exhibit showcasing the stories of people living with aids. mr. allman provides several planning policies to the city, lambda legal and washington, d.c. mr. allman, thank you very much for being with us. >> chairman sanders and distinguished members of the committee, thank you for providing us with the opportunity to share our thoughts with you on this subject that is so important to 1.2 million people living with hiv/aids in america. the national association of people with aids, known as napwa, is the largest group of people living with hiv/aids. we've also seen, because of the trusted voice in our community and longstanding independence. next year will be bittersweet.

napwa will be in existence 20 years. i say bittersweet, because we don't like seeing people lost. these are 30 years that dear friends of mine lost in the epidemic in the early '80s and 199s 0, they never had a chance to live. so with this in mind, we thank the pharmaceutical industry, the fda and the brilliant researchers for creating anti-retrovirals. i am living proof they do work. i've been positive for over 23 years. we are at a brilliant beginning in saving the lives of people living with aids. however, according to recent studies from cec, less than 25% of people prescribed anti-retrovirals stay on treatment. some say it is because they get nauseous, especially when they first start them. others, because of the barriers, access to the medication, and they have the potential to

increase risks for long-term organ damage. and while premature death at the age of 70 because of heart is preferable to premature death at the age of 30, napwa believes we can work to find better treatments that will give those of us living with hiv/aids a better quality of life and an expectancy as well as those who don't have hiv. one of my friends and colleagues who have been taking anti-retrovirals for over 20 years is thrilled to be alive because of them. but he takes an additional ten pills to manage the side effects of this class of medication. please keep in mind, when factoring in cost burden of the status quo, please keep this in mind. so our 30th anniversary is not only bittersweet because the epidemic is still here, it's bittersweet because we are fortunate to have treatments that dramatically extend

survival that are not an acceptable -- but are not an accept believe end game. we can and must do better. for the last two years at our major international conferences, napwa has hosted symposiums on functional research. this area of research involves triggers for the immune system to allow patients' own natural self-defense to kick in and work against hiv. this involves creating therapeutic vaccines that could be given to people living with hiv after they've been already infected. to explain very quickly, many children get smallpox. despite being treated for it, the virus lingers slowly in the background for the rest of the person's life. in most cases, it remains in check. but in some people as adults, it emerges as shingles. researchers are working on a shingles vaccine given despite the presence of the virus in a person's body. the vaccine is designed to prevent further outbreaks within

the person who is already infected. so, too, would this be the case for hiv therapeutic vaccines. impressive results have been emerging recently. one company has shown that therapeutic vaccine, when used in monkeys that were intentionally highly infected with the monkey version of hiv, was able to achieve a functional cure in some of the monkeys. at two years, no detectible viral load was recorded, even in the most hard to reach reservoirs of these animals. this represents significant progress. another company has shown that his therapeutic vaccine reduced the viral set or baseline in patients significantly better than a placebo. this could offer an insurance policy to all people living with hiv who either have no access, as you mentioned, can't afford

the treatments, no longer respond to them or simply stopped taking them. you can't stop taking a vaccine. once it's in you, it's in you. i want to make two last points. both of these cures, these beginning new cures, may fail because these companies do not have the money to really produce them. they do not have the money to produce them. the one in norway is actually working in human beings, but they do not have the money to produce them. we need to rethink, as you said, as this bill says, how we actually get pharmaceutical companies to invest and incentivize new companies to find new treatment. the national association of people with aids will be here as long as there are people living with hiv/aids. we want to be partners with senators, members of congress and industry representatives who are prepared to roll up our sleeves and take an honest

assessment of what does and what does not work when it comes to incentivizing drug development in hiv. we applaud you, senator sanders, for thinking creatively to figure out new incentives that could result in faster results. we do not want to come back here 30 years from now without a cure. all possible incentive options should be put on the table for discussion if we're ever going to incentivize this type of breakthrough that can provide a bridge to a complete cure. thank you so much, mr. sanders. >> our next presenter is suri moon, harvard global health initiative and harvard school of public health. she is also the co-director of the project called innovation and access to technologies for sustain ability science program, harvard school of government.

she previously worked with doctors without borders and consulted on access to med's policy for msf oxfan, unit aid and the world health organization. dr. moon is one of the directors for drugs of neglected disease, the proposal unit aid and the project on local production for access to medical products. dr. moon, thank you very much for being with us. >> thank you very much, senator sanders. it's a real honor to be here. and thank you for holding this hearing on this really crucial topic. i'm going to focus my comments today on the link between drug prices here in the united states and the challenge of access -- global access to medicines, two topics that are often discussed separately but are often closely interlinked as you pointed out this morning. first i want to provide a quick update on where we are today and how you got here.

