 HIV AIDS. Much of them are in poor developing world countries. The countries that you see on the map here with the highest prevalence have the hardest amount of time just not only getting these medicines but their healthcare infrastructure are quite challenging as well. So I'm responsible for about 130 countries and we approach this in a very strategic way. It's a two-pronged approach. On one side we have what I call our branded distributor approach. So these are about, we've expanded it since, we have about 20 distributors and they're essentially Gilead on the front lines. They're doing what we would typically do if we were in these areas and they are representing our branded products. They are on any given days submitting the dossiers that we put together for regulatory approvals and that's important because what I describe on the other side are Indian generic partners actually need to reference the complete dossier that we have on file. So they're doing their regulatory submissions, they're doing medical education training, forecasting, some of the key things that are necessary to ensure that these HIV medicines, we realize we couldn't do it alone. So we have gone to Indian generic manufacturers and given them a voluntary license to make generic versions of our patented products. So these are products that have 15, 16-year patent lives still and we've asked our Indian generic partners to operate within a geographical scope. They'll make generic versions of our medicines for nominal royalty amount of somewhere between 5% and 3%. So we have about 15 generic partners operating out of India right now and one out of South Africa. One of the things that we've seen and exactly what we wanted to see with this model is that we now have 4.2 million patients receiving our HIV medicines and I must tell you when I say our HIV medicines, if anyone in the US or Europe are taking HIV medicines, they're unlikely to all of Gilead's products about maybe 80 or more percent of the patients in the US and Europe are on Gilead's HIV medicines and one of the things that we've done is we've taken the three drugs that are used in a cocktail and put them into one pill as a single tablet regimen. So it really improves the adherence and overall compliance of patients. These are the same medicines that are being used developed by our Indian generic partners and made available in these far-flung developing world countries. So clearly the model is working. It's not perfect, but it's working in many ways which is to drive access to those in need. The other component of this model that we envisioned was that the Indian generic manufacturers are known for large volumes, low margin manufacturing and what we saw was what we envisioned was that our price for the Tanapavir in Africa was $17 a bottle. In contrast, that bottle is about $600 in the United States, but it's $17 a bottle which was still expensive for some African countries. Our Indian generic partners have gotten that price down over the years to $4 a bottle and the triple combination is now at about $8 to $10 a bottle and last year South Africa had a tender for 30 million units and three of our generic partners were able to secure 28 million units of that 30 million unit tender as a result of getting the three drug, one pill regimen down to about $8 to $10. So clearly the whole focus on delivering life-saving medicines that are used in U.S. and Europe, making them available is working here. One of the things that we did very early on is we joined the medicines patent pool. The medicines patent pool will characterize it as no different from what I just mentioned of our own Indian generic agreements, but it is independent, it's an offshoot of unitade and I think that it's important to have these types of organizations that are independent of a biopharmaceutical company. So we highly supported and endorsed the medicines patent pool. What we've also announced here was that any future pipeline products and we have a number of products that are being researched right now for HIV-AIDS, they will be part of the medicines patent pool as well and this is for a geographical scope and there are some Indian generic partners who participate with the medicines patent pool that are not necessarily involved with Gilead. Now in addition to delivering medicines, one of the challenges that we find is that the healthcare infrastructures aren't as developed, in many cases there aren't enough doctors and so the treatment of HIV-AIDS in many countries and poor developing countries is actually shifted, it's part of a task-shifting initiative to community healthcare workers and ancillary healthcare workers. We spend a lot of time educating these individuals and conducting a series of medical education and other initiatives. What's entirely sad at times is you spend a lot of time jumping through hoops to get the medicines, some hundred plus kilometers into some rural areas and then to find that the individuals there just don't understand how to use these medicines and can make life-threatening errors. So we spend a lot of time on education and training and more than anything ensuring appropriate use of these medicines. But in a nutshell from an innovative perspective the issue of taking a patented product that is being challenged on its IP side and engaging in a voluntary licensing agreement is somewhat different here. It's not without its challenges. We get a lot of questions about why India, why not China or Africa. It comes down to COGS, cost of goods and what we've seen is that our Indian generic manufacturers are some of the best of the best when it comes to chemistry, when it comes to large scale-up. So what we've seen is that there are large scale-up and getting the costs down. That's what you need to tackle diseases such as HIV and viral hepatitis is that you need to have the scientific bench strength in order to make it a reality. So I think that's my final slide. Thank you very much. The next case study is PNG purifier of water. A full disclosure moment. The next speaker and I share our common history. We're both formally employed by Procter and Gamble. We're both retirees and doing other things now. I'm here at CSIS. Keith is actually retired which is good for him. In any case, what we have is a case study of a water purifier that is basically reverse engineered municipal water treatment facilities in a small sachet that's transportable and able to deliver to extreme conditions. However, it's also a case where the commercial basis for this product was never fully established. So we had a successful product and no commercial success. Keith is here to talk about the