PEPFAR’s original authorization in 2003 established the Office of the U.S. Global AIDS Coordinator (OGAC) at the Department of State (State) and gave OGAC primary responsibility for the oversight and coordination of all resources and international activities of the U.S. government to combat the HIV/AIDS pandemic. OGAC also allocates appropriated funds to PEPFAR implementing agencies, particularly CDC and USAID. CDC and USAID obligate the majority of PEPFAR funds for HIV treatment, care, and prevention activities through grants, cooperative agreements, and contracts with selected implementing partners, such as U.S.-based nongovernmental organizations (NGO) and partner-country governmental entities and NGOs. This includes the 33 countries and three regions that developed PEPFAR annual operational plans for fiscal year 2012. The 33 countries were Angola, Botswana, Burundi, Cambodia, Cameroon, China, Côte d’Ivoire, Democratic Republic of the Congo, Dominican Republic, Ethiopia, Ghana, Guyana, Haiti, India, Indonesia, Kenya, Lesotho, Malawi, Mozambique, Namibia, Nigeria, Russia, Rwanda, South Africa, South Sudan, Swaziland, Tanzania, Thailand, Uganda, Ukraine, Vietnam, Zambia, and Zimbabwe. The three regions were the Caribbean, Central America, and Central Asia. that also provide support to HIV programs. Moreover, UNAIDS data indicate that support for HIV programs in many countries is increasingly a mix of resources from the country government, Global Fund, PEPFAR, and other donors. PEPFAR strategy stresses the importance of having the partner-country government play the coordinating role. PEPFAR funding supports country programs that provide comprehensive HIV treatment—a broad continuum of treatment, care, and supportive services. This continuum begins with HIV testing and associated counseling, during which patients learn their HIV status and receive interventions to help them understand test results and link them to subsequent HIV treatment services. For individuals who are HIV positive, eligibility for ARV treatment is assessed by means of standard clinical or laboratory criteria—using CD4 count tests to measure the strength of a Patients eligible for treatment receive ARV patient’s immune system. drugs as well as regular clinical assessment and laboratory monitoring of the treatment’s effectiveness. Patients on ARV treatment also receive various care and support services such as treatment of opportunistic infections including TB co-infection, nutritional support, and programs to promote retention and adherence to treatment. Patients are expected to take ARV drugs on a continuing, lifelong basis once they have initiated treatment. CD4 (cluster of differentiation antigen 4) cells are a type of white blood cell that fights infection. The CD4 count test measures the number of CD4 cells in a sample of blood. Along with other tests, the CD4 count test helps determine the strength of the person’s immune system, indicates the stage of the HIV disease, guides treatment, and predicts how the disease may progress. Normal CD4 counts range from 500 to 1,000 cells/mm. never been on ARV treatment, pediatric patients, and pregnant and breastfeeding women. In 2010, WHO updated its guidelines to recommend ARV treatment for all people with CD4 counts of less than 350 cells/mm Treatment and Care include many of the clinical, laboratory, and support services that make up the comprehensive HIV treatment continuum as well as support services for orphaned and vulnerable children. Prevention includes interventions to prevent HIV infection, such as preventing mother-to-child transmission of HIV, sexual prevention, and medical male circumcision. The program area known as Other includes PEPFAR funds for efforts to strengthen health care systems, establish or enhance laboratory infrastructure, and provide strategic health information. For additional detail on the services budgeted in each PEPFAR program area and associated PEPFAR budget codes, see appendix II. Declining prices for ARV drugs have been a key source of per-patient cost savings, with most of these savings coming from the purchase of generic ARV drugs. Costs have also declined because programs have benefited from economies of scale and program maturity as they have expanded. These savings have contributed to substantial growth in treatment programs—both in the number of patients that PEPFAR directly supports on treatment, as well as the number of patients treated within the country programs that PEPFAR supports more broadly. OGAC has reported a substantial decline in PEPFAR per-patient treatment costs, from $1,053 in 2005 to $339 in 2011. Using available program information, PEPFAR calculated these costs by dividing specific elements of its budgets for HIV treatment in a given year by the number of reported patients for the subsequent year (see fig. 1). For this calculation, PEPFAR defined its HIV treatment budget as the total amount budgeted for ARV drugs (hereafter referred to as ARVs), adult