Hard to Swallow

Hard to Swallow

Hard to Swallow: As new Medicare reforms threaten AIDS patients with exorbitant medical expenses, local AIDS activists look to Brazil for lessons in sucessful education and treatment.

As of New Year’s Day, Kerry Walters faces a horrible dilemma. He has to spend almost half of his meager $1,079 monthly income on medical expenses. Because of a little-known change in federal Medicare law, he will no longer receive free medications and doctor’s visits.

San Francisco resident Walters was diagnosed with AIDS in 1989 and has been disabled since 1994. So he qualifies for both Medicare and Medi-Cal, which previously covered all of his medical expenses, including the exorbitantly-priced 15-plus pills he takes a day. For example, a one-month supply of just one antinausea pill, Anzemet, costs over $5,000.

In 2003 Congress passed the Medicare reform legislation–known as “Plan D”–that as of January 1, 2006 for the first time pays some drug costs for seniors, the blind, and the disabled. But hidden inside the law is a provision that means people like Walters, who pay a “share of cost” for their Medi-Cal, will now pay thousands of dollars per year more for medical expenses than they have in the past.

Some 3,500 low-income people with AIDS in California face this dilemma, about 120 of them residents of Alameda County. “I’m going to cancel a lot of doctor’s appointments and go untreated,” says a desperate Walters. “This is a nightmare.”

Many people with AIDS don’t yet know what the new law means for them. “A great many of those 3,500 people are paddling in a canoe but don’t know there’s a waterfall coming,” says Walters. “I’m not someone who rings the bell saying ‘emergency, emergency.’ But I honestly think this has the potential to kill people.”

It’s a cruel irony that the wealthiest state in the world’s wealthiest country now provides less prescription drug coverage for AIDS patients than some developing countries. Brazil, for example, has strengthened its groundbreaking AIDS programs, providing free medical care and prescription drugs for anyone who is HIV positive. Since 1996 its government

reduced AIDS mortality rates by half and reduced hospitalization for AIDS by 80 percent.

Brazil is no medical Shangri-la. Many poor people don’t receive adequate health care and can’t get other medications at affordable prices. But Brazil does have a large and active network of nongovernmental organizations who have successfully pressured the government to improve AIDS treatment. Given the recent changes in Medicare law, East Bay activists say Brazil’s experiences are an inspiration to organize for reform in the U.S.

“Brazil’s example shows the power of being organized,” says John Iversen, co-founder of the AIDS advocacy group East Bay ACT UP. “Treatment [there] is more universal than it is in the U.S. Brazil has shown that grassroots pressure works.”

In the ’80s in Brazil, as in the U.S., AIDS was considered a “gay plague,” says Veriano Terto, executive director of the Brazilian Interdisciplinary AIDS Association (ABIA).

Then Herbet de Souza, a famous intellectual better known as “Betinho,” contracted AIDS through a blood transfusion. His two well-known brothers, also hemophiliacs, became infected as well.

“When Betinho declared himself as HIV positive, that was very important to change the visibility of AIDS in the country,” says Terto.

Betinho formed ABIA and it became one of the country’s first AIDS advocacy groups. By the early 1990s gay and progressive groups were banding together with other social justice activists to pressure the government to provide free AIDS drugs. Since Brazil had been ruled by the military from 1964 to 1985, AIDS activists there joined with pro-democracy advocates.

“We demanded democracy, social and political participation in governmental decisions,” says Terto.

AIDS activists had a long battle before them. In 1992 the World Health Organization estimated Brazil would have 1.2 million cases of AIDS by 2000 and international health experts told Brazilian doctors that there was little anyone could do to prolong the lives of those patients.

Ignoring that advice, the country’s health ministers decided that rather than backing away from the worst cases, they’d ramp up the care. In 1996 that country’s government instituted programs to provide free exams, testing, and up-to-date medication for anyone who is HIV positive. While there are certainly flaws in Brazil’s overall national health policies, the AIDS program has been highly successful. Brazil has reduced the rate of new AIDS infections and today there are an estimated 610,000 cases of people living with AIDS, reflecting the prolonged life span of those already infected.

“Our government was sensible enough to yield to the grassroots pressure,” says Dr. Mauro Schecter, a professor at the Federal University of Rio de Janeiro and an AIDS expert. Governments in many other developing countries, he says, have failed, under similar circumstances, to bring the number of AIDS cases down.

But AIDS activists say good government policies are only a first step. After setting up accessible public health programs, how can a government make sure that the poor actually use the healthcare system and follow through with treatment? AIDS educators in the U.S. say their Brazilian counterparts have found some answers.