reinvention. While Keith is retired, his last assignment with Procter and Gamble was in the global sustainability program and dealt with the very real issues of having a successful product and an unsuccessful way of distributing it and finding success out of failure. So please welcome Keith Zook. Thank you, Scott. Thank you very much to CSIS for this opportunity to join you this morning and thank you to the audience for being here this morning. A lot of you had some difficult times getting here. I on the one hand came from Cincinnati so it only took me. I seem to beat a lot of you. The record for the longest commute. As Scott said, my name is Keith Zook. I worked since 2004 on our program to help bring this innovative product to people in need. So what I'm going to do today is tell you a little bit of the history of our development, how we tried to commercialize it and then talk to you about how we changed the whole business model completely. So many people, in fact most of the people around the world wake up to every morning and they don't have access to water like you and I have access to water. They don't turn on a tap to drink water out of, to brush their teeth from. They don't wash their cars, flush their toilets, water their lawns with drinkable water. Most of them don't have access to safe water. In fact, over a billion people lack access to safe water. That means they've got severe health problems that typically means young children are dying because they're most susceptible to those types of waterborne diseases that are very prevalent around the world and it has a huge health impact on people. We recognize this in about the mid 90s and started doing some work on that. So we created an agreement with the CDC to look at this issue. They had chlorine treatment, chlorine tablets, bleach that they were utilizing, but they found it wasn't effective in many situations, especially turbid water situations, places where you had dirty, dirty, awful looking water. So we worked with the CDC to let Scott said to basically reverse engineer water treatment that's done in municipalities. We combined a coagulant ferric sulfate with a chlorine agent calcium, sorry, the coagulant was calcium hypochloride was the chlorine agent. Ferric sulfate was the coagulant. We combined those two ingredients and made them work in a batch operation. So instead of having huge unit operations where you pumped water into receiving tanks and then treated those at various steps, we made this all happen together. And there's a lot of magic in that. And there is a lot of chemistry that went into it. In fact, as was referred to earlier, we've got patents on that and won several awards because of the patents of that. This is what that product looks like right here. It's about the size of a ketchup packet. Each one of these little packets will treat 10 liters, two and a half gallons of water. And it'll literally turn dirty, turbid water into crystal clear water that looks exactly like what you see here that's next to Clifford. It's quite remarkable, very effective. It removes bacteria, 10 to the eighth quantity of bacteria, 10 to the fourth of viruses. And it also removes protozoa, 10 to the third, 10 to the fourth there. Also, it's important it'll take arsenic out of solution. So it takes out, you know, that type of contaminant, which is very prevalent around the world. And obviously it removes the dirt as well so that you can get clear water. So we set about trying to commercialize this. We'd done a lot of our initial work in Guatemala with the CDC. So we began some small market scale tests around the world. First off, we started in Guatemala, worked there for a significant amount of time. Then we went to the Philippines. In this process, we also moved our manufacturing from a contract manufacturer in the UK to a contract manufacturer in the Philippines. We worked then in Pakistan and Morocco. And then in that work, we also decided we would move our manufacturing from a contract manufacturer to a P&G facility in Pakistan. So a lot of things were going on behind the scenes. We were collecting a lot of data on the effectiveness of our products. We were actually were running clinical studies in Guatemala, Kenya, Pakistan, and one other location I can't remember now. Finding that the product was extremely effective. We had data to show that we reduced incidence of disease. We actually saved lives. And that the effectiveness of the product. And so we were getting great results. We were all gun-ho about it. And let me see you. And so we decided, well, I think there's one slide. Okay, sorry. Yes. So through those three, those four small scale markets, we actually distributed about three million packets. And once we started looking at it with a business lens on and doing an analysis of that, three million of these little packets at an average sale by a consumer of 10 cents per packet, $300,000 of, you know, sales, we were never going to recoup the 20 to 30 million dollars of investment that we had made in the product, the R&D, the moving and manufacturing plants, the staff people that were working on it, the armies of people that we were putting in place, for example, in Pakistan, we had, I think around 1,000 people at one time who were going around to small markets. They were painting signs of the product. They were conducting education programs because you had to do several things. First off, you had to convince people they had a problem. And most of these people have been drinking this water for years and years. And the fact that they were alive today said, well, I don't really have a problem. They forgot about their, you know, their brothers or their sister that died, you know, while they were growing up. Then secondly, you had to convince them to do something about that problem, you know, use a treatment process. And then thirdly, you had to convince them to buy our product. That's a huge investment that was going on. We're talking about behavior change. And that's something that, you know, all of you know, I'm sure that takes decades in order to create that kind of behavior change. And we simply could not afford to continue with that type of model. And literally, we were in 2003, 2004, we were having a huge internal debate on what do we do with this lifesaving technology? Do we abandon it? Or do we do something else? And thank goodness we had people both at the worker level and at the management level who were smart enough to say, let's change the business model. And we had senior management who said, okay, we'll give you a chance to do that. And so what we did is we created what we call the Children's Safe Drinking