Sanford Journal of Public Policy - Volume 5 No. 1

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Acknowledgments

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Contents

Access to Medicine Index: Can a global scorecard framework increase access to essential medicines in developing countries? 1Jamie Attard

County Costs and Funding in North Carolina’s Electronic Recycling Program 25Rachel Leven

Access to Medicine Index: Can a global scorecard framework increase access to essential medicines in developing countries?

Jamie Attard

The Access to Medicine Index (ATMi) is a scorecard framework that measures the efforts of pharmaceutical companies to enhance access to essential medicines. By pro-viding a reliable and objective appraisal, the Access to Medicine Foundation (ATMf) hopes to encourage pharmaceutical companies to increase their work in this pivotal area. The ATMi could represent an important tool for improving access to essential medicines in developing countries but must focus more on optimally engaging the diverse stakeholders necessary to shape the practices of pharmaceutical companies. This study evaluates the effectiveness of the ATMi in engaging different stakeholder groups and provides recommendations to enhance its influence, credibility and objectivity.

Executive SummaryOne-third of the global population still lacks access to essential medicines,

with the greatest need concentrated in developing countries (H. Hogerzeil & Mirza, 2011, p. 5). Improving access to essential medicines could save 10 million lives each year (Hunt, 2009, p.4). Essential medicines satisfy the pri-ority health care needs of a particular population based on considerations of disease prevalence, efficiency, safety, and cost-effectiveness (WHO, 2012a, p. 16). Recently the Access to Medicine Foundation (ATMf) developed the

Sanford Journal of Public Policy, Vol. 5 No. 1 (Winter 2014), 1–23

Jamie Attard has a depth of experience in the professional services industry, delivering a range of operational, strategic, technological and financial projects across diverse sectors in Australia, France, the United States and Uganda. Jamie graduated from Duke University with a Master of Public Policy from the Sanford School of Public Policy and a Master of Business Administration from the Fuqua School of Business.

2 Sanford Journal of Public Policy Vol. 5, No. 1 (Winter 2014)

Access to Medicine Index (ATMi) to evaluate the pharmaceutical sector’s success in broadening access to essential medicines.

The future effectiveness of the index in promoting substantive change across the pharmaceutical sector will depend on its ability to meaningfully engage and empower diverse stakeholders. Key stakeholders include gov-ernmental/intergovernmental agencies, investors, the pharmaceutical sec-tor, health care professionals, procurement groups, non-profits, advocacy organizations, and the public. Currently, only pharmaceutical companies that perform well on the ATMi publicly acknowledge the index results, which may reflect how companies perceive the value of the index. The ATMi needs to resonate with and unite diverse stakeholders in order for the perceived benefits to outweigh the costs of continuous improvement by the pharmaceutical sector.

This report notes a number of opportunities for the ATMi to improve its engagement with stakeholders. The current level of engagement between the ATMi and stakeholders, at least on a public level, is not strong. The ATMi must also achieve greater levels of objectivity, account-ability, transparency, and collaboration in order to further improve access to essential medicines.

More specific and verifiable measures and a greater focus on outcomes would further differentiate pharmaceutical company performance. The ATMi should incorporate additional measures to more completely and accurately capture the performance of pharmaceutical companies. Greater levels of disclosure would facilitate more alignment with alternate third party measures of pharmaceutical sector performance, thereby enhancing the credibility of the ATMi. More complete and detailed disclosure of company information would make the ATMi a more trusted and com-plete measure of industry performance. Visualization and data analysis tools would enhance the ability of stakeholders to evaluate performance over time and across different criteria. Rapid developments across the pharmaceutical sector require more frequent reporting by the ATMi to provide relevant and accurate information to users. Complementary and distinct measures are also required to provide insight on the affordability and availability of generic drugs.

Access to Medicine Index Jamie Attard 3

Policy / Research QuestionThe World Health Organization (WHO) estimates that 30,000 chil-

dren die daily from diseases that could be easily treated with basic essen-tial medicines (WHO, 2009, p.4). Today, at least one-third of the global population does not have access to medicines (H. Hogerzeil & Mirza, 2011, p.1; DFID, 2005, p.17). Factors that limit the delivery of effective, safe and quality medicines include high costs, inefficient distribution, lim-ited health infrastructures, limited health financing, narrow disease focus, inequitable health financing mechanisms, limited research and develop-ment pipelines, lack of data and coordination, limited quality controls, and ineffective practices.

The ATMi was launched in 2008 by the ATMf, a Dutch-based international, non-profit organization. The purpose of the ATMi is to encourage the pharmaceutical industry to improve access to medicines worldwide. The index is intended to provide a reliable, independent and impartial evaluation of pharmaceutical companies’ performance across several dimensions. The policy question addressed in this article focuses on the ATMi as a mechanism to change pharmaceutical practices:

Can a global scorecard framework promote a system of public accountability across the pharmaceutical sector to support increased access to essential medicines in developing countries?

BackgroundOver the past decade, multinational pharmaceutical companies have

been more active within the neglected disease field. This greater focus on neglected diseases can be attributed to growing public awareness of developing countries’ health needs, as well as the establishment of ded-icated institutes and public-private partnerships (Mary Moran, Ropars, Guzman, Diaz, & Garrison, September 2005, p.8). Many believe pharma-ceutical companies hold a special duty to provide essential medicines to populations that need them (Forman & Kohler, 2012, p.75).

The ATMi is building momentum and credibility. In 2008, only nine of the 17 originator firms and none of the three generic firms responded to data requests from the ATMf (AMI, 2010, p. 16). By 2010, 19 of the 20 originator companies and three out of seven generic companies responded


to the ATMf (AMI, 2010, p. 16). Recently, the Bill & Melinda Gates Foundation committed $2,952,852 over four years in addition to the $1,095,018 provided in 2009. The Dutch Ministry of Affairs commit-ted to a five-year grant, and the British Department for International Development committed to a four-year grant (AMI, 2012a). The ATMf declined a request as part of this study to reveal the level of grant funding it has received.

As an actionable governance indicator (AGI), the ATMi can play an important role in defining societal expectations of an industry consisting of opaque activities and operating across diverse business models. AGIs distill and standardize complex data from different sources into simple ratings and present the information in a format that is designed to be user-centered, allowing performance to be understood, compared and acted upon (Fung, Graham, & Weil, 2007, p. 2). However, AGIs require a degree of subjectivity in the weightings and measurements that AGI cre-ators apply. Successful AGIs embed new information into users’ and dis-closers’ existing decision-making routines, based on an understanding of their diverse priorities and capacities (Fung et al., 2007, p. xiv). Examples include, the Carbon Disclosure Project, World Bank ‘Doing Business’, Aid Transparency Index, and Transparency International ‘Corruption Perceptions Index’. These all reveal either or both source data and full disaggregated scores.

Research MethodologyThe analytical strategy for this paper consists of a combination of liter-

ature reviews, case studies and interviews. Personal interviews and survey tools were utilized to obtain a sample of perspectives across global health organizations, human rights organizations, investors, and the pharmaceu-tical sector.


