Transcript Industry Compliance Costs

Evolution of Science to
Policy: Applications in
Food and Nutrition
Helen H. Jensen, Professor of Economics
Center for Agricultural and Rural Development
Iowa State University
[email protected]
http://www.card.iastate.edu/
November 2012
Learning Outcomes
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Context of science and policy decisions
Making Sense of Science in Policy and
Politics
Case examples: fortification and food safety
The role of economics in evaluation
Changes in consumer market
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Declining share of expenditures on food

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Increase in marketing share of food expenditures

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Marketing bill now 79% of food expenditures
Increasing value of time and demand for convenience in
foods
Increase in demand for nutrition, food quality and food
safety

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U.S. consumers spend on average $0.11 of each $1 of income
on food
Proposed legislation for warning labels on products
Similar trends throughout the world (developed and
developing countries)
Prevalence* of Self-Reported Obesity Among U.S. Adults
BRFSS, 2011
*Prevalence reflects BRFSS methodological changes in 2011, and these estimates should not be compared to
previous years.
15%–<20%
20%–<25%
25%–<30%
30%–<35%
≥35%
New Scientific Findings – the
Science Context

Dietary Guidelines for Americans 2010

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Dietary Reference Intakes (DRIs), Institute of Medicine

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Food Plate
2000 – present
IOM Committee on sodium
IOM review of vitamin D and calcium
Food Safety

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Technologies – irradiation, packaging
Production – organic vs. conventional practices
Food handling and distribution practices
Science, Policy and Politics

The obesity “epidemic”

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While rates for many diseases are decreasing,
increased rates of obesity and overweight
Food vs supplements and fortification
Production methods (e.g., Michael Pollan)
Food safety outbreaks

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Peanuts and salmonella, 2009, 2012
E-coli and spinach, 2006
E-coli and salmonella contamination of meats
Making Sense of Science in
Policy and Politics
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The “Pure Scientist”
The “Science Arbitrator”
The “Issue Advocate”
The “Honest Broker of Policy Alternatives”
Ref. The Honest Broker: Making Sense of Science
in Policy and Politics, R. Pielke, Jr. 2007
Making Sense of Science in
Policy and Politics


The scientific
application is not
independent of policy
and politics
Based on behavioral
and communications
sciences
Science, Policy and Politics
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Science: the systematic pursuit of knowledge
Policy: a decision
Politics: bargaining and negotiation
Conditions for science offering “objective”
knowledge

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Decision maker narrows choices
Low rate of uncertainty
Policy Decisions and Market
Influence Science

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Who conducts research?
What resources are available?
Who has rights to the results?

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Market influence on scientific development

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Patent protection, publication policy
R&D, innovation, orphan drugs
Induced policy innovation

ref. Hayami and Ruttan
Case Example:
Fortification with Folic Acid

Health problem:

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Spina bifida and anencephaly are birth defects
related to neural tube closure
Affected children die shortly after birth
(anencephaly) and have permanent neurological
deficits (spina bifida)
Scientific evidence:

Folic acid supplementation lowers risk of neural
tube defects ( NTD) (reduce cases by 50-75%)
Case example:
Fortification with Folic Acid


1992 US recommends all women of
childbearing age consume folic acid
supplements
Consider fortification in the US



To reach more women of child bearing age
Evidence: 50% of live births are unplanned
1996 Folic acid fortification mandated

FDA required manufacturers to fortify enriched
ceral-grain products with 140 ug of folic acid per
100 g cereal product
Ex ante: Folic Acid Fortification
Study
NTD
Cases
Averted
Cases
Neuro.
Damage
Benefit
NTD Pre
$ million
Fortific.
Costs
$ million
Adverse Net
Health
Benefit
Costs ($) $ million
FDA
116
(4.6%)
0
651-786
27
NA
624-759
California 304
(1991)
(10.5%)
500
121.5
11.5
16.4m
93.6
CDC
(1993)
89
16.1
11
350,000
4.7
89
(2.3%)
Source: Grosse, Waltzman, Romano, Mulinare, Am J Pub Health, 2005
Ex post: Folic Acid Fortification
NTD
No. NTDs Total
Averted
Cost/NTD
Birth
(Direct), $
Total
Benefit,
$
million
Spina
bifida
520
636,000
(279,000)
331
145
Anencephaly
92
1,020,000
(6000)
94
1
Both
612
425
Net
Benefit
(minus $3
mil cost)
$422 mil
Total
Direct
Cost, $
million
146
Cost
Savings
(minus $3
mil cost)
$143 m
Source: Grosse, Waltzman, Romano, Mulinare, Am J Pub Health, 2005
Ex post: Folic Acid Fortification