Water Program, named because of the health impact of water on children. So what we did is we formed a small group of people. Now instead of having, you know, armies of folks out working on this issue, we only had three full time staff working on it. We created this program and we provided the packets for not for profit. So instead of trying to make a profit on it, we simply tried to cover our cost of manufacture. We didn't try to cover all that previous investment that was $20 to $30 million. So we provided it in emergency relief situations. And we also provided them what we considered sustained type of situations because emergency relief is an incident occurs, you go in for a little short while, and then you come back out. But we also wanted this to be available on sustained basis. So I'm going to give you three examples of how we went about working with other organizations to deliver those that type of thing. So interestingly with there's a parallel here with the Gilead work on HIV AIDS. One of our first areas that we focused on was all the investment that was going on in the early to mid 2000s and HIV AIDS efforts, both, you know, there was prevention efforts, but there was also treatment efforts going on. So we did a lot of work looking at, well, what if you coupled an ARV treatment along with clean water versus just the ARV treatment alone. We worked with UNC University of North Carolina to look at that in Malawi. And what we found in the studies that we conducted was that we improved the effectiveness of that ARV treatment. If you give people drugs to treat their AIDS issue, and at the same time they're drinking lousy water, those people's immune systems are terribly compromised. The drugs are not as effective. The people are dying typically from secondary type of issues like water, you know, bad water. So this was one way of really improving the effectiveness of both the drugs and the ability for those people to survive. So we had a huge focus on working with countries around the world that were real big into the PEPFAR initiative. We're busy providing ARV treatments. And that was one of our areas of focus. So places like Tanzania, Ethiopia, Malawi, we did lots of work. And there we worked with other organizations like PSI or Save the Children, you know, other well established NGOs around the world because they had the folks in country. So they had the infrastructure in place. They had the ability to reach into the community and do all that work around what, you know, you've got an issue, you need to treat your water. Here's a product that will help you do that. And I also want to say before I go to any further, we do not believe this is the only solution to water treatment. We believe there's a large group of products that just as I mentioned at the outset, bleach, chlorine tablets, other water treatment processes that are vitally important. It's going to take all of us working together to address this issue and not just our products. I want to make sure I don't come across as sounding like I have the only solution. So did a lot of work on that issue. And we made great, made great success there. Likewise, we found that if you integrated this technology with feeding programs, we found that you could reduce the amount of food you needed to provide children, you improve the effectiveness of the food that you did give those children. So it's very similar to the AIDS study. So we did a lot of work with organizations again, established, and we're working on specific nutrition programs in countries. So like Save the Children, we've provided a lot of product in East Africa and West Africa, did a lot of work there as well to supplement those feeding programs. And the key to both of this ARV and this nutrition is you're spending dollars in the case of ARVs, multiple dollars, you're spending dollars in the case of feeding programs for just another 10 cents. You can provide them the water they need to couple with that and make it effective, make it more effective. Then the third area we worked in was an emergency relief. Like I said, disasters occur. You know, an event happens. Water is typically one of the top issues that people have. If you're listening to any of the news reports today about what's going on in the Philippines, water is always mentioned. So and disasters can be both events like a typhoon, an earthquake, but it could also be something like a famine. Or when you have those types of drought situations and you have famines that occur. When people don't have access to clean water and either those types of dramatic situations like earthquakes or typhoons or in a drought situation, they're drinking lousy water. And this is one way, this top of technology is one way that you can bring it in and treat that water that they do have access to and make it safe to drink. So I checked with my colleagues in Philippines before I came and it turns out we already have some of this product prepositioned in the Philippines with a couple of organizations. So that's how we're initially going to help out in that situation. I'm certain that long term we will also be bringing a lot of additional product in. And that was one of the key learnings we had in the disaster response area. Pre-positioning was vitally important. We manufacture the product today in Singapore. If an event occurs in South America or Africa, the supply line is going to take us. We're not a disaster response company. We don't have airplanes. We don't sit there on the ready. We don't fill them full of product, ship them around. We need to have the product preposition pretty close to those events. And so we've worked very hard to do that with organizations like UNICEF, World Vision, and others that have worked with us very closely. So prepositioning is very important. And here's just a list, a partial list of some of the kinds of organizations we've worked with over the years in the disaster response area. So this is basically a map just to show you a list of where all we've worked. And I see that not every one of the countries is highlighted, but mostly Latin America, a lot of Africa, and quite a bit in Asia as well. So those are the countries. Obviously a technology like this has virtually no place in, say, a U.S. or a European disaster. You know, we get to ask that question all the time, well, why aren't we helping provide it? When those types of events occurs, lots of bottled water gets shipped in. Frankly, people won't be bothered with the process it takes to mix up for five minutes, filter, and then wait another 20 minutes so that your water's clean. Now I told you at the outset, three million packets were distributed