as you mentioned, global medicines have reached 240 million people as of 2010, 90% of whom have lived in developed countries. i think this treatment was unimaginable ten years ago. two that were key in access in developing countries in particular were the development of anti-retroviral medicines and the lack of funding. they have dropped from 10 to $15,000 down to as low as $100 or less today, in other words, less than 1% of the patented u.s. price. these price reductions came about because of robust competition among producers through a number of measures. americans can be proud of these accomplishments because the u.s. government has played a key role in three elements of this story. first, major investments by the nih and hiv that started in the 1980s that auto merged in

anti-retroviral treatment today. they are the largest through pepfar and the global fund, and they have strengthened the content in the u.s. and overseas. i urge you to do everything that you can to prevent this reversal. third, most recently, as was alluded to earlier, the nih-fund red search last year demonstrated that hiv therapy can reduce the transmission by 90%. this research finding is the closest thing we have to an hiv vaccine. we, unfortunately, are far from a vaccine, as my colleagues have pointed out, but this is a major finding, and it could potentially bring benefits to millions more people and could potentially help the epidemic. ironically, and it's a painful irony, just as the science shows we need to reach more people with art domestically as well as

internationally, funding for hiv are putting the drugs out of reach. too many americans living with hiv in our own backyard are unable to access treatment, and the same drugs that cost about $220 overseas cost $25,000 here. the question is, what explains this difference? in my view, the availability of low-cost generic use in developing countries is part of an unwritten political bargain and that bargain goes as follows. people living in the u.s. and europe will continue to pay higher prices in medicines in order to reward companies for their investments, while people living in the poorest countries or the donors who support them will essentially pay for generic drugs sold near the cost of production. but that bargain is based on an assumption, and that assumption is that people who live in rich countries will, in fact, be able to get access to care through the aid of private insurance. if this is no longer true, and the prices are too high to enter access even in the wealthiest

country of the world, then that bargain is not sustainable and that is a problem for everyone everywhere, both in the u.s. as well as abroad. this crisis stems from the very way in which research and development for new medicines takes place and the fact that we recuperate r and d investments. of course, this pricing system has terrible consequences, especially when we know the drugs can be manufactured for less than 1% of the patented price. but we also know that if everybody in the world paid that 1% generic price, then the incentives for r and d would evaporate. is there a better system? what i find fascinating of the hiv price fund bill you put on the table is, in fact, it would try to achieve both. it would achieve innovation as well as ensuring the aspects of the fruit of scientific research and that's through a concept called delinkage that was recently endorsed by an independent expert group of the who looking at new r and d

mechanisms. i'm going to leave it to other panelists to go into detail how the price funding would work, but i wanted to highlight one more linkage, that it would dramatically decrease the marginal costs of extending access to more people, and this is the critical principle that we need to keep in mind when we're thinking about how to get access to millions -- excuse me -- how to get access to art for more people so we can use treatment for prevention as well as to save lives. let me make one final comment regarding how this could function at the international level. at the end of your bill, you mentioned the possibility of a donor prize fund and the way the donor prize fund could function is to incentivize companies to share their patents with the new international initiative called the patent pool. the patent pool encourages generic firms to increase

production for lower price of medicines everywhere. the patent pool has been difficulty getting all developing countries included in the scope of the pool and incentive such as those provided through your bill could make it easier to expand process to people living in all developing countries, not just in some of them. so let me conclude my remarks there, and thank you very much for hosting this panel, and i look forward to the other testimonies and to your questions. >> dr. moon, thanks very much for your testimony. our next panelist is dr. joseph stiplitz. he is a university professor at columbia university and winner of the 2001 nobel prize in economics as well as the 1979 john bates clark medal. he served in the chair of the economic advisers followed by an appointment of chief adviser of the world bank, he is a co-founder of the initiative of dialogue economic association, chair of the u.n. commission to

perform ways of the financial system and a member of the cdc on one of the top 100 global thinkers. thanks very much for being with us. >> thank you very much for holding these hearings. i welcome the opportunity to share with you my thoughts of bill 1138 and the broader subject of how we can best enhance research on hiv/aids and help generally. i would say the approach taken on the bill is exactly right. it reflects the approach i've been arguing for for years, including my book "making globalization work ". the timing of this hearing couldn't be better. coming soon after the release of the report and the consultive expert work of the world health organization. i was able to present a keynote address in the launch of the

