Transcript Health Economics (and Antimicrobial Resistance) Richard Smith Reader in Health Economics School of Medicine, Health Policy and Practice University of East Anglia School of Medicine, Health.

Health Economics
(and Antimicrobial Resistance)
Richard Smith
Reader in Health Economics
School of Medicine, Health Policy and Practice
University of East Anglia
School of Medicine, Health Policy & Practice, University of East Anglia
Economics is about …

Limited resources

Unlimited “wants”

Choosing between
which ‘wants’ we can
‘afford’ given our
resource ‘budget’
School of Medicine, Health Policy & Practice, University of East Anglia
Economics is about choice
Good ‘B’
Good ‘A’
Budget
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Opportunity cost
“The value of forgone benefit which could
be obtained from a resource in its nextbest alternative use.”
School of Medicine, Health Policy & Practice, University of East Anglia
Implications of opportunity cost

Deciding to do A implies deciding not to
do B (i.e. value of benefits from A>B).

Cost can be incurred without financial
expenditure.

Value not necessarily determined by “the
market”.
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Economists view of the world...

Pessimist: bottle ½ empty

Optimist:

Economist: bottle ½ wasted
bottle ½ full
inefficient!
School of Medicine, Health Policy & Practice, University of East Anglia
Efficiency

Efficiency
=
maximising benefit for
resources used

Technical
Efficiency
=
meeting a given objective
at least cost

Allocative
Efficiency
=
producing the pattern of
output that best satisfies
the pattern of “consumer
wants”
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Topic versus discipline
Topic
=
area of study
Discipline
=
conceptual apparatus
Health economics is the discipline of
economics applied to the topic of health.
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Task of economics
Descriptive
=
quantification
Predictive
=
identify impact of
change
Evaluative
=
relative preference
over situations
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Health economics ‘map’
H. Micro-Economic Appraisal
B. What influences
Health? (other than
health care)
C. Demand for
Health Care
E. Market Analysis
A. What is Health?
What is it’s value?
D. Supply of
Health Care
G. Planning, budgeting,
regulation mechanisms
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F. MacroEconomic
Appraisal
Antimicrobial resistance (AMR)



AMR occurs where a micro-organism previously
sensitive to an antimicrobial therapy develops
resistance to its effect, rendering it ineffective
It is associated with antimicrobial usage (over &
under use) and the interaction of microorganisms, people and the environment
It is potentially irreversible once developed:
 some resistances are linked (therefore reduction in all
associated antimicrobials is necessary)
 the resistance mechanism/gene encoding may provide
an unrelated selective advantage to the organism
 the 'genetic cost' to the organism of maintaining AMR
in the absence of selection pressure may be minimal
School of Medicine, Health Policy & Practice, University of East Anglia
Importance of AMR



“Despite the multifactorial nature of antibiotic
resistance the central issue remains quite simple:
the more you use it, the faster you lose it” (The
Lancet, 15/4/95)
“We may look back at the antibiotic era as just a
passing phase in the history of medicine, an era
when a great natural resource was squandered,
and the bugs proved smarter than the scientists”
(Cannon, 1995)
“We are further away from mastering infectious
diseases than we were 25 years ago” The Times,
4/4/95
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Importance of AMR
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Application of economics to AMR
Economic conceptualisation of AMR
 Cost of resistance - country, hospital,
disease
 Micro-economic evaluation of strategies
to contain AMR
 Macro-economic evaluation of impact of
AMR and strategies to contain AMR