via our commercial model. Six hundred and 15 million have been distributed via this not-for-profit social responsibility type model. So tremendous success we've had. This has been over a nine-year period and the test markets we ran were over like a two to three-year period. So there's a difference in time frame, but clearly it's been a huge, huge success for us from a not-for-profit social responsibility type of initiative. We've used health professionals to help us estimate lives saved. We think it's about 33,000 lives, so we worked with lots of health people to understand what the impact was on having clean water. Key to is we worked with over 120 organizations, not-for-profits, government agencies, you know, Johns Hopkins, University of North Carolina, PSI, AmeriCares. It's just an alphabet soup of organizations that we worked with. And important there is we've established relationships with these organizations. Many times companies go in and have these transactional organizations. I'll do X for you, if you do Y for me, and when that deal is over, the relationship ends. But this has allowed us to really establish long-term ongoing relationships with these organizations, which have been very valuable to us. It's also allowed us to work, and I said all those countries that I showed you, and it's provided us benefits. For example, we've used the fact that we're working on these types of initiatives to go in and have discussions about other products. And so we've actually brought pampers into countries, always into other countries, you know, because we've had a foothold and we've learned about the country, we've gotten in, you know, we know who to talk to. It's allowed us to establish the relationships in countries that have allowed us to then bring commercial products to play. And last thing is we do have a commitment that we've announced that we are trying to achieve two billion liters of water. So each packet treats 10 liters. So that means 200 million packets a year will have to distribute. And by 2020, we hoped to reach that two billion per year mark, 200 million packets per year. Thank you very much. Thank you, Keith. Our third case study is not a product you would see in your everyday work. It's actually part of the logistics system that brings products to consumers, but it's a very interesting novel device that has its own fascinating characteristics. I think you'll enjoy hearing about Farm Report 360. Here the technology is the product of the United Parcel Service. And here to present the case is Amga Chihara, who is Senior Vice President International Policy and Strategy for United Parcel Service. Amga. So I only have one picture. I couldn't bring the product in. It's not in a sachet packet. And then like Clifford and Keith, we're still in the process of solving the case. So there's probably a few hundred people in the room here that could help me solve it once you hear about it. And unlike Keith, I'm not retired. And if I don't figure this out, I'll be forced into retirement. So anything you could do to help would be appreciated. So for any of you marketers in the room, this is not a quick presentation on the four Ps of marketing. This is a presentation on another three Ps, problem, problem, problem. And really if I could tell you a little bit about the product and the problem and then the resulting effect. So the container that you see in question is, as many of you fly on airplanes, underneath the airplane, the belly, there are things called igloos, okay, or ULDs or many other terms for it. But they're really where your suitcases are held or product is held. In all cargo planes, there are no passengers on the top deck or the bottom deck. It's full of containers such as this. If you could see the picture, look at the bottom of the picture and you'll see two small holes under each side. Any guesses on what that is by the audience? That's right, they're forklift holes. So there is where in lies a big problem. In many countries that we fly this product to, that product, that container is considered a product. Inside that container could be a payload of a million or two million dollars' worth of pharmaceutical products. So medicines, life-saving products, the container itself gets treated as part of that product based on some protocols by the WCO. Anybody know who the WCO is? World Customs Organization. So the interpretation by different countries of the WCO guidelines on what a product is versus what a container is, is where in lies the problem. So before you get to the four P's of marketing, you really needed to do the research on the three P's of how it's going to be perceived as a problem, as an interpretation by that country. So the container is an IT-enabled container, which means when it is in the supply chain, it has both GPS and GSM capabilities. We have a global control tower that watches all the containers around the world and knows where those containers are, and not only location, but the ambient temperature within the container. So within that container, those life-saving products need to be maintained at a temperature, a consistent temperature, within two degrees of when they were shipped. That container, which is battery rechargeable battery operated, will keep that product in that temperature for up to a hundred hours. If there's a problem within the supply chain of that ambient temperature changing, we're able to deploy a whole bunch of other efforts, and that's what we do for a living, in order to replace that container and have that product safely on its way. So as you can see what the issue here is, if you have a limited amount of time of 100 hours, you have a payload of $2 million, and you have global policy at the border that says, well no, please place that container here until we talk to the authorities to see if we will let it into the country, in some cases, into the country, but levy duties and taxes on it in other cases, and in other cases, only let it out of the country if it still has its payload with it that you brought into the country. So we all learned about disruptive technologies. Our efforts here were to come to the table with a disruptive technology that's an innovation that has been commercialized, but the intersection of reality versus policy still is in its infancy stages in many countries. So in knowing all of that, what I wanted to tell you is our game plan a little bit here. We are working with others on trade negotiations, and one of our competitors, we compete on the street, but we certainly work on policy together, Brambles out of Australia, who specializes in containers, as well as skids, etc., and this is the nitty-gritty