Economics Of Tobacco Control In Developing Countries

Economics of Tobacco Control in Developing Countries Syed Aljunid MD (UKM) MSc Public Health (Singapore) PhD (Health Econs and Financing) (London) FAMM Professor of Health Economics and Senior Research Fellow UNU-International Institute For Global Health Kuala Lumpur UNU- International Institute For Global Health (UNU-IIGH)

OUTLINE
Introduction
Smoking in Developing Countries
Healthcare Cost of Smoking
Smoking and Poverty
Tobacco Control Price Measures
Non-price measures
Conclusions

Introduction
Health Systems of developing countries is facing major crisis due to internal and external factors.
World Health Report (2008) identified Five Shortcomings of Health Systems
Inverse Care
Impoverishing Care
Fragmented and Fragmenting Care
Unsafe Care
Misdirected Care

Introduction
Health System is excessively burdened by increasing prevalence of Chronic and Non-communicable Diseases
Most are linked to unhealthy lifestyles including Smoking
The poor living in low and middle income countries are the main victims
Some economist argued that smokers contribute to economy by paying high taxes

Shift towards Non-communicable Diseases/Accidents as Cause of Deaths

Projected Deaths (Millions) and DALYS in 23 Selected Countries Source: Abegunde et all (2007) Lancet 370:1929-38

Leading Cause of Deaths in Malaysian Hospitals (2008)

Healthcare Costs from Smoking
Annual (gross) healthcare costs:
0.1-1.1% of GDP, or 6 -15% of total health costs in high-income countries
proportionally similar in lower-income countries
Annual Global Net Loss due to smoking
USD 200,000 million
One third of loss is in developing countries

Annual Cost of Selected Chronic Illness in Malaysia (2005) Chronic Diseases Annual Cost (Millions, RM) Ischemic Heart Diseases 1,432 Chronic Obstructive Airway Diseases 2,919 Cervical Cancer 247 Lung Cancer 146

In-Patient Utilisation For Smoking Related Diseases in Malaysia, 2004 IHD CA LUNG COPD Average Average Number of Admissions 1.6 2.4 1.3 1.8 Average Annual Fees (RM) 151.51 213.47 47.50 137.49 Average Length Of Stay (ALOS) 5.32 6.73 5.67 5.88 Minimum Length Of Stay (LOS) 1 1 1 1 Maximum LOS 19 43 25 43

Total Cost Per Year for Malaysia IHD CA Lung COPD Annual Cost per patient 21,676 42,287 32,172 Nos. of new cases 32,816 2,881 12,776 Nos. of old cases 99,852 1,701 233,857 Total Cost per Year (Nation)(Mill) 630.4 116.6 2,306.0

Annual Cost per Patient (RM) Patients’ Cost Providers’ Cost Total Annual cost IHD 1,362 20,134 21,676 CA Lung 7,758 34,529 42,287 COPD 12,757 19,415 32,172

HealthCare Cost of Smoking for IHD (RM Millions)

HealthCare Cost of Smoking for Lung CA (RM Millions)

HealthCare Cost of Smoking for COPD (RM Millions)

Age Start Smoking Among Secondary School Children in Selangor, Malaysia (2006

Students Exposed to Tobacco Smoke at Home and Outside Home Global Youths Tobacco Survey: 1999-2005

Health and Poverty: The incidence of catastrophic out-of-pocket payments in 59 countries

Risk of Distress Borrowing and Selling During Hospitalisation in India, 1995-1996 Source: Bonu et al (2005) Health Policy and Planning 20 :41-49

Prevalence of Daily Smokers: Poorest vs Richest Quintiles in Low and Middle Income Countries

Ratio of Expenditure on Tobacco vs Education in Bangladesh, 1995-96 Efroymson et al (2001): Tobacco Control 10:212-17

Which interventions are effective? Measures to reduce demand
Higher cigarette taxes
Non-price measures: consumer information, research, cigarette advertising and promotion bans, warning labels and restrictions on public smoking
Increased access to nicotine replacement (NRT) and other cessation therapies

Taxation is the Most Effective Tobacco Control Measure
Higher taxes induce quitting, reduce consumption and prevent starting
A 10% price increase reduces demand by:
4% in high-income countries
8% in low or middle-income countries
long-run effects may be greater
Young people and the poor are the most price responsive
Source: Chaloupka et al. , 2000

Tobacco Tax and Economic Impact
Empirical evidence shows that higher tobacco taxes:
improve public health
increase tax collection (even in the presence of smuggling)
do not have negative impact on employment
do not have negative impact on the poor

Industry clearly understands the impact of tobacco taxation
"With regard to taxation, it is clear that in the US, and in most countries in which we operate, tax is becoming a major threat to our existence."
"Of all the concerns, there is one - taxation - that alarms us the most. While marketing restrictions and public and passive smoking (restrictions) do depress volume, in our experience taxation depresses it much more severely. Our concern for taxation is, therefore, central to our thinking...."
Philip Morris, “Smoking and Health Initiatives”, 1985

Cigarette price and consumption show opposite trends (1) Real price of cigarettes and annual per adult cigarette consumption in South Africa 1970-1989 Source: Saloojee 1995

Cigarette price and consumption show opposite trends (2) Source: ImpacTeen, 2003

Youth and the Poor Most Responsive to Tax Increases
Effects on youth up to three times as large as effects on adults
low incomes, less addicted, greater effect of peer influences, importance of current costs
Large reductions in lowest income populations compared to small reductions in highest income populations
Consistent with economic theory
Implies tax increases can be progressive
Source: Chaloupka et al. , 2000

Cigarette price and youth smoking show opposite trends Real price of cigarettes and youth smoking prevalence, US, 1975-2002 Source: ImpacTeen, 2003

SEA and Australian Region Source: Judith Mackay, Michael Eriksen : Tobacco Atlas

Price of a 20 Cigarettes Pack (International Dollars, 2006)

Non-price measures to reduce demand
Increase consumer information: dissemination of research findings, warning labels, counter-advertising
Comprehensive ban on advertising and promotion
Restrictions on smoking in public and work places
Increase access to nicotine-replacement therapies (NRT)

Health information reduces the demand for cigarettes Source: Kenkel and Chen, 2000

Comprehensive advertising bans reduce cigarette consumption Consumption trends in countries with such bans vs. those with no bans (n=102 countries) Source: Saffer, 2000

Effect of advertising bans and counter-advertising
A comprehensive set of tobacco advertising bans can reduce consumption by 6.3%
Counter-advertising messages (set at 15% of the total number of advertising messages) can reduce smoking by about 2% a year
Source: Saffer and Chaloupka, 2000

Effectiveness of Smoking Cessation Clinic in Malaysia (2006) KLINIK KESIHATAN % Quiters KK Bandar Alor Setar 11.8 KK Merbok 17.6 KK Kg Simee 21.9 KK Setiawan 16.1 KK Bakri 24.2 KK Segamat 12.0 KK Selingsing 18.8 KK Pulai Chondong 15.2 All Klinik Kesihatan 17.3

Conclusions
Chronic non-communicable diseases linked to smoking pose major challenges to health systems
Smoking is an effective agent causing negative economic impact to individuals, families and nations especially to the poor living in low income countries
Cigarette tax is the single most effective measure to control smoking through price increase
Non-price measures should be systematically implemented to potentiate the effect of cigarette tax in tobacco control

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Economics Of Tobacco Control In Developing Countries

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