Analysis and FindingsATMi is shaping pharmaceutical practices, but its continued impact is uncertainPharmaceutical companies do appear to be responding to the ATMi; however, changes have been limited

An analysis of changes between 2010 and 2012 shows that pharmaceu-tical companies do appear to directly respond to the ATMi. Attributing company responses to the ATMi is challenging as companies rarely pub-licly acknowledge their actions in response to the index. However, as the New York Times noted in April 2013, pharmaceutical companies are no longer ignoring the ATMi as they are appointing executives to ensure they excel in the index (McNeil, 2013). For example, five companies created a business unit and/or introduced board-level engagement ded-icated to improving access. Another eight companies strengthened their codes of conduct and three responded to litigation related to recent eth-ical breaches. Progress is also shown through research and development pipeline focused on the poor, introductions of intra- and inter-country pricing schemes, and the support of Trade-Related Aspects of Intellectual Property Rights (TRIPS) flexibilities. TRIPS is an international agree-ment administered by the World Trade Organization (WTO) that gov-erns intellectual property rights for WTO members.

However, not all changes observed have been positive. One com-pany withdrew from the Medicines Patent Pool negotiations and three contested patent rights in developing countries. Another three compa-nies failed to follow through on prior commitments from 2010 to either issue non-exclusive voluntary licenses or to not enforce patents in least developed countries. (Refer to online Appendix xiv for more detail on the changes in company performance from 2010 to 2012 as formally acknowledged by the ATMi in the 2012 Access to Medicine Index.)


Pharmaceutical company public recognition of ATMi is improving but still limited

Public recognition of the ATMi by pharmaceutical companies is grow-ing, but is still considered limited. In 2010, three companies acknowledged their ATMi ranking and three acknowledged the existence of the ATMi either within their annual or corporate responsibility reports. In 2012, seven companies, all of which ranked within the top nine of the index, acknowledged the index results. Only one company in the ATMi that fell

in ranking in 2012 acknowledged the index on their website. The eleven bottom ranked companies in the ATMi did not acknowledge the index results in 2012. (Refer to online Appendix xii for the analysis of public recognition of the 2010 and 2012 ATMi results on corporate websites and annual/corporate responsibility reports of pharmaceutical companies included in the index.)

ATMi is not optimally meeting its objective of promoting multi-stakeholder dialoguePublic engagement is limited in concentration and breadth based on analysis of web search volume

An analysis of Google Trends shows that the search volume associated with “Access to Medicine Index” is concentrated for a short period sur-rounding the publication of the biannual index, with the public interest in the ATMi having increased marginally since 2010 (See Figure 1). The concentrated volume over short periods could be attributed to the ATMi’s failure to keep the public engaged with regular industry sector updates. More recently, the ATMf has adopted Twitter and LinkedIn and is exploring other social media tools to promote greater public engagement.

Media reports are growing, but only marginally, over timeAn analysis of media reports including social media notes a concentra-

tion of interest across blogs and Twitter in the week following the release

Figure 1: Search volume trends over time associated with “Access to Medicine Index”

Source: Google Trends, February 2013


of the index. (Refer to online Appendix iv for the count of media reports containing ‘Access to Medicine Index’ including social media.) The ATMi is establishing public credibility as demonstrated by IDEA Pharma’s Productive Innovation Index which considers the results of the ATMi as part of its scoring framework (Grogan, 2013).

Investor response is weak with no relationship observed between ATMi and share price

There does not appear to be any relationship between ATMi rankings and share price movements to date, which may reflect the need for more time for the ATMi to gain acceptance and credibility in capital markets. The following analysis consists of general rather than statistically signif-icant observations, as the analysis was limited to only three data points for 2008, 2010 and 2012. Across these years, no consistent and significant movements were noted in the share prices of the best and worst ATMi performers immediately after the index was released. (Refer to online Appendix v to x for the indexed share price movements of the best and worst ATMi performers in 2008, 2010 and 2012.)

An analysis of the share price movements of the four best and four worst performers of the ATMi since 2008 suggests greater market returns for companies consistently ranked higher in the index. (Refer to online Appendix xiii for the indexed share price movements of the top four and worst four ATMi performers since 2008). , Merck & Co is a noted excep-tion, with its share price performing generally worse or consistent with two of the lowest ranked companies in the ATMi. It is important to note that correlation is not necessarily causation, evidenced by the lack of consistent and significant share price movements in response to each ATMi release.

The ATMi is building an investor community receptive to the impor-tance of access to essential medicines. In December 2012, the ATMf pre-sented the 2012 ATMi findings to the top 50 pharmaceutical analysts at three meetings hosted by Goldman Sachs in London, Amundi Asset Management in Paris, and MSCI ESG Research in New York. In June 2011, 29 investors with USD $3.7 trillion under management agreed that access to medicine is potentially financially significant to long-term share-holder value creation and that they consider the ATMi as appropriate in their environmental, social and corporate governance analysis.


Civil sector groups do not appear to be leveraging index resultsThe civil sector does not appear to be publicly engaged and is not

leveraging the ATMi over time. A search was performed of a sample of civil sector websites, and a Google search was performed (combination of the name of each organization with ‘Access to Medicine Index’) to iden-tify links to past ATMi reports and an analysis of ATMi results. (Refer to online Appendix xi for the analysis of civil sector recognition of ATMi results.) Of the 26 civil sector organizations sampled (all of which focused on global health and/or human rights in developing countries) only five referenced the 2010 index report and only one referenced the 2012 report. Additionally, only three organizations were noted to have publicly analyzed the ATMi’s findings: Health Action International provided a critique in 2008, Oxfam analyzed the 2010 results, and Pan American Health Organization referenced a related BBC article.

RecommendationsSimplifying the measurement framework would enhance stakeholder understanding More specific and verifiable measures would improve the ability of stakeholders to understand and trust the ATMi evaluation framework

ATMi indicators could be more specific and verifiable to foster greater levels of credibility (refer to online Appendix ii for the results of the eval-uation of each 2012 indicator). Thirty percent of the 101 indicators were considered inadequately specific as they failed to detail what evidence the pharmaceutical companies were to provide, to whom they were to provide the evidence, and how often they had to submit information. Fifty-five percent of indicators did not adequately detail the source and nature of evidence used for verification to facilitate independent validation.


Strengthening the measurement framework in terms of measures, weighting and focus would enhance accuracy and completeness of findingsAdditional measures would provide for more complete and accurate measure of pharmaceutical performance

The ATMi should analyze additional measures to capture the per-formance of pharmaceutical companies more accurately (refer to online Appendix i for the results of the ATMi 2012 indicator evaluation). One category of missing measures relates to the need for companies to disclose more information on current practices, such as ethics complaints related to promotions and tax benefits derived from product donations. Secondly, the ATMi should develop a measure that evaluates companies on their ethical practices, such as not utilizing transfer pricing practices for tax avoidance purposes, designing packaging to suit local environmental con-ditions, and addressing counterfeiting. A third category of missing mea-sures relates to practices that can accelerate the availability, accessibility and affordability of essential medicines. This includes pricing practices that are affordable to the majority of populations in developing countries and not lobbying for stronger intellectual property rights in relation to the Trans-Pacific Partnership Agreement.

Strengthening the weighting allocation would place a greater focus on activities important in improving access to essential medicines

The weighting allocation across the ATMi needs to be more reflec-tive of its priorities to improving access to essential medicines. Currently, only four percent of the total score for each company is attributable to breaches of conduct and litigation in relation to lobbying, marketing, brib-ery, corruption, clinical trials, and anti-competitive behavior. Although internal governance structures, codes of conduct, policies, and procedures are important, their assigned weighting of 25 percent of a company’s score is disproportionate to the weighting assigned to breaches of conduct and litigation. A greater relative weight should be given to breaches of conduct and litigation.