of international trade that most of you, it's sexy for me, but I know you probably don't care about it, but this is how your stuff gets around the world. We've been able to insert language, or hopefully insert language, into these trade negotiations where these containers are not treated like products, but all countries allow them entry and exit under mechanisms that allow temporary entry with no duties and taxes paid, etc. So one mechanism is to work through trade agreements. The other mechanism is obviously bilateral lobbying with these governments. The third mechanism is to utilize and trigger the United States departments to work bilaterally with these governments in regards to the movement of these pharmaceuticals. All that to say is that in every one of these challenges that we face, whether it's this case study or multiple case studies we talk about in our company, the whole of government is really what you need to bring to the table. So the Health Services Department in Japan or India or China that needs to work with the Customs Administration, which needs to work with the Finance Department, we find that as a company, we're the catalyst to bring them all to the table to find the solution. And until you bring that whole of government to the border or behind the border, our learning has been, that's not how policy and practicality is going to change. So that's it for me Scott. Thank you. Well thank you for experiencing this with me. I'm excited to have the opportunity to moderate a brief discussion now with you as the audience. I'd like to ask the first question, if I could, as the moderator. And I think it's a question for Clifford and Keith. One of the things I noted in your presentation is you develop close relationship with partners. But your partners brought an exceptional amount of know-how to the partnership. This is not a matter of finding distributors or suppliers in the classic sense, but your suppliers and your partners had know-how which provided synergies for your own operation. I mean I note that the purifier of water or technology, you have to let it sit for 10 or 20 minutes. I know how long 10 or 20 minutes is because I have a wristwatch. This product's being distributed in a lot of places where people don't have wristwatches. And some of the practical problems that need to be overcome are quite remarkable. But Keith and Clifford, if you could talk about the know-how your partners brought and how that made the cooperation worthwhile. You're absolutely right Scott. Selection and work with certain partners was absolutely essential. As I tried to say, they had people in country. For example, a typhoon hit, Myanmar, that's what was that, 2007, 8, I can't remember the exact date. World Vision was our partner in that situation. They had 700 people in country. So with that network of established people, we simply had to get the product across the border which was no easy task at all, as you can imagine. Getting the product in and then that infrastructure, they were willing to adopt, take the product in, do the education, do the distribution, the type of thing that we never could have afforded to do and therefore they could reach millions of people through that type of partnership. You also asked the question, well, how do you, you know, when you're doing that kind of training, how do you determine, you know, what is five minutes mix time? What is, you know, 20 minutes of wait time? Well, we always use some kind of relevant measure. So maybe it's the length of time that you could porridge, you know. So the local people who are doing the training might say, well, you know, you need to let it set the length of time you would cook your porridge. They may make something so relevant that or maybe it's, you know, two or three or four songs on the radio, you know, they don't, because people, like you said, they don't have clocks sitting up there and they're watching it. Many times too, you just say mix it up at night and it's safe to drink the next morning. So those types of things. Thanks. Yeah, for Gilead, it takes a while to find good partners. We had to look for individuals who knew how to navigate the regulatory landscape within the countries and also do that within the scope of our business conduct, because lots of people can get things done. It's the how they get it done. And we're a U.S. company and foreign corruptions practices actor and highly enforced. You also needed some degree of technical skills you need. You needed to have someone who can understand the clinical and the preclinical sections of a dossier or the the chemistry and manufacturing sections. So it takes a while. That's really the challenge in many developing countries. The talent, if it's there, it's very hard to grab. And most of the talent actually leaves the countries. You get a flight of talented individuals heading off to Europe and even U.S. It's one of the challenges we have with trying to find manufacturing in Africa that can really get the cost. It would be ideal to have more manufacturing on the continent and has the highest prevalence of HIV AIDS. But trying to find the chemists and the pharmacists and just even the facilities to store medicines in good conditions, temperature control conditions have been challenging. Thank you. Let me open it up to questions. Recall, please wait for the microphone. When you get the microphone, introduce yourself and give us the name of your organization and make sure the question is in a form of a question. Thank you. Yes, sir. Hi, I'm Stephen Kanner, U.S. Council for International Business Retired. And this is an inquiry for AMGOT. You mentioned about using temporary entry and exit for these containers. And I was under the impression that this is what the KANE system does. Are there shortcomings in the system that could be fixed to facilitate this aspect of your problem? Unfortunately, some of the countries, even under the KANE system, bundle the contents of the product with the container of the product. So the value, you can understand that UPS has a philanthropic arm outside of the UPS core product. So we charge the carrier, the carrier charges Novartis, Johnson Johnson or any of our customers. Those charges, whether it's for duties, taxes, duty drawback, KANE, or the facilitation of that. When you add and compound the cost of that facilitation, sometimes it becomes cost prohibitive to move products using this mechanism because of the administrative costs that are burdened to move the product that are necessary. So I would tell you that every country, we have, just like you saw my partners with a country by country, every country has a different