Surveillance: Reduction in NTD 20-30%
Reasons for the large decrease:

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Higher folic acid intake
Larger dose response
No evidence of harm (effect on B12 deficiency)
Higher benefit cost ratio, cost effectiveness
The Debate: UK Fortification


Should Folic Acid Fortification be Mandatory?
YES

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Delay not justified
Voluntary efforts inadequate
Evidence supports
NO
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Evidence not strong, weigh other risks
Folate in foods may differ from fortification
Level of exposure important (low vs. high)
The Debate: Fortification

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Risk analysis: the “precautionary principle”
Approach 1. The “selective approach”

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No fortification unless a documented need
Iodine in salt; iron for targeted population
Approach 2. The Non-selective approach”
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Food manufacturers -- voluntary
Science, Policy and Politics
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Cost benefit analysis
Cost effectiveness analysis
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Analysis and assumptions

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Disability adjusted life years (DALY)
Effectiveness and efficacy
Cost
Vehicle and exposure
Related behaviors
Consumer choice
Science, Policy and Politics:
Food Safety

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Improved science (+)
Changes in production practices, distribution (+,-)
Increased trade and imports (-)
Tracing food safety problems (+)
Public Regulation
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US Dept of Agriculture: meats and poultry
US Food and Drug Administration: seafood, eggs, imports,
processed, drugs, supplements, fresh fruits & vegetables
Environmental Protection Agency (drinking water, pesticides, toxic
substances)
State and local health authorities
Food Safety in the US

Estimated 76 million cases of foodborne
illness in the US

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Only about 20% are attributed to specific food
Meats: Improvements since mid 1990s
Seafood
Produce: New problems in raw produce
Imports
Food Marketing Institute
Trends Survey 2009
Slide from Gale Price
Consumer Confidence in Food Safety
Somewhat & Completely Confident
85%
82%
83%
81%
66%
65%
68%
43%
2005
2006
2007
Grocery Stores
Source: U.S. Grocery Shopper Trends 2009
2008
2009
Restaurants
Slide from Gale Price
Food Is as Safe or
Safer
Than Five Years Ago
Food Is Less Safe
Than Five Years Ago
Completely
Somewhat
Somewhat
Disagree
Disagree
Disagree
Completely
8%
15%
Agree
23%
10%
41%
Completely
Disagree
10% Completely
Agree
10%
18%
27%
39%
Neutral
Somewhat
Agree
Source: U.S. Grocery Shopper Trends 2009
Somewhat
Agree
Neutral
Slide from Gale Price
Health Risks Perceived as “Serious”
53%
Confirmation by bacteria or germs
47%
BSE (Mad Cow Disease)
45%
Product tampering
43%
Pesticide and herbicide residues
41%
Terrorist tampering
39%
Avian influenza
36%
Antibiotics and hormones used on poultry or livestock
25%
Foods produced by biotechnology and GMOs
22%
Irradiated foods
21%
Food handling in supermarkets
Eating food past the Use-by date
19%
Additives and preservatives
19%
Eating food past the Sell-by date
Eating food past the Best-by date
17%
13%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55%
Source: U.S. Grocery Shopper Trends 2009
Slide from Gale Price
Shoppers’ Comfort Level with Foods
Grown/ Produced In and Outside the United
States
63%
Food grown/produced in the U.S. 2009
Food grown/produced outside the U.S. 2009
40%
37%
27%
18%
9%
5%
Very Comfortable
2%
Somewhat
Comfortable
Source: U.S. Grocery Shopper Trends 2009
Not Too
Comfortable
Not at All
Comfortable
Slide from Gale Price
Questions…
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Does economics play a key role in the
implementation of proper food safety and
sanitation practices in the food industry?
How much food safety is “enough”?


Public policy and public health
Private industry
What would a market for food
safety look like?
Price
Supply
Demand
Quantity – food safety
Food Safety has Value

To individuals
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To society
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avoidance of suffering
risk reduction
greater for those at higher risk
health care costs
loss of productivity
Key question:
How much are consumers (or is society)
willing to pay for safer food?
What is the cost of a “food
safe” hamburger?

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Would you be willing to pay double the price
for a completely safe hamburger? (100% tax)
How about 20%?
What is the producer obligation?
Should there be a “law” that requires
producers to produce a safe burger?
Should there be a choice?