A greater focus on outcomes would more accurately differentiate company practices

The analysis of the ATMi would be strengthened by evaluating evi-dence and incorporating studies that focus on the perspectives of people living in developing countries, particularly in terms of drug availability, pricing and rational use. The ATMi analysis currently focuses on infor-mation submitted by pharmaceutical companies that is verified against third party sources. However, the price set by a pharmaceutical company, the quantity shipped to a country and recorded sales volumes provide only limited assurance that the final sale price of medicines is affordable, acces-sible and available to disadvantaged communities and facilitated rational use. Surveys of health professionals, patients and community members in developing countries should be performed across a subset of in-scope countries and should supplement company evaluations (HAI, 2013).This approach would be consistent with similar studies conducted by the WHO and Health Action International Project on Medicine Prices which focused on promotional activities and prices. Transparency International’s Corruption Perceptions Index (CPI) represents an example of utilizing the perceptions of diverse sources to derive an average absolute score. This study acknowledges the limitations of perception-based indices as observed for the CPI. Perception-based indices, which may influence and be influenced by the very perceptions they are measuring through media effects, may not always reflect reality and may be associated with large margins of error (Byrne, 2010).

The evaluation criteria of the ATMi needs to be flexible in consider-ing alternative, local approaches to improving access to essential medi-cines, rather than prescribing top-down, global solutions. For example, the ATMi currently places an emphasis on global-tiered pricing policies, non-exclusive voluntary licenses and non-assert declarations, but has excluded consideration of generic business units of originator companies. As further detailed, the “Manufacturing and Distribution” strategic pillar of the ATMi focuses on inter- and intra-country tiered pricing across all products and relevant countries, but this may not be a viable strategy for a company with a generic business unit. Generic business units were excluded due to a miscommunication between the ATMf and pharmaceu-tical companies as to the in-scope nature of generic drug manufacturers.


Greater transparency would strengthen the credibility of resultsATMi level of disclosure is less than alternative pharmaceutical benchmark studies, undermining intention to promote greater transparency

The ATMi has a number of strengths when compared to alternate benchmark approaches in measuring the performance of the pharmaceu-tical sector. However, it is weaker in terms of scoring transparency. An analysis was performed of the methodologies and results of past alter-native benchmarking exercises in evaluating the role of the pharmaceu-tical sector in improving access to essential medicines. (Refer to online Appendix xv for the analysis of alternative pharmaceutical benchmark-ing studies related to access to essential medicines.) A limitation of the analysis performed was that most alternate indices only included access to essential medicines as a sub-component of the larger environmental and social governance framework. The ATMi is comparatively stronger in terms of its holistic approach to assessing access to essential medi-cines; free availability to public; evaluation of both public and sensitive private information; transparent scoring methodology; regular frequency; and engagement of external, non-pharmaceutical company stakeholders in the development of the scoring methodology. However, the ATMi is comparatively weaker in terms of disclosure by not detailing indicator level scores, with three benchmarking studies providing full detail on the basis for derived scores. Greater transparency would help bolster the cred-ibility and accuracy of the ATMi.

Greater disclosure would facilitate more alignment with alternate third party measures of performance to enhance credibility

The ATMi needs to detail indicator-level scores to enable a compar-ison and the validation of company performance with third-party mea-sures. The 2012 CPA-Zicklin Index of Corporate Political Accountability and Disclosure notes that the most transparent pharmaceutical companies were Merck & Co, Gilead Sciences and Johnson and Johnson, while the ATMi recognized GlaxoSmithKline, Sanofi and Novo Nordisk A/S as the leaders in terms of transparency. The Center for Responsive Politics noted in 2012 that the pharmaceutical sector spent USD $232 million on lobbying in the United States, with the top lobbyists being Eli Lilly & Co, Pfizer Inc, Merck & Co., and Novartis (Opensecrets, 2013). Lobbying


efforts focused on intellectual property protections in the Trans-Pacific Partnership Agreement and U.S. intellectual property rights overseas (Opensecrets, 2013). The ATMi noted the best performers in terms of public policy as Sanofi, Bristol-Myers Squib Co and Novartis, with Eli Lilly & Co equally placed with other companies including Merck & Co. for third, and narrowly above Pfizer.

Disaggregated indicator ratings are necessary for stakeholders to analyze and validate findings from different vantage points of accountability

ATMi ratings should be disaggregated to the indicator level to enable different stakeholders to evaluate and validate absolute performance level against alternative perspectives of industry accountability. The ATMi pub-licly disaggregates rankings only to the strategic and technical area level, limiting the ability of different stakeholders to understand and validate absolute performance levels. The ATMf does provide pharmaceutical companies with their absolute scores for select indicators upon request. An analysis of changes in the rating of each company between 2010 and 2012 could not always be explained by individual companies’ activities as reported by ATMi, an inherent limitation of focusing on relative per-formance where rating changes can be attributed to competitor actions. (Refer to online Appendix xiv for the analysis of changes in company performance from 2010 to 2012.). The Aid Transparency Index is a good representative model of transparency, publishing not only its results by organization and indicator but also the evidence used, comments on evi-dence and outcomes of the peer review. Disaggregated indicator infor-mation should be supported by evidence gathered when not subject to confidentiality restrictions.

Lack of absolute performance transparency can erode the perceived credibility of the ATMi by not allowing independent validation. The ATMi does not facilitate a full analysis by product of each company’s relevant patent policies, registration, tiered pricing, non-exclusive volun-tary licenses, sales, and donations segmented by country. For example, the ATMi only acknowledged the positive contributions by Gilead for Viread and Truvada in terms of HIV/AIDS drugs, not referencing three other relevant drugs, Atripla, Emtriva and Stribild, one of which Gilead was making more accessible. As a result, the ATMi fails to draw attention


to activities related to medicines on the WHO EML that fall outside of the index disease scope but are still important to monitor, such as Gilead’s Tamiflu (influenza), Sanofi’s wide range of vaccines and Taxoterne (oncol-ogy), and Novo Nordisk’s NovoSeven (hemophilia).

The ATMi also does not facilitate a reconciliation of each compa-ny’s product portfolio and research pipeline to the diseases in scope,. For example, Gilead is noted by the ATMi as conducting research in rela-tion to Hepatitis C, Hepatitis B, Liver Fibrosis and Type 2 Diabetes, the first three indirectly related to in-scope diseases and the last an in-scope disease. However, none were acknowledged by the ATMi. Additionally, Sanofi is given credit by the ATMi for products related to low-respira-tory infections, malaria and tuberculosis and research related to diarrheal diseases, tuberculosis and trypanosomiasis. However, these products and research were not able to be reconciled to Sanofi’s product and research pipeline on their website.