protocol and interpretation. So it all comes back to the world customs organization and redefining some of those programs that they have to recognize these new technologies that weren't contemplated when they first drew up some of these programs. Another question? Yes, sir. Hi, I'm Kandair. I'm a student at Johns Hopkins University. My question is for Clifford. The thing is you mentioned that you have a partnership with the Indian generic pharmaceutical manufacture, which has been pretty successful for your drugs. Do you see Giliad falling the same strategy going ahead with other drugs being developed or in the pipeline? Do you see yourself utilizing that partnership for and the supply chain for your future drugs? Yes, I think we've seen, well, there are a couple of things. We have a product that's being FDA reviewed now for hepatitis C. HIV is about 34 million people globally with HIV AIDS. Hepatitis C is about between 170 and 200 million people. So the scale is even higher and so clearly we will need some sort of model that involves what I've described for HIV. The scope of the countries might be different. It might not be as broad. The other challenge that we've seen is the reason why this HIV model works. It's not just because Giliad developed it. It's because of funding agencies such as Global Fund and PEPFAR providing the financing to countries to purchase HIV medicines. You don't have that with hepatitis C. You don't have that with dengue or other diseases. So it will be interesting to see if even the Indian generics are interested in making a product where there isn't a clear funding mechanism where they can recoup their output of to manufacture product. But to answer your question, yes, we would contemplate a similar model. Yes, sir. Sebastian Becker. Are you a student? I have two questions for you, Mr. Sock. The first one is Peter Prabek. So the former CEO of Nestle mentioned once that water is not a human right or free access to water is not a human right. What do you think about this and what does Procter and Gabel think about that? And the second question is 10 cents for a package sounds really cheap for us, but for countries where most of the people are earning less than a dollar a day, it's a lot of spendings. They have to afford it. So wouldn't it be a better possibility to distribute the package for free on the CSR aspect? Thank you. Two good questions. Is this on? Yes. Personally, yes, I think water is a human right. I can't, I'm not going to answer that for my ex-company. I'm not sure what their position is on that at the time, but I know we've done a lot of work to bring water to people as cost-effectively as possible. Interesting. We looked at the question too about the cost of the product and our work and our investigations, we found that when people got something for free, it didn't seem to appreciate it very much. They didn't seem to value it. And by paying just a little bit of money for it, you know, the price of an egg, for example, they seemed to have a lot more value and they were willing to use it, interested in using it. Our actual cost that we charge people is three and a half cents per packet, and today we're losing money on that. It costs us more than three and a half cents a packet to manufacture the product, but we've maintained it at that price point since 2004. So I think that's pretty remarkable to not change the price in that length of time. If you load in all the extra costs of sometimes you have to provide buckets, sometimes you have to provide stir sticks, sometimes you have to provide cloth, that's typically in a disaster situation. So if, you know, people in their homes, they have buckets to use, they've got something to stir with, they've got a, all you need is a t-shirt. It's nothing special on the filter cloth. So those items don't have to be provided on the ongoing, you know, sustained markets, but in disasters they do. That's where we use a 10 set number because it comes out at a cost about that. So we would love to make it cheaper. We don't think it's unreasonable that we're losing the amount of money we're losing today on the packets. And we think people value it a lot more by paying a little bit for it. In a disaster, they get it for free. It's just the organizations we work with will pay that three and a half cents. I'll just add something else on, on, what we've found and we've studied whether to do something on their corporate social responsibility, umbrella or through foundation, it's best to devise something that's sustainable, that has some way of funding itself. What you find is, is, is when, and we've seen this in HIV, a lot of good work done over the years to build schools and clinics with a lot of companies within our space, but once there's a financial crisis or some hiccup financially, these are the programs that are hit the hardest and cut first to the detriment of the people in, in far flung areas. So it's best if you're developing something to develop something that's, that's financially sustainable that can stand on its own. Yes sir. Job Henning again with open revolution. You often hear that big companies can't innovate. Of course, big companies do innovate and you're, you're, you're talking about innovations in big companies, but sometimes it's a little mysterious how companies, big companies, make decisions to innovate. Could you talk a little bit about the experimentation innovation agenda and your respective companies and why did you choose or how did you choose to, to pursue these specific innovations and, and specifically how did you get or what were the decisions made to continue the investment strategies, particularly after the ROI question became what, what seems to be problematic or challenging and maybe link that into the CSR discussion because it sounds like we're, you're talking about innovations that are not commercially viable even today. There may be reasons not to pursue them under CSR, but, but what are the reasons to pursue them at all? Outside of the fact they're obviously humanly very desirable. Well, in our case on the water area we, we have tried a variety of approaches to stimulate and encourage innovation. This actually came about as a result of a process we had internally where people could come up with great sounding ideas, basically write up a internal proposal, seek funding for that and the scientists that developed this product did exactly that. He was working on the detergent area and how to take the solids you result when you do a load of wash, you have a lot of solids. He was looking at doing something with those solids and how could you remove them from the water and he happened