School of Medicine, Health Policy & Practice, University of East Anglia
Economic conceptualisation of AMR
Externality
= Effect on those other than
the immediate consumer (crosssectional & temporal ext.)
Resistance
= Negative externality (i.e. cost)
associated with consumption
of antimicrobials now
Implication
= Sub-optimal (over) consumption
of antimicrobials
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Equilibrium with a negative
externality
Price/
Cost
Quantity
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Equilibrium with a negative
externality
Price/
Cost
S (MPC)
D (MPB/MSB)
Quantity
School of Medicine, Health Policy & Practice, University of East Anglia
Equilibrium with a negative
externality
Price/
Cost
S (MPC)
Equilibrium
Price PA
A
D (MPB/MSB)
QA
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Quantity
Equilibrium with a negative
externality
Price/
Cost
MSC
S (MPC)
Equilibrium
Price PA
A
D (MPB/MSB)
QA
School of Medicine, Health Policy & Practice, University of East Anglia
Quantity
Equilibrium with a negative
externality
Price/
Cost
MSC
B
S (MPC)
A
Equilibrium
Price PA
D (MPB/MSB)
QB
QA
School of Medicine, Health Policy & Practice, University of East Anglia
Quantity
Equilibrium with a negative
externality
Price/
Cost
MSC
B
S (MPC)
A
Equilibrium
Price PA
D (MPB/MSB)
QB
QA
Quantity
Equilibrium Output
School of Medicine, Health Policy & Practice, University of East Anglia
Equilibrium with a negative
externality
Price/
Cost
MSC
B
S (MPC)
A
Equilibrium
Price PA
D (MPB/MSB)
QB
QA
Quantity
SchoolEfficient
of Medicine, Health
Policy & Practice, Equilibrium
University of East AngliaOutput
Economically
Output
A difficult balance
The best interests
of the individual
Society’s need
for sustainable
antimicrobial use
School of Medicine, Health Policy & Practice, University of East Anglia
Form of negative externality
ERt = f(At, Xit)
ERt = extent of externality (AMR) in time t
At = quantity of AMs consumed in time t
Xit
= vector of exogenous factors
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Form of positive externality
EPt = f(At, ERt, Xit,)
EPt = externality associated with reduced
transmission of disease during time t
At = quantity of AMs used in time t
ERt = extent of externality (AMR) in time t
Xit = vector of exogenous factors
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Optimisation of AM use
NBAt = f(Bt, Ct, St, Dt, EPt, ERt, At, Xit)
NBAt = net benefit from AMs used in time t
Bt
= direct benefit to patient of AM
Ct
= drug (+ administration) cost
St
= cost associated with side-effects
Dt
= represents difficulties in diagnosis
(EPt, ERt, At, Xit as before*)
*EPt = externality associated with reduced transmission during time t; At = quantity of AMs used in
time t; ERt = extent of externality (AMR) in time t; Xit = vector of exogenous factors
School of Medicine, Health Policy & Practice, University of East Anglia
Implications of AMR as externality
NOT eradication, but containment of AMR
 Importance of optimisation over time - use
(and benefit from) AMs now and in future
 Importance of assessing costs and benefits
of AM use and strategies to contain AMR

School of Medicine, Health Policy & Practice, University of East Anglia
Cost of AMR
Additional investigations
 Additional treatments
 Longer hospital stay
 Longer time off work
 Reduced quality of life
 Greater likelihood of death
 Impact on wider society (health and
economic)

School of Medicine, Health Policy & Practice, University of East Anglia
Cost of AMR

By country (e.g. USA)
 $4-7bn pa to medical care sector (American Soc. for
Microbiology, 1995; John & Fishman, 1997)

By institution (e.g. hospital)
 ~£500,000 to contain 5 week outbreak of MRSA in
general hospital (Cox et al, 1995)

By disease (e.g. Tuberculosis)
 Double cost of standard treatment ($13,000-$30,000)
(Wilton et al, 2001)
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Micro-economic evaluation of
strategies to contain AMR

Systematic review of
strategies (GFHR/
WHO)

Specific economic
policies (WHO, CMH,
UNDP, CIDA/Health
Canada, US NAS)

Development of WHO
‘Global Strategy’
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Strategies to contain AMR
LEVEL OF
FOCUS OF STRATEGY
STRATEGY Reduce transmission Prevent emergence
Micro
E.g. handwashing in
hospitals
E.g. ‘cycling’ drugs
within hospitals
Macro
E.g. restricting
international travel
E.g. restriction policies
(eg taxation, permits)
School of Medicine, Health Policy & Practice, University of East Anglia
Strategies to contain AMR
School of Medicine, Health Policy & Practice, University of East Anglia
Strategies to contain AMR
Objective
 Transmission
Strategy
Early recognition of
resistant organisms
 Infectivity
 OPPORTUNITIES
FOR TRANSMISSION
 Susceptibility to
infection
3. DEVELOP NEW ANTIMICROBIALS
Discover/develop new
 Range of Agents
agents
Available
Intervention
•More rapid techniques
•Surveillance
•Screening patients/staff
 Use of antimicrobials
 Isolation
 Handwashing
 General Hygiene
 Patient/Staff ratios
 Bed spacing
  Immunity
  Nutrition
1. Modification of existing agents/
discovery of new antimicrobials
2. Discovery of new drug targets
through microbial gene analysis
4. Genetic manipulation
5. Computer modelling
School of Medicine, Health Policy & Practice, University of East Anglia
Evidence: literature review
127 studies of strategies to contain AMR. Most are:





of poor methodological quality (high risk of bias)
from developed nations (principally the USA)
not measuring the cost impact of AMR
micro (institution) not macro (community)
concerned with transmission not emergence
School of Medicine, Health Policy & Practice, University of East Anglia
Importance of transmission versus
emergence
% of organism resistant to an anti-microbial
Equilibrium
resistance
Lag phase
0
X
X+n
Time
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Importance of time

Because of uncertainty, evaluation of
strategies to reduce transmission easier to
undertake than evaluation of strategies to
control emergence

Because of discounting of future benefits,
strategies to reduce transmission likely to
appear to be more cost-effective than
strategies to control emergence
School of Medicine, Health Policy & Practice, University of East Anglia
The problem

Micro policies – generally to contain
transmission – are more likely to be
rigorously evaluated ...