Greater disclosure and analytical tools would more effectively inform stakeholdersMore complete and detailed disclosure of company information would make the ATMi a more trusted and complete measure of industry performance

Although the ATMi focuses on publishing positive contributions by pharmaceutical companies in order to encourage leadership by example, more detailed and complete coverage is required of activities that limit access to essential medicines. An analysis was performed utilizing Factiva, Lexis / Nexis, ABI / Inform Complete, Business Source Complete and Global Socrates - Corporate Social Responsibility to identify key access to essential medicine issues not adequately addressed by ATMi. The ATMi did not address the global advocacy campaign in 12 countries to chal-lenge Abbott Laboratories’ monopolistic hold on Kaletra (lopinavir+ri-tonavir), which is considered a key part of HIV/AIDS treatment regimens (Rosenberg, 2012). An administrative judge in Colombia ruled in 2012 that Abbott improperly maintained the price of the Kaletra AIDS medi-cation above the so-called reference price (Silverman, 2012b). The ATMi did not note in 2012 that Abbott Laboratories had filed a citizen’s petition with the Food & Drug Administration, asking the agency not to approve any biosimilar for its Humira treatment for rheumatoid arthritis, which


has the potential to restrict product innovations (Silverman, 2012a). Although the ATMi did acknowledge the potential negative implications of legal cases related to patentability criteria (Novartis) and compulsory licensing (Bayer), it only mentioned the Gilvec and Nexavar briefly in one combined sentence, which does not reflect their significance (H. V. Hogerzeil et al., 2013).

The ATMi needs to provide more depth, balance and context in its reporting of company performance by technical area and company report cards. The ATMi only reports on activities in the two-year period under evaluation, often providing limited contextual information and depth. Information does not always detail when initiatives are started, their related activities and partners, the full product and research pipeline, and related access policies. Further, the one- to two-page company report cards at the end of the ATMi report fail to provide a balanced representation of absolute performance. For example, the summary report cards often exclude litigation and ethical breaches, such as the 2011 Securities and Exchange Commission charge of Johnson & Johnson in relation to the UN Oil for Food Programme and AstraZenca’s 28 marketing and sales breaches. The information communicated in the company scorecards is particularly important as they represent the only consolidated summary of absolute performance generated by the ATMi. The company report cards need to be more representative of each company’s absolute performance for each technical area evaluated. The ATMi should additionally maintain a complete, time-scaled repository of the activities of index companies on its website, with supporting links to more in-depth information where publicly available.

Visualization and data analysis tools would enhance ability to evaluate performance over time across different criteria

The ATMf needs to provide visualization and data analysis tools to facilitate the analysis and comparison of company performance over time. The ATMi should allow for data to be filtered based on different cri-teria corresponding to the needs of its diverse stakeholder groups. All information detailed by the ATMf is primarily in a static and text form. The ATMi does not provide tools to compare information, over time, across regions or diseases. The ATMf should provide analytical and data


visualization tools in a format that enhances understanding, simplifies and standardizes information, and empowers greater analysis. For example, a graphical map that displays the products and initiatives of companies individually and in aggregate by countries and disease could be helpful in comparing disease incidence over time.

More frequent reporting would deliver more relevant and accurate informationRapid developments across the pharmaceutical sector require fre-

quent reporting to provide relevant and accurate information to users. The ATMi currently publishes an industry index every two years and does not otherwise report on developments across the industry. Index scores published every two years can quickly become obsolete. For example, the 2010 ATMi scored Johnson & Johnson positively for entering nego-tiations with the Medicine Patent Pool. However, by December 2011, Johnson & Johnson had withdrawn from the negotiations. More frequent updates would ensure that the index scoring reflects current practices. The ATMi should regularly report updates on companies included in its index to draw attention to key developments relating to access to essential med-icines. For example, the ATMi could have drawn attention to the recent launch by Eli Lilly & Co of a legal challenge under the North American Free Trade Agreement. Eli Lilly & Co demanded USD $100 million in compensation for the Canadian court decision striking a patent for an attention-deficit disorder drug (Gray, 2012).

Additional distinct measures would enhance insight on access to essential medicines bottlenecksGap in access to generic drugs needs greater attention to improve access to essential medicines

A complementary and distinct measure is required to provide insight on the affordability and availability of generic drugs. Rather than place a focus on generic companies, a complementary index should rank individ-ual generic products or categories in terms of the level of competition that exists. Such an index would ensure that generic drugs are available, cheap and of sufficient quality.

The ATMi commenced in 2008 by evaluating generic manufactur-ers and originator pharmaceutical companies under the same evaluation


framework. In 2010, the ATMi evaluated originator pharmaceutical companies and generic manufactures under two different frameworks. However, after further stakeholder consultations, generic manufacturers were entirely excluded in 2012. The exclusion was attributed to the need for more specific measurement standards specific to the generic manufac-turing industry, which the ATMf is exploring for potential inclusion in 2014 to bring generic manufacturers back in scope (AMI, 2012a, p. 104).

Contributions of distributors, biotechnology companies, and small and medium sized enterprises to access to essential medicines needs to be monitored

Distribution companies, biotechnology companies, and small- to medi-um-sized enterprises (SME) represent important industry stakeholders in increasing access to essential medicines and need to be continuously mon-itored. Monitoring is necessary to encourage positive contributions and discourage activities that limit access to essential medicines. Rather than developing a separate index, the ATMf should attract greater attention to industry activities that positively or negatively impact access to essential medicines by publishing industry updates on its website.

Study LimitationsLimited Stakeholder Participation and Lack of Access to Information

This study attempted to sample a range of perspectives across the pharmaceutical sector, investor groups, global health organizations, and human rights organizations. However, the responses received, while valu-able, cannot be considered representative. The ATMi is able to evaluate a wide breadth of performance standards by obtaining access to sensitive and confidential information, but the resulting lack of transparency of activities and scores limited the ability of this study to benchmark results and findings. It should be noted that the benchmark analysis represented only one component of this study and that the qualitative comparative analysis that was able to be performed still provided important insights.

ConclusionThe ATMf needs to place a greater focus on effectively engaging its

key stakeholders over time. Greater engagement will only be realized by the ATMf if the index espouses greater levels of objectivity, accountability,


transparency, and collaboration. Simplifying the ATMi measurement framework with a clearer focus on best practices and outcomes would enhance stakeholder understanding. Strengthening the measurement framework in terms of measures, weighting, and focus would improve the accuracy and completeness of findings. Greater transparency would strengthen the credibility of results, while greater disclosure and analytical tools would more effectively inform stakeholders. Finally, additional dis-tinct and complementary measures would enhance the insights on access to essential medicines bottlenecks.

AppendixReaders can refer to appendix items in a previous version of this article

at http://dukespace.lib.duke.edu/dspace/handle/10161/7557.

Caveat / Disclaimer This study is adapted from one delivered to the Access to Medicine

Foundation in May 2013. Please refer to the original full report of this study on the Duke Space website for further detail and depth on the enclosed analysis. The original report was presented to the Open Society Foundations with the author assuming full responsibility for any errors noted. ATMi has recently published its November 2013 Methodology Report. Some points raised in the original report have been focused on in the revised ATMi methodology, though this paper does not analyze the adequacy of the revisions announced.

Disclosure of Potential Conflict of InterestThe author of this report holds 18 shares in Johnson & Johnson and

71 shares in Merck, both purchased prior to 2010 and not traded since.

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County Costs and Funding in North Carolina’s Electronic Recycling Program

Rachel Leven

North Carolina Senate Bill 887, known as the “Amend Electronics Recycling Law,” created a new system of funding for electronic recycling programs in 2010. The state’s Department of Environment and Natural Resources (DENR) and counties expected that the law’s implementation would eliminate or significantly reduce the cost to coun-ties of recycling electronic materials. However, in North Carolina FY 2011–2012 and FY 2012–2013, local counties reportedly spent large amounts of money on their elec-tronic recycling programs. Using survey data from 21 counties in North Carolina, this paper describes the costs experienced by county electronic recycling programs. It also seeks to determine if there are any faults in the funding system. Finally, in the service of other electronic waste recycling programs, this paper analyzes the factors in county demographics and program management that predict high costs. The results suggest adopting cost-management techniques. The paper finds that a large drop in the price of CRTs played an important role in county costs. However, it concludes that local government recycling programs may be able to protect themselves from such market changes by shopping carefully for their recycling vendors, investing in their collection infrastructures, and diversifying their customer and material bases.