“Brazil opened the eyes of the world to the issue of access to medicine,” says Anne-Christine d’Adesky, executive director of the national group AIDS, Medicine and Miracles, which carries out an AIDS education program in Oakland.

The office of HIV Vida (Portuguese for “life”) is a single concrete room at an abandoned bus station just outside Rio. Trucks rum-ble by as kids play in the empty lot where the local buses used to park.

Cleidejane Araújo, president of HIV Vida, sits in the room filled with donated, secondhand furniture. She formed her group several years ago, after she got AIDS in the early 1990s from a philandering husband. The doctors told her she was HIV positive, but she didn’t understand what the diagnosis meant. And since she didn’t have any symptoms, she didn’t seek treatment. Then, after breaking up with her husband, she became a prostitute to support her two young children. Araújo doesn’t know how many men she may have infected.

Then in 1996 she began to get sick with diseases associated with HIV: tuberculosis, herpes, and pneumonia. “They all came together at once,” she says. Araújo almost died, but credits the medical staff at Rio’s federal hospital for saving her life. After regaining her health, she became an AIDS activist and today she uses her personal experience to educate other poor women. Traveling to a nearby neighborhood, where residents have access to government-run clinics, Araújo walks down the narrow passageway between two houses while small children laugh and chase chickens around the backyards. Healthcare may be available here, but that doesn’t mean it has always worked.

On this day, Araújo is visiting Sandra Palagar, a 36-year-old cook’s assistant, who is also HIV positive. Palagar says she was diagnosed five years ago but that the doctor never explained the full implications of HIV. Or, she admits, perhaps she didn’t want to believe the doctor because she had no visible symptoms. Her case demonstrates the problems facing even the best government program in educating people about AIDS.

Palagar went back to seek treatment only when the AIDS symptoms hit. HIV Vida, she says, played a critical role in making sure she took her medications and helped her deal with the myriad problems typical for the working poor.

“I got really depressed because my viral count was really high,” says Palagar, seated in the sparse living room of her concrete-block home. HIV Vida got her to attend meetings of other HIV positive women.

“They explained how to take the drugs and their side effects,” says Palagar. “They helped look after my kids. It made me stronger to be part of the group.”

HIV Vida is one of hundreds of NGOs now carrying out grassroots education and organizing in Brazil. It takes the AIDS prevention message to schools, youth hangouts, and to where the AIDS virus thrives the most: streets where sex workers ply their trade.

Araújo used to doher streetwalking in a seedy area near a produce market outside Rio. The customers were mostly Brazilian men. Now she goes back to her old haunts at night to distribute condoms and preach the safe sex gospel. As a result of this and similar activities across Brazil, Araújo says sex workers take a tough line on safe sex.

“Some men want to pay more not to wear condoms,” she says. But the women say “either use condoms or no sex.”

Transvestites often work the same streets as female sex workers but they are less likely to make their customers use condoms, according to Araujo. “The transvestites tend to think, ‘If I get it, I’ll be treated,’ ” she says. “They don’t realize all the side effects of the drugs.”

Getting the anti-AIDS message out to married women and transvestite sex workers is more difficult, Araújo says. Married women are reluctant to ask their husbands to wear condoms, and the husbands might well refuse anyway.

At the upscale Copacabana beach, female sex workers grab a quick bite at an open-air restaurant before resuming work. They mingle with the other customers looking out over the breaking waves and a shimmering blue sea. They look like everyone else, except their skirts are shorter and their heels spikier.

A woman who calls herself Maria says that, on the whole, the government’s anti-AIDS program works well. Her clients are mostly Americans, British, and other Europeans.

“I work usually with tourists,” she says matter-of-factly. “They demand to use condoms. And the women [sex workers] also.” Maria says volunteers from nongovernmental organizations are the key to successful AIDS education. Unlike some government bureaucrats, she says, they have empathy for the sex workers.

“The NGOs carry out campaigns,” she says. In the summer, they go to the beach and distribute flyers and condoms. “They are volunteers. I don’t think of this as pressure from the government. It’s a good way to raise awareness of the problem.”

This is the kind of success that makes American AIDS educators take notice.

D’Adesky, from AIDS, Medicine and Miracles, uses Brazil’s grassroots groups as a model for her AIDS education work. She traveled to Brazil and other third-world countries to make the documentary film Pills, Profits, Protest: Chronicle of the Global AIDS Movement. Through the film and her book on the same theme, Moving Mountains: The Race to Treat Global AIDS (Verso, 2004), d’Adesky has helped spread the word among other East Bay AIDS educators about Brazil’s successes.