BUT ... macro policies – generally to
contain emergence – are more likely to be
socially optimal (and) in the long-term.
School of Medicine, Health Policy & Practice, University of East Anglia
Macro-economic strategies to
contain AMR

Charges/taxes (equal to marginal external
cost of AMR) – changes private cost to
equal social cost

Regulation of overall quantity (rationing)

Tradable permits (licences) - set quantity
and let price adjust in market through
physician ‘trading’
School of Medicine, Health Policy & Practice, University of East Anglia
Macro-economic impact of AMR



Requires macro-economic model – Computable
General Equilibrium (CGE) is most ‘popular’.
Model solved to find prices at which quantity
supplied equals quantity demanded across all
markets (sectors)
Describes economy using representative agents:
consumers, producers, and government
 Consumers allocate time to employment/leisure and
income to consumption/saving to max utility
 Producers combine labour/capital inputs to max
profit
 Government collects tax revenue to finance
expenditure & redistribute as benefits
School of Medicine, Health Policy & Practice, University of East Anglia
Macro-economic impact of AMR



AMR is a (negative) exogenous shock on the
labour supply and productivity of inputs, and a
(positive) shock (cost) to healthcare delivery
No UK data of impact on productivity or
labour supply so use data from other
areas/countries
Assumptions:




Prevalence of AMR ~20% in UK
AMR reduces labour supply by 0.1% to 0.8%
AMR reduces productivity by 0.5% to 10%
AMR School
increases
healthcare cost by 0.5% to 10%
of Medicine, Health Policy & Practice, University of East Anglia
Macroeconomic impact of AMR in
UK
Change in:
Productivity (%)
Healthcare delivery cost (%)
Labour supply (%)
Different Scenarios
-1.0
-1.0
-0.5
-1.5
-1.5
+1.0
+1.0
+0.5
+10
+5.0
-0.2
-0.8
-0.5
-0.2
-0.1
Impacts on macroeconomic indicators in percentage
-0.140
-0.174
-0.085
-0.234
-0.257
+1.690
+1.407
+0.753
+2.092
+2.119
-0.160
-0.196
-0.086
-0.216
-0.269
+9.630
+9.159
+4.644
+12.98
+13.66
-1.200
-1.211
-0.600
-1.816
-1.821
-0.810
-0.776
-0.387
-1.199
-1.174
-0.560
-0.559
-0.276
-0.834
-0.841
+0.010
+0.008
+0.004
+0.013
+0.013
-1.000
-1.017
-0.525
-1.449
-1.512
-0.5
+0.5
-0.1
-0.5
+0.5
-0.8
Household income
Government transfers
Tax Revenues
Unemployment
Household utility
Real GDP
Welfare (EV/GDP)
Inflation (CPI index)
Total Savings
-0.070
+0.740
-0.081
+4.210
-0.590
-0.400
-0.270
+0.004
-0.500
-0.098
+0.721
-0.110
+4.919
-0.612
-0.381
-0.282
+0.004
-0.531
Healthcare and social
Services (average)
Social services
Health administration
Hospitals
Family health services
-0.566
-0.585
-1.131
-1.156
-0.575
-2.621
-0.537
-0.575
-0.576
-0.575
-0.558
-0.594
-0.594
-0.594
-1.074
-1.150
-1.150
-1.150
-1.100
-1.174
-1.175
-1.174
-0.547
-0.584
-0.584
-0.584
-1.803
-2.894
-2.894
-2.892
-2.0
+5.0
-0.8
-2.0
+10
-0.8
-0.327
+2.802
-0.352
+17.71
-2.413
-1.574
-1.121
+0.017
-1.990
-0.327
+2.817
-0.324
+17.80
-2.425
-1.582
-1.121
+0.017
-1.980
-2.105
-2.613
-3.139
-1.717
-2.234
-2.235
-2.234
-2.242
-2.736
-2.737
-2.735
-2.344
-3.404
-3.405
-3.403
School of Medicine, Health Policy & Practice, University of East Anglia
Summary results
Parameter of interest
Household Income
Government Transfers
Tax Revenues
Unemployment
Household Utility
GDP (real)
Welfare(EV/GDP)
Inflation(CPI)
Total National Savings
Impact of MRSA (% change)
-0.070 to -0.327
+0.721 to +2.817
-0.081 to -0.352
+4.210 to +17.800
-0.590 to -2.425
-0.381 to -1.582
-0.270 to -1.121
+0.004 to +0.017
-0.500 to -1.990
Health and Social Services
Social Services
-0.537 to -2.344
Health Administration
-0.575 to -3.404
Hospitals
-0.576 to 3.405
Family Health Services
-0.575 to -3.403
Note: All results are relative to 1995 economy in the absence of MRSA.