BackgroundElectronic waste legislation is growing in the United States. The first

law was enacted less than a decade ago. As of 2013, 25 states, including North Carolina, have laws addressing the management of discarded elec-tronics. Most of these laws, as well as calls for national legislation, place manufacturer responsibility at the center of the legislation. Manufacturer

Sanford Journal of Public Policy, Vol. 5 No. 1 (Winter 2014), 25–45

Rachel Leven has researched, written, and spoken about solid waste management and recy-cling for over a decade. In 2011, she completed a Fulbright research grant on decentralized waste management in India. Rachel holds a Master of Public Policy from Duke University and a Bachelor’s Degree from Tufts University.


responsibility, also known as extended producer responsibility (EPR), is based on the philosophy that the companies who make and sell their equipment should internalize the cost of proper end-of-life management (Wiesmeth and Häckl 2011). Taken to the extreme, manufacturers could be forced to pay for the entire cost of disposal or recycling for every TV they manufacture. They may be able to decrease the costs of recycling and disposal by making design changes to the product or passing on the costs to TV consumers (Organisation for Economic Co-operation and Development 2004).

In 2009, the North Carolina legislature ratified Senate Bill 887 (Session Law 2010-67). Also known as the “Amend Electronics Recycling Law,” S. 887 banishes electronic waste from landfill disposal. It sets up a funding system to ensure that manufacturers of electronics sold in the state put resources into recycling. The law addresses TVs, computers and computer accessories. Electronic recycling requires some infrastructure and operat-ing costs. However, local counties were reportedly spending unexpectedly large amounts of money to build and run their electronic recycling pro-grams in North Carolina during FY 2011–2012 and FY 2012–2013.1

Lessons from the cost experience of counties in North Carolina are valuable to states and communities that are struggling with the rising costs of their own programs as well as states that are currently considering enacting recycling legislation.

North Carolina’s E-Scrap Legislation Chapter 130A of the General Statutes

North Carolina’s Discarded Computer Equipment and Television Management legislation seeks to protect the environment primarily by changing the economics of consumer electronic recycling programs. The statute states that televisions and other discarded consumer products cov-ered by the law (such as computers and computer accessories) “may not contain any valuable products but should nevertheless be recycled to pre-vent the release of toxic substances to the environment. (Chapter 130A §130A-309.130).” In banning electronics from landfills, the law forces

1. Reports are primarily from counties calling the Department of Environment and Natural Resources with requests for more funding, advice, and general complaints about the costs of the program.

North Carolina’s Electronic Recycling Program Rachel Leven 27

consumers and local governments to invest in recycling or re-using elec-tronics, even at a cost. The legislation seeks to establish “a shared responsi-bility among manufacturers, retailers, consumers, and the State (Chapter 130A §130A-309.130).” The law covers computer equipment, such as printers, keyboards, scanners, and TVs, including devices with a broadcast, cable or satellite tuner with a viewable screen larger than nine inches. The law also requires recovery and recycling of products in this category and was accompanied by amendments to General Statutes 130A-309.10, a list of materials banned from landfills. Materials that are not included in the ban are typewriters, servers, Industrial Commercial and Institutional (ICI) devices and systems, professional workstations, mobile telephones, and other standalone portable electronics, such as calculators and tablet devices.

The law lays out specific requirements for computer and television manufacturers. Both computer and television manufacturers are required to register with the state and place a permanent label on the product iden-tifying the manufacturer. Then, computer manufacturers must commit to an in-state recycling program, including a mix of direct recycling of one’s own material, recycling of any brand of electronics and cooperative recy-cling with other manufacturers. The computer manufacturers do not have to meet a minimum target for tons of material recycles. Depending on the type of recycling programs the computer manufacturers sign up for, they are required to pay different registration and annual renewal fees.

Television manufacturers face stricter regulations. In addition to label-ing their products and paying an initial and annual renewal registration fees, they are required to recycle their market share of televisions sold in the previous year. The television manufacturers may arrange for inde-pendent recyclers to cover their market shares (a number determined through national statistics). They are also able to form joint plans with other manufacturers, and materials they recycle may come from a variety of sources including Goodwill, a non-profit that sells items second hand. According to internal sources at the Department of Environment and Natural Resources (DENR), Goodwill is a major contributor of recycled TVs. The inclusion of this requirement in the law may have led county programs to expect that all of their TVs recycling would be paid for by manufacturers seeking to meet their state targets. As this paper will elab-orate, this is not the reality.


The fees paid by computer and TV manufacturers are returned to the state. The law allows DENR to use some of the fee-revenue for its admin-istration costs related to the electronic recycling program.2 The rest of the funds collected are delegated to the Electronic Management Fund. In 2012, DENR’s distribution fund totaled $600,000. This money was distributed based on population to counties that have at least initiated electronic collection and used a certified processor. Manufacturers that annually sell 1,000 items or less are exempt from fees.3

If working as intended the recycling system in North Carolina should flow as follows (see Figure 1):

• Fees are paid to DENR, who then invests these funds in administering and supporting recycling across the state.

• Manufacturers, counties and other actors, such as Goodwill, collect electronic materials from residents and businesses.

• TV manufacturers collect a prescribed minimum of materials through direct take-back programs or, more frequently, pay independent recyclers and middlemen to find and recycle these materials for them.

Observations on E-Scrap Legislation Implementation in North Carolina

There are a number of potential and perceived patterns in the flow of funds and materials through the North Carolina electronic recycling system.4 Cathode Ray Tubes (CRT) are the primary pattern of interest for this paper. CRTs, glass found in old TV screens, are included in North Carolina’s landfill ban. While CRTs can technically be recycled, their market demand is currently low and declining. It is possible that this mar-ket trend was not fully factored into contracts between TV manufacturers

2. The law allows all of the fees paid by television manufacturers and 10 percent of the fees paid by computer manufacturers to go towards the Department of Environment and Natural Resources’s administration costs.3. See http://www.ncleg.net/Sessions/2009/Bills/Senate/HTML/S887v6.html4. This assertion is based on my extensive literature review and conversations with DENR’s division of Environmental Assistance and Customer Service, who over-seas electronic recycling in partnership with the vision of Solid Waste. The extended literature review can be found at http://dukespace.lib.duke.edu/dspace/bitstream/handle/10161/6660/RLeven_MP.pdf ?sequence=1


and recyclers in 2010 and 2011. If this is the case, the additional cost for recycling CRTs will fall to North Carolina counties who are laden with unsellable and non-disposable CRT materials. (For trend studies in CRT supply see Lee, Cooper et al. 2010 and Walker 2009.)

A handful of counties in North Carolina initiated electronic recycling programs prior to the change in law, some as early as 2003, while others are just now implementing their programs. New electronic recycling pro-grams are likely to attract a lot of old TVs containing CRTs (Lee, Cooper et al. 2010). It is also possible, though less likely, that counties receive and send electronics for recycling that are not covered by the legislation and, therefore, are also not covered by manufacturer funds.