She says the kind of work done by HIV Vida and other grassroots groups helps inform her work. It’s important that people who have a history as sex workers, for example, talk with those still in the trade. “We offer training and educational programs,” she says. “Brazil has done excellent targeted prevention among such groups as sex workers.”

But d’Adesky and other health educators acknowledge that effective grassroots education must be backed up by a strong medical treatment program for those who do become infected. On this score as well, Brazil has succeeded in getting anti-retroviral drugs (medicine to treat the virus that causes AIDS) to those who need them. Many years ago Brazil realized it couldn’t offer these free medicines by relying strictly on big U.S. and European brand-name drug manufacturers, because they charged too much.

Driving out of the urban grit of Rio, the Farmanguinhos pharmaceutical factory rises like a field of green. It looks like a college campus, or the grounds of some tropical hi-tech firm transplanted from Silicon Valley.

During a 2002 visit, factory supervisor Jorge Margalais opened an airtight door leading to the special machinery that make generic drugs for AIDS patients. Workers wear white bunny suits that cover every inch of their bodies, including special hoods and respirators.

Margalais points proudly to one machine churning out drugs. “This machine produces about 40,000 capsules per hour,” he says.

By all accounts Farmanguinhos produces safe and effective drugs that meet international standards. Scientists here are developing new drugs for malaria and other tropical diseases. As for AIDS, they have developed a medication that combines three patented retrovirals into one pill, allowing patients to take two pills a day instead of six.

Dr. Robert Scott, an AIDS specialist practicing in Oakland, buys these pills from Brazil for a clinic he operates in Zimbabwe. “In the U.S., a month’s supply [of the three separate retrovirals] would cost $1,800,” he says. “In Brazil it costs $10.”

Up until 1996, Brazil had not signed decades-old international agreements on the manufacture of pharmaceuticals, so it was able to legally produce these and other retrovirals patented by American and European companies. Brazil continues to do so without objection by pharmaceutical companies–and it manufactures these generics at a fraction of the cost of the originals, since they don’t bear the cost of research and testing. Brazilian generic drugs are only distributed domestically for free to government hospitals and clinics.

Eloa Dos Santos Pinheiro is a former factory director at Farmanguinhos. She now works for the World Health Organization in Geneva. Previously she worked for 18 years for multinational pharmaceutical companies in the U.S.

While she worked at Farmanguinhos, the Brazilian government asked Pinheiro to calculate the cost of manufacturing anti-AIDS drugs. So she compared retail prices for drugs made by firms like Merck and Roche with the actual cost of production.

Pinheiro estimates that big pharmaceutical companies charge 80 to 90 percent over the cost of production for AIDS anti-retrovirals. For other drugs, the difference is even higher. She compared the pharmacy price for one hypertension drug with her cost of production in Brazil and found it was a 2,000 percent markup.

“It’s incredible,” she says. “They are so greedy.”

From the early 1980s until recently, pharmaceutical companies earned more profits than any other industry in the U.S. In 2003 their profits were 14.3 percent of sales revenue, according to Dr. Marcia Angell, a former chief editor at the New England Journal of Medicine and author of The Truth About the Drug Companies (Random House, 2004). For comparison, the median profits as a percentage of sales revenue for all other U.S. industries that year was 4.6 percent. For their controversial pricing policies and high profits, the top ten pharmaceutical companies–based in the U.S., Britain, and Switzerland–have been dubbed “big pharma.”

U.S. and European pharmaceutical companies bristle at that name and the charges of profiteering. They argue that they must pay more than just the cost of raw materials, and spend a massive amount of money to research, develop, and market their drugs. Their high prices are justified, they say, because they must recoup those initial expenses, and also accumulate money to research new drugs, according to Gregg Alton, senior vice president and general counsel for biopharmaceutical company Gilead Sciences in Foster City.

The pharmaceutical industry estimates that it costs $800 million to research, develop, and bring a new drug to market. Alton says that figure “is not out of the ballpark.”

“It’s very risky and costly to develop new products,” he says. “It’s a very difficult business.”

Neither Gilead nor any other pharmaceutical company releases precise figures on the cost of developing new drugs, arguing that the information could help competitors. But, Pinheiro estimates that she could develop a drug for one-tenth the cost that pharmaceutical companies quote. In part, that’s because salaries are cheaper in Brazil, as are other overhead expenses. “But they have lots of expenses we don’t have,” she says. “They pay for lobbyists. They pay for marketing. They pay for a lot of things.”