report in geneva just over a week ago. interestingly, but not surprisingly, its core recommendations considering the organization and finance of research and development coincide closely with this bill. the working group arrived at those conclusions after reviewing a wide range of alternative proposals. i will not spend time reiterating the seriousness of the hiv/aids problem both in america and around the world. medicines have made enormous progress in prolonging lives and alleviating suffering. the problem is the medicines are very costly, or more accurately, the price charged for them is very high but production is perhaps a fraction of the price charged, the point the senator made earlier, that the cost of production is less than 1% of the price charged. this is the inherent consequence of our current innovation system. the curious recurring system is that the government, directly or

indirectly, they are directly through public support and indirectly through purchase of public medicine both in the medicare and medicaid programs. given the government is financing most of the research, it is especially important that it be done in a way that is efficient. there are many dimensions to efficiency, two of which i want to talk about today. third, once this knowledge is acquired, it should be used efficiently. thomas jefferson described knowledge as being like a candle. when one candle lights another, it doesn't diminish the light of the first. it must be disseminated and used as widely as possible. the desire to have knowledge used as widely as possible can run counter, however, to another concern. we have to have incentives to do research. our patent system attempts to balance these concerns by providing a temporary monopoly power to innovators, the result of which there is a restricted use of the knowledge for a limited period of time. this is enlarged efficiency. increasingly, we have become aware of some other limits of the patent system.

while providing incentives, it does not necessarily provide incentives to health care concerns. in the health care sector, it may be more proper to promote the drug rather than a drug that makes no difference. it may have effects in innovation because the most input into any research is ideas. it is the hallmark of successful universities and academia. that is precisely what s-1138 proposes to do in the context of new medicine to treat hiva's. it does this through a simple mechanism: prizes. the patent is, of course, a prize. it works in a temporary monopoly power and that monopoly power works in distortions described above. we use the power of competitive markets to ensure that once a drug is discovered, it's made

available at the lowest possible price. in contrast with monopoliemonop prices are raised to restrict the benefits of the accrued knowledge. words can better reflect the social contribution of the innovation, the true marginal contribution as opposed to the current system where research efforts are directed and maximizing ranks often achieved by taking ranks from others. what's particularly innovative about this bill is section 9 in the open source derivative prices. there is a more open and collaborative approach to innovation that has proven enormously successful in a number of areas of research and not just mit. it ensures more knowledge is in the public domain and the bill will contribute to the vast amount of knowledge in the spinal area. finally, this bill has an important division for a donor price fund. the united states recognizes

that aids is a global problem and must be expressed globally. it is a humanitarian action but is also an action which is in our self-interest. the united states can play a leadership role in coordinating research and development to meet health needs including, and especially, in developing countries. with this bill the u.s. does this. i should emphasize in closing that especially in the time of budget in trinsic, it is developing. the difference between what the government charges and the cost of production is in the tens of billions of dollars a year. the gap is 17 billion a year. the money on drugs could be far better spent. we need more spent on diseases that matter. much of the difference in the cost of production and what is charged does not go into research but into advertising and marketing, and much of that is not spent to transmit

information that would lead to better health but to decrease the elasticity of products. moving from a patent system to an effective price system, using the power of the medicines is a critical step in creating this more efficient innovation system. america is the most innovative country in the world, it has the best universities, attracting the best minds from around the world, but america also has the least efficient health care system in the world, spending in the advanced industrial countries spending more money per capita on the health care sector than any other country and getting far poorer outcomes than countries that spend much less. we need to harness our innovation system to work to drive down costs and improve performance. it is not just a matter of economics. it is in many cases a matter of life and death. we can do it. an essential step in doing this

is delinking the research and development incentives from the drug prices and promoting greater sharing of scientific knowledge. this bill does this in an area that is of critical importance. it will provide a model for further reforms in our health innovation system. thank you. >> thank you very much dr. stiglitz. our next panelist is lawrence lessig who is the royal professor of law at harvard law school and center safra ethics at harvard university. he founded creative commons and the foundation for internet society in stanford law school and was previously on the faculty of chicago law school. professor lessig serves on the boards of creative commons, maplelight, brave new film foundation, the american academy berlin, axa research fund and on the advisory board of the sunlight foundation. he's a member of the american academy of arts and sciences and