Material value is a critical component of any recycling program (Lacoste 2007). If a material has a positive recycling or reuse value, recy-clers will often pay the county or other material generators to acquire this “waste.” The price depends on the material’s quality and quantity. Counties that do not protect their valuable materials, such as computers, and/or col-lect little valuable materials may receive less revenue. Some counties may

Figure 1: North Carolina’s E-Scrap Legislation—Flowchart

This chart is based on the Solid Waste Management Act of 2007 (S.L. 2007-550, SB 1492 Part 2E, Article 9, Chapter 130A of the General Statutes)


have to incur material transportation costs and other expenses typically covered by recycling vendors.

North Carolina is geographically diverse, with its population concen-trated in the middle corridor of the state. The law does not require recy-cling vendors to cover any particular area of the state. Therefore, recyclers are likely to concentrate on certain counties based on geography or mate-rial. Recyclers will provide these counties with free services or even a small profit, while charging other, less profitable, counties.

Although electronic waste is banned across the state, each county is left to implement its electronic recycling program in the way it sees fit. Management practices of counties can affect capital costs as well as the rev-enue potential from electronic material. For example, a county that carefully packages its electronics prior to transferring the materials to a recycler may be offered more money (or be charged less for negative-value materials).

Analytical GoalsAs the amount of electronic materials entering our waste stream con-

tinues to increase, this paper examines the cost and management structures of county electronic recycling programs in North Carolina to determine if there are high costs in the system and how those costs can be managed or avoided in the future. This analysis seeks to address these questions in three parts:

1. Approximately how high are the costs? Are counties’ com-plaints about high costs a long-term concern? Or, are they over-reacting to small unexpected and temporary costs?

2. What (or where) is the disparity in costs occurring? Are there common factors that predict the cost of a program such as the number of cities or wealth of population? Is the volume of CRTs the primary driver of high costs or do identifiable man-agement practices also play an important role?

3. Assuming high costs are pressing concerns, where does the solution reside? Should counties change their management practices? Should DENR’s electronics fund be distributed differently? Should manufacturers be required to contribute more? Are changes to the legislation necessary?


This analysis does not seek to argue whether the electronic waste pro-gram is good or bad. Nor does it aim to value non-monetary benefits and costs. Instead, this paper focuses on analyzing trends in program manage-ment, such as customer base and material processing techniques, as well as budgetary expenses.

MethodologyData sources

The data used in this analysis includes primary information collected through surveys and follow-up interviews with 21 counties. To analyze the survey results and further examine trends across the state, this article draws on annual solid waste reports filed by each county, as well as 2012 reports filed by manufacturers of computers and electronics. This analysis also draws on information collected during meetings with DENR staff, recyclers and county program managers. Correlation is used as a demon-stration of trends. However, tests for significance of correlation were not carried out, as the number of sample counties was too small.

County survey overviewThe survey aimed to build an accurate picture of county financing and

material management. The primary method for analysis is side-by-side comparisons of county programs to recognize unusual costs as well as management, geographical and/or other program characteristics that lead to budget stress.

The survey questions collected as much detail as possible about the revenue costs and management of county electronic waste programs. Specifically, the survey gathered the following information about county electronic recycling programs:

• Budget allocated to the program• Capital costs for building the program• Operating costs for running the program• Revenues and costs from selling or transferring electronic material

to recyclers• Management practices • The quantity and type of material collected


Most counties did not record specific information about the various programs within their budget. Therefore, the accuracy of the survey relied on the careful participation of interviewees.5

AnalysisCounty participants

In late 2012, representatives from solid waste departments in all of North Carolina’s 100 counties received the survey. Twenty-one counties, listed in the table below, returned the survey. Follow-up with counties consisted of phone calls averaging 10 minutes each. The response rate for this survey was higher than expected, considering its voluntary nature.

The first goal in distributing this survey was to collect a diverse list of counties based on predictors of program structure and success (listed in the following table). There is a good representation in the age of county programs. Nine programs started between 2003 and 2005, seven pro-grams started between 2010 and 2011, and five started between 2005 and 2008. The older programs tend to serve larger county populations with high urban density. Thirteen of the participating counties are located in the central region of North Carolina. There are four Western and four Coastal region programs. Eight of the top 10 most populous counties surveyed are located in the central region, reflecting state patterns. Wake and Mecklenburg, which are included in the survey, have the largest pop-ulations in the state and two out of the six oldest electronic recycling pro-grams in the survey. It is possible that some of the answers these counties provided are not representative of the state as a whole. However, given the newness of this field, exploring the factors that lead to high or low costs in these counties can provide a base for other counties and states to begin examining their own programs.

Trends in materials receivedPopulation

The more populous a county, the more material the county’s pro-grams receive. Figure 3 below confirms that tons of TVs collected is closely related to population. Figure 4 shows there is a similar relation-ship between urban density and TV tons (Wake and Mecklenburg were removed for scale in both figures).

5. For the full survey see http://bit.ly/17nbuV5 (Appendix B)


Figure 2: Sample Counties

County Region% of State Population

Population Density

(Persons/sq mile, 2010)

First Year Electronics

Program appears in

State Record

Sector Served by Recycling Program

Alamance Central 1.59% 356.5 2010 Residential

Guilford Central 2.29% 418.8 2005 Residential

Lee Central 0.61% 227.0 2003 Residential

Mecklenburg Central 9.78% 1,755.5 2003 Residential; Commercial

Moore Central 0.93% 126.5 2010 Residential

Nash Central 1.01% 177.3 2007 Residential

Northampton Central 0.23% 41.2 2010 n/a

Orange Central 1.41% 336.2 2003 Residential; Commercial

Stokes Central 0.49% 105.6 2011 Residential; Commercial

Vance Central 0.47% 179.2 2011 Residential

Wake Central 8.03% 969.4 2003Residential;

Commercial; Industrial

Gaston Central/North 2.14% 578.8 2003 Residential;

Commercial

Madison Central/North 0.22% 46.2 2003 Residential

Brunswick Coastal 1.14% 126.8 2005 Residential; Commercial

Carteret Coastal 0.70% 131.3 2007 Residential

Chowan Coastal 0.15% 85.8 2007 Residential; Commercial

Currituck Coastal 0.25% 89.9 2010 Residential

Burke Western 0.94% 179.3 2011 Residential; Commercial

Rutherford Western 0.70% 120.2 2006 Residential

Transylvania Western 0.34% 87.4 2005 Residential; Commercial

Watauga Western 0.53% 163.4 2008 Residential

Population data from http://quickfacts.census.gov


Figure 5 shows that the relationship between county population and the portion of TVs in a recycling program is weak, indicating that population may be a reasonable metric to distribute state funds. Survey respondents reported the percentage of TVs, computers and computer equipment, as well as other electronic materials present in their recycling programs.

Figure 3: Tons of TVs vs Population

Figure 4: Tons of TVs and Population Density


Program ageThere was little association between the start date of a program and the

number of TVs and other materials collected as a percent of all electronic materials. The analysis relied on self-reported information from the survey and divided counties by age of program as seen and detailed in Figure 6 below.

According to the survey respondents, older programs receive only slightly fewer TVs as a percentage of all electronic materials. While the number of CRTs is on a downward trend overall, there appears to be a spike in CRTs after a number of years and a high leveling point. It is a common belief that as flat screens replace old TVs, public programs will receive fewer CRTs. However, it appears that this trend is slow. Counties should plan to receive CRTs for a decade or more, rather than hoping to wait out the tide for a few years.