treatment, pediatric treatment, and laboratory infrastructure. The number of patients currently on ARV treatment directly supported by PEPFAR is routinely reported by country teams at the end of each fiscal year. PEPFAR officials told us that they use HIV treatment budgets to approximate trends in PEPFAR’s per-patient treatment costs because they lack detailed information on the costs of comprehensive HIV treatment over time. They acknowledged that the calculation is a rough approximation that does not capture the full scope of PEPFAR funds spent to support the broad continuum of services under comprehensive HIV treatment. The calculation also does not capture funds from other funding sources. Detailed PEPFAR studies of the estimated costs of providing comprehensive HIV treatment services in eight countries also show declining per-patient treatment costs. The average of PEPFAR’s estimates includes costs not only to PEPFAR but also to other funding sources for PEPFAR-supported treatment programs. Using the data from the country treatment-cost studies, PEPFAR estimated that in fiscal year 2011 the per-patient cost of providing comprehensive HIV treatment services averaged $768, with PEPFAR’s share amounting to an estimated $335. In comparison, the estimated per-patient treatment cost in fiscal year 2010 was $812, with PEPFAR’s share amounting to an estimated $436 of the total. These estimates represent average costs because per-patient treatment costs vary by country, by treatment facility within a country, and by different types of patients, such as adult patients on ARV treatment versus pediatric patients on ARV treatment. Two key factors have contributed significantly to declining per-patient ARV drug costs in PEPFAR-supported treatment programs: (1) the increasing use of generic products and (2) decreasing prices for specific ARV drugs. From fiscal year 2005 to 2011, PEPFAR-supported treatment programs substantially increased their use of generic products, as shown by PEPFAR’s data on ARV purchases. In fiscal year 2005, the first year when PEPFAR purchased ARVs, generics represented about 15 percent of ARV purchases (by volume). By fiscal year 2008, generic ARV products had risen to 89 percent of purchases. By fiscal year 2011, 98 percent of all ARVs PEPFAR purchased were for generic products. Although PEPFAR’s overall increases in generic ARV purchases have been steady and substantial over the 7 years of data that we reviewed, the percentage of PEPFAR purchases for generic ARVs each year has varied across countries based on the availability of quality-assured generic products in each country. This is because PEPFAR purchases only quality-assured ARV products that comply with the laws—including patent and drug-registration laws—that apply in each partner country. For example, because of country-specific requirements in South Africa, in fiscal year 2008 only 25 percent of the ARVs that PEPFAR purchased in South Africa were generic products. In 2010 and 2011, PEPFAR worked with the South African government to update its ARV procurement processes, and in fiscal year 2011 almost 97 percent of PEPFAR- purchased ARVs in South Africa were generic. PEPFAR estimates that in fiscal years 2005 to 2011, it saved almost $934 million by buying generic versions of ARVs instead of equivalent branded products. PEPFAR estimated these savings by determining the amount it spent each year on quality-assured generic products that have an equivalent branded product. for those generics with internationally negotiated prices for the equivalent branded products. (See table 1.) Purchasing generic ARVs has also allowed PEPFAR to broaden the selection of ARVs it purchases to include WHO-recommended products, particularly fixed-dose combination products that do not have an equivalent branded formulation. However, PEPFAR has not estimated savings associated with purchasing these fixed-dose combination products because there are no branded equivalents. An equivalent branded product is one that contains the same active ingredients and is available in the same form—tablet, capsule, liquid—and dose (for example, 100 mg and 300 mg). PEPFAR has also benefited from declining prices for specific ARV products, which have led to declining prices for the ARV treatment regimens recommended for use in resource-limited settings. WHO recommends that most patients starting ARV treatment for the first time receive one of several first-line regimens that combine three ARV drugs. Based on updated 2010 WHO treatment guidelines, these first-line regimens are built from combinations of the following six ARVs: tenofovir disoproxil furmarate (tenofovir), zidovudine, lamivudine, emtricitabine, nevirapine, and efavirenz. WHO’s 2010 guidelines recommended that countries move away from including stavudine, a previously recommended ARV, in first-line regimens, because of toxicities associated with the drug. Instead, WHO recommended that countries use tenofovir or zidovudine.