to take a trip to Kenya and he was out in rural Kenya and he saw the water that people were utilizing at that time and a light bulb went off in his head and he said, I could apply the concept I'm working on for a laundry detergent to this water issue that exists. So he did a little research, gathered some background information, put together a proposal and actually got funding to go away for a couple of years. He and a partner and they worked on the actual development of the product came up with the patentable product. So that was the innovation that led to the development of the product through that process internally we had. Then the process for how we changed business models, I can't say it's as nice and neat and tidied up. We had the good fortune of one of the key people that helped make that transition actually to the key people that were working on it. Both were in the sustainability area. One had just come off of a lot of work on a nutritional supplement where he'd been doing a lot of work with health organizations, developing countries, had a lot of experience there. He was able to parlay that experience and that knowledge into the arguments that went forth. We also had a lot of strong allies at the senior level of the company who understood the importance of drinking water and did not want to abandon that. So strong senior leadership along with some fortuitous people who knew how to push that concept through and get some traction for it and the social responsibility area. Does that answer question for my company? For us at UPS, we've been around over 100 years and we have a saying that's been with us for a number of years and we're always constructively dissatisfied. That kind of hurts at the end of the year during pay raises because you're never good enough but we're always constructively dissatisfied. So that innovation that effort comes from always looking to do things better and in this particular case is really the intersection of environmental issues and growth issues. From an environmental standpoint like I said there's no hazardous material issues with this container no hazmat issues so dry ice is not required. We've been using dry ice for decades in the cold supply chain. So this is a way to really remove that from the equation. Secondly, there's a global aging population affluence rising middle class. Personal health is important. That sector of health care and of pharma and bio is a significantly high growth sector around the world. It's a multi-billion dollar piece of our global effort now and it's only really been an effort for us for the last decade. So you have to really find an economical model that works and then couple it with finding an innovative way to put it in the market. But I would say the nexus of all that is really leadership. You have to find internal champions that believe in it and as long as it's economically viable and you have a strong leadership it'll happen. I would agree on both counts. In one case, we can't dilute ourselves that you do need to make some money in one area that would allow you to finance the innovation and just the time that's spent on coming up with these novel solutions for areas where it's not commercially viable. In our case, our chairman CEO John Martin went with a few other pharma execs to Africa. I think in either 2002-2003 came back and recognized that the extent to the pandemic there and people dying we just couldn't make these products available in the U.S. and Europe only and challenge our internal research teams to find some solutions. And we stumble on it for a number of years at least three, four years until we came up with this model. So you do need to have a viable marketplace where you're doing well and that allows you to then go off and incubate these kinds of environments where there aren't any piano pressures per se. What we learned during the time was that you still need to set up whatever you're doing in some kind of financially sustainable way which is why we charge a royalty to our Indian generic partners and so it's not free. And then the final piece is what you've all echoed is you need senior leadership buying to allow this to happen because you likely fail a number of times before you have some marginal degree of success. Yes, sir. Bill Mounce from the Pacific Northwest Region again for Keith to follow up on John Hammer's introductory remarks about good government helping in this commercialization particularly of innovation how important was the CDC and your initial foray into Latin America and particularly your transition from the pure commercial model essentially to the NGO model that you've ended up successfully with now and shouldn't that sort of government catalyst activity also be something that UMGuard and UPS could use as well if they could find a champion like that? Well, the CDC was absolutely essential for the initial development of the product. They've also maintained a strong relationship with us. This this product has huge health effects. So when we've gone and conducted clinical type studies around the world we've involved those types of health experts around the world and the CDC's helped us you know understand who are the people that we would talk to that we would work with who could you know do that type of work correctly and in a valid in a valid fashion. So relationships we've maintained with them and absolutely essential other than encouraging us to continue to stand strong you know I can't really I don't believe they had any direct effect on our business model change but they've always been there and encouraged us and that was very valuable in that regard. So the two cents I'd say in that regard Penoir Pacific Northwest is a great example for the world actually on how they use cross-border regional cooperation to pilot things. What I loved about working with Pacific Northwest is they don't try to change everything in one shot. They say let's cooperate amongst these four states and three provinces or whatever it is at this point and let's create show the world this pilot program will work and then they'll beat a path to our door. So you know we take ingredients of success and we try to do that in regards to this product or other products and we say this country has created access to its population for XYZ based on how they treat us at the border. So we use other countries as a pilot and fortunately here's what I would tell you whether it's the U.S. government or other governments and I'll say this as delicately as possible as a private sector company we work on 13 week cycles which means by the third week into that cycle you have a plan and you've got 10 weeks to