Figure 6: Age and Material

Program Start Date TVs (%) CE (%) Other (%) CRTs (%)Number of Programs

Old Programs(existed in 2003) 60 29 12 78 6

Middle-Age Programs(started between 2005–08) 63 24 13 83 8

New Programs(started between 2010–11) 63 29 10 77 7

Figure 5: TVs as a % of All Materials in Electronic Recycling Program vs Population


County resident incomeThe average income of a county’s population appeared to be a stronger

predictor of the type of material counties received than either popula-tion or program age. Although causality and statistical significance is not tested in this study, Figure 8 demonstrates that per capita income in the past 12 months is more highly correlated with the percent of CRTs and TVs than are any of the other variables mentioned above.6 When the three counties that reported 50 percent or fewer CRTs are removed, the trends between county income and material become stronger.

Wake and Guilford counties are not included in the income correla-tion. Wake and Guilford do not manage the solid waste programs in the town of Cary (Wake) and the town of Greensboro (Guilford). Since these districts cannot be removed from the measure of county income, it is inac-curate to use county income data for Wake and Guilford. When Wake and Guilford are removed from the other measures in Figure 7, the values of correlation coefficients generally decrease. One exception is that the correlation between population metrics and CRTs received increases to 0.22 for population and 0.15 for population density as noted in brackets.

Interestingly, the correlation for CRTs versus non-CRTs is positive, indicating that higher income counties receive more CRTs as a percent of all TV material. However, given the narrow margins (most points fall between 70 and 100 percent) in which this portion is considered, the trend is not informative for practical purposes. Figure 8 below shows this narrow

6. Per capita money income in the past 12 months (2011 dollars), 2007-2011 accord-ing to US Census Bureau, American Community Survey, 5-Year Estimates. http://quickfacts.census.gov/qfd/states/37000.html

Figure 7: Correlations of Wealth with Material Composite

CRTs as a

Portion of TVsTVs as a

Portion of All Material

County Income 0.38 -0.37

Population % 0.15 (0.22) -0.16

Population Density 0.13 (0.15) -0.13

Program Age -0.15 0.08

Parentheses indicate correlation with Wake and Guilford counties removed.


trend line. In contrast, Figure 9 shows a stronger relationship between income and TVs as a percent of all material. The lower income counties tend to collect a higher portion of TVs in their programs.

Customer baseWhile customer base, the population providing material, and the per-

cent of TVs, computers and other materials are not related in any mean-ingful way, there is a large correlation (-0.46) between the portion of CRTs a program received and its customer base. This indicates that counties will not be able to increase the number of computers they receive by expanding

Figure 8: CRT-TVs and County Wealth

Figure 9: TVs and County Wealth


their collection to commercial businesses. However, counties may be able to decrease the percent of CRTs they receive. As Figure 10 demonstrates, with each additional customer added, the portion of CRTs (as percent of all TVs) tended to decrease. Those counties that received material from residents, non-profits, government, and businesses on average received 26 percent fewer CRTs (as a portion of all TVs) than counties that collected material only from residents or residents and non-profits/government.

This type of analysis is possible because counties follow a similar pat-tern in their customer base. All counties receive materials from residents. Some counties receive materials from non-profits or local government. Following that, all counties with three customers receive materials from residents and non-profits as well as local government or commercial businesses.

As noted in Figure 10, adding one customer category increases the portion of CRTs when the customer is local government or non-profits. When businesses, residents and non-profits are added, the proportion of CRTs drops. When counties serve all four of these customers, the propor-tion of CRTs decreases by more than 12 percent. Finally, when schools are included as a fifth customer, the proportion of CRTs increases once again. In fact, those counties that received material from schools, in addition to all other customers, had 13 percent more CRTs than those counties that received material from only three sources and no schools.

Figure 10: CRT-TVs and Customers

Collected: +0 +1 +2 +3 +4

Only Residents

Residents & Non-Profits

or Local Government

Residents & Non-Profits & Government or Business

Residents & Non-Profits & Government*

& Business

Residents & Non-Profits & Government & Business &

Schools

% CRTs 92% 97% 82% 69% 77%

Number of Counties 2 3 3 6 7

*One of the counties collected from schools instead of government. Without this county, % CRT is 64.


While not conclusive, this trend leads to a hypothesis that the portion of CRTs drops the most when businesses are served, followed by govern-ment. It is more difficult to make a statement about non-profits given the division of the customers. However, it is clear that counties serving schools are likely to have a higher portion of CRTs. It is relevant to note that county per capita income, as measured above, is also highly correlated with the customer base (-0.41). This means that the wealthier a county is, the fewer customers it tends to serve. This observation might play a role in the positive correlation between CRTs and county income mentioned previously.

Trends in vendor relationshipsIn FY 2011–2012, county-vendor pricing and contracts went through

a great deal of changes. Most of the counties surveyed experienced a change in contract pricing during the year. All but one change involved an increase in the charges and/or a decrease of services provided by the recycler.7 Prior to 2012, many counties received free pick-up and equip-ment from recyclers. Common “fee” increases consisted of charges for such previously free services.

However, only five out of the 14 counties that experienced price changes also changed their vendors. All nine of the counties that did not change vendors accepted a price increase and many of those nine noted in the survey that they were hoping to change vendors soon. Three counties that changed or shopped for vendors (tried a new company but returned to the original vendor) also experienced cost increases in their programs. While counties should be changing to cheaper processors, many were locked into contracts or unable to find acceptable options available on

7. The exception was a county whose costs decreased for that year.

Figure 11: Changes in Vendor Pricing FY 2011–2012

7 33% 11

79%

3 21%

14 67%


the market within the FY 2011–2012. Two counties reported that they are currently searching for new options and one county changed vendors during FY 2012–2013. It should be noted that a county’s ability to switch to a more affordable certified vendor will be hampered by a worsening CRT market that affects all processors. The best that a county can hope or plan for is to find a vendor that has support from TV manufacturers to subsidize costs as part of their market share recycling obligations.

Out of a total of eight recyclers serving the 21 counties, Synergy, Creative Recycling Systems, and E-Cycle Secure captured 76 percent of all contracts (formal and informal) in the survey. All of Synergy’s custom-ers experienced a fee increase. Synergy did not receive any manufacturer funding, so it is reasonable to expect that it would increase its fees.

Creative and E-Cycle Secure customers also experienced price increases. However, unlike Synergy, both Creative and E-Cycle Secure received the majority of TV manufacturer funding (by pounds recycled). This indicates that these companies were recycling more TVs overall than covered by their agreements with manufacturers, or that the companies charged manufacturers too little for recycling. There is no law that restricts recyclers from charging counties an additional amount over the manufac-turer’s price. Recyclers should not charge counties in a competitive market. However, the recyclers may charge the county if the recycler’s costs are not fully covered by manufacturer funds or if the market is not competitive. (For example, a county may have limited knowledge or access to recyclers.) Both of these forces are likely at work in North Carolina.

In FY 2011–2012, TV manufacturers under-purchased recycling ton-nage and were likely charged less than they should have been by recyclers.8 It is likely that this situation produced a temporary shortage of funded recycling and limited county options. However, even if manufacturer funding reaches the correct levels, survey responses show that counties are not able to jump quickly from one recycler to another, even when they experience price increases. If counties are unable to connect with the recyclers who receive manufacturer money, they will not be able to use competition to their advantage.