the american philosophical association and has received numerous awards including the freedom award, fast cast 50 award and being named one of scientific americans top 50 visionaries. >> thank you very much for the opportunity to testify. as you know, since the beginning of this republic, there has been a fierce debate about how best to create incentives for scientists and innovators to discover and to bring to market advances in science that address important public needs. on one side of that debate have been the supporters of exclusive rights secured by the government, the constitution gives congress the power to secure such rights, and since the earliest days of the republic congress has by law established mechanisms which secure exclusive rights to inventors. on the other side of this debate have been skeptics about exclusive rights at least within some demands of innovation. these skeptics have not doubted the need for incentives, they have instead worried that the

cost of the system of incentives secured through government granted monopolies sometimes outweigh the benefits. such monopolies are, of course, just property rights, but as another nobel prize winning economist ronald chost wrote all property rights interfere with the ability of people to use resources. what has to be ensured is that the gain from interference more than offsets the harm it produces, end quote. now these costs are many, and in my view too often simply igno d ignored. they include the costs of administering a patent or copyright system but the cost imposed on the environment of the discovery itself. many have worried that one unintended cost of the act has to inhibit the sharing of knowledge among academics as technology transfer offices have instructed researchers that secrecy is necessary to protect the patentability of inventions. if we have no way to be certain of the cost of such a change in incentives but we need to worry

about whether such costs outweigh the benefits of the system. my view is that the patent system in general has provided important support for innovation but it is important that congress innovate with alternatives and test alternatives to see whether it is the best system in all areas of innovation and whether there aren't better systems for particular areas of innovation. now, i've been asked to address one particularly important part of this bill, what's called the open source fund in section nine. and this, of course, builds upon the insight that we've seen since the beginning of the internet where scientists have been experimenting with alternative ways to share scientific knowledge. the traditional scientific journal provided important service but the process and constraints of journal production were grounded in the technology of physical printing. the significant investment in producing published work justified the strict control and distribution and vigorous

enforcement of copyright and access restrictions were essential tools to provide the revenue necessary to support even nonprofit journal production, free access is simply not feasible. but as the traditional mode of scientific publication has moved to the internet, the temptation of at least some has been to exploit market power to radically increase the cost of access. in one study, for example, the american association of research libraries calculated that between 1986 and 2004, while the cpi increased just 73%, the unit cost of serial publications increased by close to 190%. likewise, in a study published in 2004, theodore bergstrom found the average cost per page of a for-profit journal was 4 1/2 times the average cost of a not for profit journal and the cost of a citation was 9.2 times the cost of a not for profit journal. these differences don't reflect

the relative inefficiency of for profit journals. they reflect, instead, a business model that seeks to exploit inelastic demand that some have for for profit journals. for many publications, the benefit from the increase in that price to elite universities more than outweighs the loss from institutions that can no longer afford access. so the internet changes this dramatically by offering a free digital platform for distributive work and not just publications data, as well. but this work, too, needs revenue to support its provisions. and so journals such as the public library of science medicine make published work available for free, but the authors must pay publication fees in order to make that work available initially. and while these fees are often subsumed within research budg s budgets, these research budgets could benefit from the support

that the dividend prize authors so that more science can make themselves available in this particular way. finally, let me make one last comment on these hearings and your bill. i've spent the last five years of my career working on the cynical story of congress, and that would predict such a bill and such a hearing would not occur. indeed, it's not surprising that we have a bill with one senator sponsoring it and a hearing with no support accepts the sponsor present. so when jamie asked me to come, my initial reaction was, why waste my time? but i think it's extremely important, and i commend you, senator, to give america a conception of how legislation could occur where it was cents and not campaign dollars that drove the bottom line of what copping did. so i thank you the opportunity to fling myself down here for this purpose, at least, and i strongly support the innovation you're trying to add to this field. thank you.

>> thank you very much. last but certainly not least of our panelists is jamie love. james love is the winner of a mcarthur award. i get a little intimidated up here with you smart people. nobel prize winners and mcarthur. for creative infective institutions. mr. love is the co-chair of the transatlantic consumer dialogue intellectual policy committee and chairs the board of directors. he serves as agencies and governmental organizations and nongovernmental organizations on innovation and intellectual property rights and has been working on the potential for prized fund for at least a decade and jamie is somebody i've known for a long time and jamie, thanks very much for much admire. being with us.

>> thank you. i'd like to start saying, my prepared statement is 14 pages long and rather than attempt to read it in five minutes, i will provide a summary. today we are asking that the congress should undertake a radical and transformative change in our incentive system for hiv/aids. and this is a big ask, of course. so why should congress consider something that is radical and transformative as it relates to aids? part of the answer is that the current system is flawed in important ways. many of which were referred to by the other speakers. but these flaws and works would be acceptable if there was no other feasible way to stimulate innovation.