GDP loss = ~£3-11 billion (~ 6-20% of total NHS expenditures)
Welfare losses imply society willing to pay ~ £8 billion to avoid AMR
School of Medicine, Health Policy & Practice, University of East Anglia
Evaluation of strategies
Parameter of interest
Household Income
Government Transfers
Tax Revenues
Unemployment
Household Utility
GDP (real)
Welfare(EV/GDP)
Inflation(CPI)
Total Savings
Health and Social Services
Social Services
Health Administration
Hospitals
Family Health Services
Impact of
Regulation
+0.014
-0.150
+0.017
-0.862
+0.119
+0.078
+0.055
+0.000
+0.101
Impact of
Taxation
+0.005
-0.048
+0.005
-0.278
+0.039
+0.025
+0.018
+0.000
+0.033
Impact of
Permits
+0.015
-0.151
+0.017
-0.870
+0.120
+0.079
+0.055
+0.000
+0.102
+0.108
+0.115
+0.115
+0.115
+0.035
+0.037
+0.037
+0.037
+0.109
+0.116
+0.116
+0.116
CAM and MRSA
CAM (%)
-10.00
-0.968
-10.00
MRSA Level (%)
-10.00
-0.968
-10.00
Note: All results are relative to 1995 model that includes the adverse impacts of
MRSA on the economy in the absence of any intervention.
School of Medicine, Health Policy & Practice, University of East Anglia
Key conclusions of macro approach
AMR substantially affects wider
economy, not just healthcare
 Concentrating on healthcare sector alone
may therefore underestimate the societal
impact of AMR/strategies
 Of ‘macro’ strategies, taxation appears to
be the least efficient & tradable permits
the most efficient

School of Medicine, Health Policy & Practice, University of East Anglia
Conclusions – applying economics
to the analysis of AMR

Conceptualisation of problem:
 Optimisation and balance
 Importance of temporal factors (trade-off now vs
future)

Technical analysis:
 Micro-economic evaluation of strategies
 Macro-economic assessment

Strategies:
 Financial incentive structures (e.g. permits)
 Tackling ‘public good’ issues globally
School of Medicine, Health Policy & Practice, University of East Anglia
Further references

Externality & micro-economic evaluation:
 Coast J, Smith RD, Miller MR. Superbugs: should antimicrobial resistance be
included as a cost in economic evaluation? Health Economics, 1996; 5: 217-226.
 Coast J, Smith RD, Karcher AM, Wilton P, Millar MR. Superbugs II: How should
economic evaluation be conducted for interventions which aim to reduce
antimicrobial resistance? Health Economics, 2002; 11(7): 637-647.
 Wilton P, Smith RD, Coast J, Millar MR. Strategies to contain the emergence of
antimicrobial resistance: a systematic review of effectiveness and costeffectiveness. Journal of Health Services Research and Policy, 2002; 7(2): 111-117.

Macro policies & macro-economic analysis:
 Coast J, Smith RD, Millar MR. An economic perspective on policy for
antimicrobial resistance. Social Science and Medicine, 1998; 46: 29-38.
 Smith RD, Coast J. Controlling antimicrobial resistance: a proposed transferable
permit market. Health Policy, 1998; 43: 219-32.
 Smith RD, Coast J. Antimicrobial resistance: a global response. Bulletin of the
World Health Organisation, 2002; 80: 126-133.
 Smith RD, Coast J. Resisting resistance: thinking strategically about antimicrobial
resistance. Georgetown Journal of International Affairs, 2003; IV(1): 135-141.
 Yago M, Smith RD, Coast J, Millar MR. Assessing the macroeconomic impact of a
healthcare problem: the application of computable general equilibrium analysis
to antimicrobial resistance. Journal of Health Economics (in press).
School of Medicine, Health Policy & Practice, University of East Anglia