Dr. Angell writes in her book that the true cost of developing a new drug from scratch is closer to $266 million. But she notes that pharmaceutical firms purchase the rights for most new drugs from smaller technology companies or research institutions, leaving the bigger companies only to test and distribute them. The real cost of R&D is probably under $100 million per drug, according to Dr. Angell, a figure quite close to Pinheiro’s estimates.

For the past ten years the Brazilian Ministry of Health has struggled to pay for the AIDS medications that Farmanguinhos does not make itself. These days two-thirds of its entire AIDS budget is spent on three drugs manufactured by Merck, Abbott Laboratories, and Gilead Sciences.

Brazilian health ministry officials have issued demands that the drug companies lower their prices, threatening to impose a “compulsory license” if the companies do not comply. Under international law, says Dr. Angell, Brazil could declare a health emergency and manufacture the drugs as generics, paying a royalty to the patent holder. Drug companies call this “breaking their patents.”

Both the drug companies and the Bush administration strongly oppose such compulsory licensing, saying it violates the drug companies’ intellectual property rights. The Bush administration has threatened trade sanctions should Brazil follow through on its threats. The Bush administration also refused to give AIDS funding to Brazil unless its government denounces prostitution, which is legal there. However, the Brazilian government has not denounced it, so the Bush administration has withheld $40 million in AIDS funding.

AIDS expert Dr. Schecter of the Federal University of Rio says the U.S. refuses foreign aid for programs involved in a wide array of “sinful things” such as prostitution, condoms, and abortion. “It’s absurd,” he says.

Late last year, Bay Area AIDS activists launched a campaign to support Brazil’s efforts to reduce the cost of AIDS drugs. In August, a small group of demonstrators picketed near the office of former Secretary of State George Shultz, who sits on the board and is a major stakeholder in Gilead Sciences.

Also at the urging of activists, city councils in Alameda, Berkeley, and San Francisco have passed resolutions supporting Brazil’s efforts. While city governments have no direct influence over drug prices, the cumulative political pressure in the U.S. and Brazil may have already had an impact. Last October, after tough bargaining, Brazil’s Ministry of Health forced Abbott Labs to reduce by nearly half the price of its AIDS drug Kaletra. As of this writing, negotiations continue with Merck and Gilead Sciences.

East Bay activists say the state and federal governments here in the U.S. also should demand lower prices for AIDS drugs and then distribute them free to anyone in need. Until the end of last year, low- and moderate-income Californians received a full regimen of free AIDS drugs through ADAP (AIDS Drug Assistance Program). Other individuals, earning between $38,200 and $50,000 a year, payed a co-payment of up to $3,900 according to a sliding scale.

But California’s fine tradition of providing free or subsidized AIDS drugs ends when the Medicare prescription drug Plan D takes effect January 1, 2006. Everyone on Medicare must now sign up with a private insurance company to provide discounted drugs, or face greater premiums if they obtain a plan in the future. People like Kerry Walters face serious problems.

Walters receives $1,079 a month in federal disability payments. With that low an income he qualifies for both Medi-Cal and Medicare. Medicare pays 80 percent of his medical costs and Medi-Cal makes up most of the rest.

But because he receives some income, he is responsible for paying a “share of cost” of his medical bills. This share of cost works like the deductible on an insurance policy. In Walters’s case, it is $459 per month.

But ADAP paid for all his AIDS drugs and those payments counted toward his deductible. Because the monthly cost of the AIDS drugs far exceeded his $459 “deductible,” Walters, and all other 3,500 AIDS patients with Medicare and Medi-Cal in California, paid nothing towards their shares of cost. They received free medical services and free AIDS drugs.

After January 1, ADAP will continue to pay for Walters’s drugs. But Medicare Plan D won’t allow those payments to count toward the share of cost. People receiving AIDS medications will now be responsible for paying the cost of their Plan D insurance premium, plus all of their share of cost for medical, dental, and lab visits.

For Walters, his medical expenses will now cost him $459 per month–nearly half of his total income. He will only pay the money in the months when he uses medical services. But for a long-term AIDS patient, that’s every month.

“In the past 60 days, I had two visits to my primary physician, one with a specialist, one lab visit, and two emergency room visits,” explains Walters. “It’s woven into my life that I visit a medical facility every month.”