Raw oysters? Fresh cider?
Market Failure

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Neither producers nor consumers may know
if the product is safe
Costly to measure, test
Contamination or control can take place
throughout food chain
Food Safety Policy
Government is involved because markets “fail”
to allocate food safety (get the “right” amount)
New approaches 

Shared responsibility for food safety throughout
food chain by government, industry and
consumers
Development and implementation of risk-based
approaches to regulation
Recent legislation – risk based
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Food Quality Protection Act (1996)
Seafood HACCP regulation for all seafood
processors (1997)
Pathogen reduction/HACCP for meat
implemented 1998 and fully implemented
2000 (1996)
Fruits and vegetables juice HACCP (1998)
Egg safety Action Plan (2000);
implementation of final rule (2010)
FDA Food Safety Modernization
Act, Jan (2011)

Preventive controls

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Move from response to outbreaks to system designed to prevent outbreaks.
Requires food facilities to evaluate, implement, monitor hazards
FDA to establish science-based standards for safe production and harvest of
fruits & vegetables
New ability to hold companies accountable
Inspection and Compliance – risk-based system
Imported Food Safety – system enhanced
Response – provides FDA with mandatory
recall authority
Enhanced Partnerships
FDA shuts down New Mexico
peanut butter plant – Nov 2012
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Outbreak: 41 people ill in 20 states
Traced to peanut butter from NM plant and
sold through Trader Joe’s
Use 2011 FDA authority to halt operations:
“suspend registration” because of reasonable
probability of causing serious health problems
FDA will require implementation of preventive
measures before allowing plant to ship
Agency has found unclean equipment,
improper handling, uncovered trailers, etc.
Economic Analysis of Regulations
for Health and Safety


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Compare benefits of regulation to costs
Measure the reduction in the level of risk
of illness and death for large populations
(i.e. benefits) to the costs
Note, the benefits are not the value to an
individual
Estimated Benefits and Costs
of HACCP Rule
Benefit Scenario
Benefits
Low
High
Low
Costs
High
Billion dollars (1995)
Preliminary FSIS 1995 proposal
Low-range benefits estimates
Mid-range benefits estimates I
High-range benefits estimates
Source: USDA Economic Research Service
8.4
1.9
4.7
47.2
42.1
9.3
23.4
171.8
2.32
1.1
1.1
1.1
2.3
1.3
1.3
1.3
Responsibility for Making Sure
Food Is Safe
55% 55%
32% 33%
32%
28%
22%
25%
12%
7% 8%
8%
Myself as
Food
Government
an individual processors Institutions
2008
Source: U.S. Grocery Shopper Trends 2009
Food
stores
Consumer
groups
Farmers
2009
Slide from Gale Price
Where Do You Think Food Safety
Problems Are Most Likely to Occur?
2005
%
2006
%
2007
%
2008 2009
%
%
At food processing plants
30
32
45
53
57
While stored in a warehouse
awaiting distribution
11
10
9
9
9
At restaurants
20
18
11
9
8
1
1
6
5
5
18
16
9
5
4
In grocery stores
5
9
3
4
3
During transportation
5
4
3
3
3
On the farm
At home
Source: U.S. Grocery Shopper Trends 2009
Slide from Gale Price
Regulatory Approaches for
Least Cost Compliance

Legal liability

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Other incentives based approaches


allow firms flexibility in compliance
Process standards

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shift risky activity to where returns are highest
Performance standards

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forces investment but limited incentives if costs of
identification are high
specify particular ways to reduce risk
Nature of risk determines what is feasible
Peanut Butter 2009
Source: CDC 030609
Slide from Gale Price
Peanut Butter 2009
Source: CDC 030609
Slide from Gale Price
PCA Peanut Product Related Recalls
Jan 10 – Mar 31, 2009
Other Food Companies Recalls
40
PCA Expands Recall
30
State of TX Orders Recall
PCA Recall
20
MN HD
10
0
10Jan
17Jan
24Jan
31Jan
7Feb
14Feb
21Feb
28Feb
7Mar
14Mar
21Mar
Recalls
~ 500 Recalls Involving > 3,900 Products as of 3/31, 9 Deaths
Slide from Gale Price
28Mar
Role for Scientists in Policy

1.
How do scientists relate their work to needs
of decision makers?
Is the decision context characterized by
consensus on values and low uncertainty?
Role for science advisor or pure scientist
2.
Is there concern about consensus on values
and high uncertainty?
Need to narrow scope of choice
Role for Honest broker or issue advocate