8. Sourced from Internal DENR reporting.


County costs Costs summary

The survey asked county recycling program managers about their pro-grams’ costs, including fixed costs such as staff wages and time spent work-ing on electronics. Counties often do not break out the actual distribution of fixed costs by recycling or solid waste programs. For this reason, the data collected by the survey should be taken as a rough reflection, rather than an absolute picture, of a county’s budget.

As seen in Figure 12, there was a wide range of costs, with one county spending as little as $1 per ton on their electronic recycling and another spending as much as $344. Since staff costs tended to be the least reliable and the highest cost point during survey follow-ups, these costs are not included in the analysis of net costs and revenue. Two counties reported charging residents a drop-off fee for electronics. This occurrence was not included in their revenue as revenue was defined as money entering in from outside the county.

Capital costs tended to be very low. Of the four counties that reported no capital costs, two programs reported a history of full-service provi-sion, including pick-up and loading from the vendor. Another county reported repurposing old equipment at no cost. And, finally, one program had already surpassed the timeframe for straight-line depreciation. The two counties reporting free, full-service contracts with their vendors also reported $0 in operational costs.

In fact, many counties were able to avoid investing heavily in capital and operational costs prior to FY 2012–2013 because their recycling ven-dors provided these services free of charge. In FY 2011–2012, all counties received a minimum of pick-up service from their recycling vendors. Most

Figure 12: Cost per Ton—Summary

Capital Operational Staff OutreachTotal Cost

Vendor Revenue

**State

Revenue

Net Revenue No Staff

Non-zero Min* $(0.17) $(0.10) $(11) $(0.47) $(1) $3 $22 $(365)

Max $(43) $(305) $(1,286) $(10) $(344) $50 $155 $116

Average $(11) $(41) $(223) $(2) $(54) $22 $54 $(24)

Parentheses indicate costs; revenues are provided without parentheses. *All costs and revenues start at zero; average includes zero. **Only four counties received vendor revenues.


counties also received basic supplies such as shrink-wrap and pallets. Only three out of the 21 counties did not report receiving supplies from their vendors. Meanwhile, only four counties actually incurred vendor charges during the fiscal year. A common complaint from counties was that ven-dors were no longer providing basic services such as transportation, sup-plies and loading free of charge in FY 2012–2013. It seems that vendors used these services as a platform to charge counties on a per pound basis for TVs. It is important to note that when vendors added fees for some material in FY 2012–2013 they generally also started offering revenue. However, since most counties have a majority of TVs and CRTs in their systems, these revenues are not making a large impact.

Only four counties received revenue from their vendors, at an average of $22 per ton. However, all but one county in the survey received state electronic funds and many reported spending only a small portion of the funds in FY 2011–2012. For those that saved their FY 2011–2012 fund-ing, this money proved to be extremely valuable in FY 2012–2013, as they were able to use these funds to pay the new vendor fees. In the table above, the tendency of counties to save state funds led many counties to have net revenue for FY 2011–2012. (Twelve of the 21 counties experienced net revenue in their programs when staff costs were not included.)

Cost and vendor relationsIt is clear that counties incurred higher costs in FY 2012–2013 than

in FY 2011–2012. However, it seems important that counties consider these costs in terms of the investments they have made in their programs. Three of the five counties (Brunswick, Orange, and Wake) that made the largest absolute investments in capital costs also received vendor revenue at an average of $0.85 for every dollar spent in capital. These counties all began their electronic recycling programs before 2006; however, the age of programs does not appear to be a good predictor of per ton capital investment.

Counties reporting no changes in their vendor relationships also tended to have a higher cost per ton in FY 2011–2012. Even if we remove the four counties that received revenue from vendors, the five remaining counties that did not experience a price change spent an average of $90 per ton without staff costs. On the other hand, the 12 counties that expe-rienced an increase in vendor fees show an average of $11 per ton in net


revenue derived from state funds. These observations indicate that money invested in an electronic program at present might put counties in a better position to negotiate with their vendor in the future.

Further Observations on Management PracticesAbout half the respondents reported that non-county electronic recy-

cling programs were operating in their counties. The majority of those counties also provide residents with information about these private col-lection opportunities. This does not seem to predict the type of material that the counties receive or the cost of the program.

Twelve counties also report receiving scavenged material in their elec-tronics programs. Those counties with scavenged material were 19 percent more likely to experience a change in prices from their vendors between FY 2011–2012 and FY 2012–2013. In addition, one quarter of these counties have faced penalization by their vendors specifically for supply-ing poor quality materials.

ConclusionAnalyzing trends in material receipt and vendor relationship alongside

cost data brings to light a number of important trends. First, it is clear that counties are experiencing unanticipated costs in the form of vendor per pound per material fees. These costs are justified by vendors in part through charges for previously free services and as a reaction to the high cost of recycling CRTs. However, the level of capital investment counties made in their electronic programs prior to FY 2012–2013 appears to have affected their vendor relationships. Counties that use their own labor and equipment might expect better relationships with their vendors in future.

If more money is funneled into the system by TV manufacturer pur-chases, costs to counties may decline. However, it is unlikely that counties will be able to return to the cost-free scenario experienced prior to 2012. Counties can make sure they are getting the best deal possible by shop-ping for more vendors and noting where else vendors may be collecting material, as well as how much manufacturer funding they have received. Given that many counties in the survey were not using a vendor with backing from a manufacturer, North Carolina and states with similar pro-grams should make sure that a marketplace for purchased TV tonnage is available and county programs have easy access.


Unlike in FY 2011–2012, material type will be a critical component to county costs in FY 2012–2013 and will likely remain so. Strategies that counties can use to increase and secure the quality of material include increasing the number of customers served while staying aware of the potential for CRTs to increase with the adoption of schools as customers. Counties can also invest in infrastructure and outreach to minimize the receipt of scavenged material.

CRTs will continue to be expensive to recycle, and it is likely that they will remain in the system for many years to come. The law does not force recyclers to take into account the full cost of recycling in their contracts with manufacturers. Once recyclers are locked into contracts for a certain amount of tonnage they will either have to bear those costs themselves or look for other sources of income. Broken down into a simple example, a recycler may enter a pre-contract with a manufacturer, agreeing to process one TV for $1. If a TV actually costs $2 to process, the recycler can turn around and charge a county another $1 or more for processing. If there is low competition in the recycling market, counties lacking a competitive edge in their material and vendor relationships will continue to pay fees.

Finally, while population appears to be a fair metric for distributing funds, DENR should examine the role that the county’s overall wealth (measured by income per capita) plays in the type of material received. If county wealth and TV output are positively correlated, there may be other funding mechanisms or vendor matching that can be put in place to assist vulnerable programs.

As the US embraces electronic waste regulation and the concept of extended producer responsibility, market structure and material trends should be a critical consideration of any legislation. Casual observers, and even waste and recycling practitioners, tend to see dollar signs in any kind of electronic material. However, the diversity and quantity of products available and the speed of changes in product design can lead to instability in the recycling market, as was the case for CRTs throughout this study. Local recycling programs that invest in building infrastructure, as well as building up the source of their incoming material, should be prepared when a market spike occurs again.


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Sanford Journal of Public Policy - Volume 5 No. 1

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