With the start of the new year, Walters goes from paying nothing for his medical care to potentially spending over $5,500 per year out of a total income of $12,948.

Walters may be one of the few Californians who actually understands the implications of Medicare Plan D for AIDS patients. The new law is incredibly complicated. Even doctors are confused.

“It scares the hell out of me,” says Oakland AIDS specialist Dr. Scott, who has many elderly African-American AIDS patients. He has attended two seminars and still can’t figure out how the new law will work and where to send patients with questions. “It’s an absolute mess.”

The loss of drug coverage for some AIDS patients is “a major flaw in the Medicare Plan D,” says Dana Van Gorder, director of state and local policy for the San Francisco AIDS Foundation. His group is urging Senator Dianne Feinstein to submit changes in the law.

Iverson, of East Bay ACT UP, says the U.S. needs some Brazilian-style grassroots activism on this issue. “Some people will be paying more for drugs than they pay now,” he says. “People out there are going to get hit, but they don’t know how.”

Getting free anti-retroviral drugs “is a civil right,” says d’Adesky, who works in Africa as well as the U.S. ” ‘Big Pharma’s’ fear is that Americans will want access to medicines at these low prices.”

Brazil has put together an unusual system of price caps and state-manufactured generics to make AIDS drugs affordable. But can any of that success be repeated in California?

Well, California’s ADAP already does negotiate lower prices as part of a national alliance of ADAP programs in other states. But the exact amounts paid for each drug is confidential. ADAP can’t even tell Medi-Cal, which also negotiates with the same drug companies, in some cases for the same drugs.

“We don’t know their prices and they don’t know ours,” says Kathleen Russell, who heads ADAP in California. But she says California is not able to negotiate the 50 percent discounts accomplished in Brazil.

“We don’t have anything like Brazil has,” says Russell.

But some in the AIDS community worry about bringing too much pressure on drug companies to lower their prices. Van Gorder says the San Francisco AIDS Foundation takes a “cautious approach.” The companies need enough money to continue research on new AIDS medications, he says. “There is tension between our need to have affordable programs and making sure there’s research and development.”

Gregg Alton with Gilead Sciences notes that his and other pharmaceutical companies regularly negotiate prices with state agencies and departments of the federal government. “There’s a danger in governments becoming too aggressive,” he says. “That reduces our return and the amount of money to innovate. It’s a dangerous road to go down.”

Dr. Steve O’Brien, of the East Bay AIDS Center, shares those concerns. “The problem with the Brazilian approach,” he writes in an E-mail interview, “is that almost all new drugs involve some significant development resources by private

pharmaceutical companies . . . . Without profit, they would not be willing to put capital into research and development. The $64,000 question is how much profit is enough?”

O’Brien adds that Brazil’s state-owned pharmaceutical company works well in Brazil but isn’t practical in the U.S., where the prevailing free-market ideology condemns the idea of a state-owned manufacturer competing with the private sector.

“It seems unlikely that a government-run system alone would develop the same quantity or quality of new drugs,” he says, “and there is no reason to believe the Western economies would ever support such a system.”

But activist d’Adesky says the U.S. can learn from Brazil. “We must consider alternative ways to develop drugs and distribute them.” She concedes that “we do need research and development” but would like to see more support for drug innovation.

“We need initiatives from private foundations and other sectors to give money to small companies,” she says. “After all, health is an essential right.”

Ironically, AIDS activists in Brazil worry that their government receives too much praise for its programs. Brazil must improve its healthcare system and needs ongoing international aid, they say.

“We wouldn’t say Brazil produced a model,” says Brazilian AIDS activist Veriano Terto. “It has an interesting experience with some good results because of the universal distribution of anti-retrovirals.”

The healthcare system doesn’t adequately treat the opportunistic infections that arise from AIDS, he says, and access to antibiotics and proper tests for infections remain problematic for the poor. While the federal government takes responsibility for distributing anti-AIDS drugs, state and local governments provide penicillin, for example, and the clinics often run out.

“If Brazil is an international reference, it’s because here we created a very political network, a very political chain of actors who work together to support the good AIDS policies,” Terto says.

HIV Vida’s Araújo agrees. “If Brazil is one step ahead of everyone else,” she says, “it’s because of what the people did. After all the deaths, the pressure from society made the government do something. It’s not because the government is the good guy.”


Oakland freelance journalist Reese Erlich has written for The Monthly from Iraq, Afghanistan, Bangladesh, and Cuba. His reporting for this story was funded, in part, with a grant from the Kaiser Media Fellowships Program.

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