, with growing incidents of protest and civil disobedience campaigns by advocates against the government’s “genocidal” failures to act.

Even the loyal Mandela repeatedly stated his open disagreement and questioned Mbeki and his policies within the ANC. Quietly, he had also turned to Clinton for help. On several occasions since the Barcelona AIDS conference, Mandela and Clinton had discussed the medical implications of Mbeki’s peculiar denialism, and the possibility of providing treatment to the millions infected in South Africa. Those discussions had pushed Mandela to demand meetings with the minister of health and closer to confrontation with Mbeki over AIDS.

When Clinton himself finally called Mbeki in January 2003, the South African president warily agreed to let Magaziner see Tshabalala-Msimang to discuss ways that the Clinton Foundation might help. But when Magaziner met with her in the capital, she obstinately insisted that AIDS was nothing more than “a capitalist plot.” In private discussions with members of her staff, he discovered that they fully understood why her ideas were bizarre and ruinous, but feared her too much to speak out. She was a powerful figure in South African politics, having risen steadily within the ANC since joining as a young student in the early 1960s. Her husband was the party treasurer.

Magaziner left Pretoria disappointed, but he and Clinton continued to push for an opening in South Africa, knowing that the pandemic
could never be contained, let alone ended, without concerted action there. No matter how successful their treatment plan proved to be, the disease would keep spreading so long as the continent’s biggest country remained a hotbed of infection. Nor could they ignore Mandela’s pleas for help and leave the innocent victims of Mbeki’s mania to their fate.

Maneuvering around the hostile minister of health, Magaziner made contact with Mbeki’s legal counsel, a tall, elegantly attired woman named Mojanku Gumbi, who had become the South African president’s most influential adviser. Unlike many in his circle, she was said to be able to speak to the president with absolute candor. And despite her reputation as a hardline African nationalist, Gumbi was open to help from Clinton.

In July, Clinton traveled to South Africa with Hillary and Chelsea to join a week of national celebrations as Mandela marked his eighty-fifth birthday. Discouraged as many South Africans felt by the persistence of poverty, illness, inequality, and other ills in the aftermath of apartheid, they cherished him even more. The father of the nation, known everywhere by his clan name, “Madiba,” remained a source of international pride, in sharp contrast with the embarrassments of Mbeki’s misrule.