execute that plan. Some governments around the world don't work on a 13 month or 13 year cycle and that's been our challenge is the speed at which you get a resolution on something while it's costing you money every day and at some point you have to abandon the strategy if they're not going to move at the speed of business and that's been our challenge. One thing on the U.S. government the USPTO has done a good job my colleague might be able to comment on that but they've they've issued waivers for companies that have programs such as Gilead's access program if there's a re-examination of patents that they can move ahead that re-examination quickly so there are incentives that are being put in place for companies to not just think about access to medicines in wealthy countries but to make those medicines available in developing and emerging economies as well. Gentlemen here then there's the gentleman in the back. Thank you. My name is Ajay I'm first secretary commerce in the Indian embassy here. My question is to Clifford and I would like to congratulate Gilead Sciences for fabulous decrease in cost of medication for HIV-AID from $600 to $4 per patient per month. I just wanted to ask you such generic medicines are also available for patients in the United States? Thank you. Not as yet. I think the patents are coming up quickly on the medicines that are that were around very early on. The problem with a lot of those medicines that are coming up patents are going generic they're no longer used they're all the medicines such as AZT and they have a lot of side effects associated with them which is why you constantly need innovation in all disease states because there are ways to improve medicines and we've certainly done that with HIV-AIDs. I would submit that today if you're looking back from 1990 or even in the early 80s today typical HIV patient worry more about cardiovascular disease and diabetes than HIV per se and that's the same focus we'd like to see in Africa and other places where the mortality goes down quite a bit but to answer your question the patents the products are coming off patents I wouldn't necessarily prescribe those if I were a doctor for patients in the U.S. because they're generics. So question at the back Howdy Thomas Ward I'm a former economist at the World Bank question I have is earlier this year I think it was at CSIS as well there was discussion about the USAID moving more decentralizing the efforts and I think it got stalled by the Senate in the movement of that but that's where the concern I have is that effort actually helping or hurting because when you're seeing news of like the malaria cases of fraud and everything does that actually impact your efforts and your thoughts and like you're talking about how do you also have your patent controls so you can keep the quality and the credit because if there is imposters using counterfeit stuff or you know like a lot of times in the past in agriculture it's like as long as we can get the food out to the people that's fine how it gets there through intermediaries are okay but when it comes to malaria and drugs and so forth there it gets a little bit more questionable your thoughts not sure who'd direct that too sorry we have some development people here at CSAS and none of them are on the panel so my apologies well I do know that USAID has been a huge partner we've attempted many times to put together programs focused on water and have been successful in some cases we have found though that many times if I broaden it for you on just USAID if I look at other organizations as well you may get the senior leadership of an organization saying yes this is an interesting and an important initiative and we ought to be supporting that in our various countries but then each country has a decision making process that they go through and a prioritization they've only got so many people so much funding they're only able to take on so many issues and so sometimes you do make the cut in those countries and sometimes you don't so we've had examples where USAID said we ought to be working on this water issue in country X and it just doesn't happen because of those types of issues I would guess decentralization is what I feel like we already face in many situations because you've got to convince country by country to adopt and to work in these areas and it's usually an add-on you know we don't bring huge funding we do bring typically some funding but we don't bring you know billions of dollars of funding to help stimulate a specific program you know we may bring a hundred or two hundred thousand dollars to work in an area which is simply not enough to even you know pay a few staff people's jobs is it so so does that help yes last question right here yes sir Hi I'm Tim Timothy Xiao USAID I have a question for Mr Zuck about the private sector innovation for development purposes so you mentioned about there's a lot of cost in putting into the R&D for the product so I wonder was there a dedicated team to conduct R&D for this particular product or just a side product coming out from the mainstream R&D activity at P&G and also how does this P&G actually file this activity in a financial statement is it file as a business loss or is file as kind of a charity donation type of expenses thank you I'm sure I can get into all the tax implications of it I do know that when initially it was worked on it was going it was considered a commercial market initiative we did yes have people permanently assigned well assigned specifically to that area I believe at one time we had up to about 30 people that were P&G employees working on it full time so we had people that were the scientists developing the product we had people that were the manufacturing folks who they were developing the supply chain how would you get all the various raw materials because each raw material is very specific for example there's only one current supplier of the ferric sulfate material that we have around the world so you know you had people assigned to building the plants and doing the engineering you had the people assigned to running those facilities so yes at that time those were legitimate business expenses that you expense in the year that they're incurred I mean we follow all the financial accounting accounting practices so you know we don't I don't think there was anything written off in the future as some kind of you know philanthropy philanthropic you know investment but I just don't know all the tax implications of that well thank you for investing your morning here at CSIS we hope this was a beneficial conference and please join me in thanking our panelists