Economics of animal health: A little theory and some applications

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At the moment I am in Kenya, at a site visit of Dr Esther Wafula, who is doing a PhD with us in Utrecht. Today I gave a presentation at KARI, the Kenyan Agricultural Research Institute. This is a huge …

At the moment I am in Kenya, at a site visit of Dr Esther Wafula, who is doing a PhD with us in Utrecht. Today I gave a presentation at KARI, the Kenyan Agricultural Research Institute. This is a huge institute, consisting of more than 3000 people. People responsible for animal health work both from KARI as well as the University of Nairobi were present.
The presentation has quite some overlap with the one I gave last year in Kupang. However, I added some new figures about the complexity of management as well as the first research results of Dr Wafula: costs of trypanosomosis.

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  • 1. Economics of animal health A little theory and some applications
  • 2. Who am I  Born on a dairy farm  Animal science at Wageningen University ● Epidemiology (simulation model of management regarding cystic ovaries) ● Economics (long term effects of herd health management programs)  PhD at Fac. Veterinary Medicine (AI to diagnose mastitis)  Working in field of animal health management In between Wageningen University and Faculty of Vet. Med. (since 2001) @henkhogeveen animal-health-management.blogspot.com www.slideshare.net/henkhogeveen
  • 3. Wageningen Utrecht Leusden
  • 4. Animal diseases are a ……….  Welfare problem  Human health problem (one health)  Nuisance to the farmer
  • 5. Animal diseases are a:  Welfare problem  Human health problem (one health)  Nuisance to the farmer But also an economic problem ….
  • 6. Outline  Disease control: optimization  Modeling disease  The cow level: reproduction  The herd level: trypanosomosis - costs  The herd level: mastitis - prevention  Final remarks
  • 7. Maximization Veterinarians want to maximize animal health ● If there is a vaccine, use it ● If there is a (better) treatment, use it ● In case of doubt: treat (better safe than sorry) Medical doctors also want to maximize health ● And minimize risk of infection Microbiologists want to maximize detection ● If there are more precise tests, use it
  • 8. But ……. Is it optimal?  There is more than only the health of animals: ● Money ● Time ● Availability of drugs or vaccin  So measures need to be balanced
  • 9. Economic effects of diseases Expenditures (additional resources) ● Drugs ● Veterinarian ● Labour ● Expenditures to control disease Losses (decrease in production) ● Decreased production level ● Discarded milk ● Changes in milk price (milk quality) ● Culling
  • 10. Total costs  Expenditures + losses  Often overlooked  90 % of studies only look at losses  Farmers tend to look at expenditures  We need to optimize
  • 11. Source: McInerney et al., Prev. Vet. Med, 1992 Control vs failure Control expenditures (€) Output losses (€)
  • 12. Source: McInerney et al., Prev. Vet. Med, 1992 High losses, low control expenditures Control vs failure Control expenditures (€) Output losses (€)
  • 13. Source: McInerney et al., Prev. Vet. Med, 1992 Low losses, high control expenditures Control vs failure Control expenditures (€) Output losses (€)
  • 14. Source: McInerney et al., Prev. Vet. Med, 1992 Optimal Control vs failure Control expenditures (€) Output losses (€)
  • 15. Types of animal diseases  Production diseases ● On-farm optimization ● Externalities ● E.g., mastitis, lameness, trypanosomosis  Endemic contagious diseases ● On-farm control decision ● Interaction between farms ● E.g., BVD, Aujeszky’s disease  Notifiable contagious diseases ● Regional control decisions (eradication) ● Surveillance ● E.g., FMD, AI, Rinderpest
  • 16. The management problem Consequences animal health Epidemiological consequences Veterinary knowledge of diseases
  • 17. The management problem Consequences animal welfare Consequences human health Consequences animal health Epidemiological consequences Knowledge about externalities
  • 18. The management problem Consequences animal welfare Consequences human health Costs of intervention Consequences animal health Epidemiological consequences
  • 19. Decisons become increasingly complex Decision maker Objectives Available resources Consequences animal welfare Consequences human health Costs of intervention Consequences animal health Epidemiological consequences
  • 20. Levels of decision making  Individual animals ● Treatment ● Culling ● Interaction  Groups of animals (herd/farm) ● Prevention ● Eradication  Sector ● Control ● Eradication  Region ● Control ● Eradication
  • 21. Levels of decision making  Individual animals ● Treatment ● Culling ● Interaction  Groups of animals (herd/farm) ● Prevention ● Eradication  Sector ● Control ● Eradication  Region ● Control ● Eradication Farmer, supported by advisor Farmer’s organisation Processors Government Decision maker
  • 22. Outline  Disease control: optimization  Modeling disease  The cow level: reproduction  The herd level: trypanosomosis - costs  The herd level: mastitis - prevention  Final remarks
  • 23. Modelling to estimate effects of diseases and disease control  Simulation model  Input data based on data, literature, expertise  Relatively cheap  Pragmatic approach  Bio-economic modelling: economics combined with detailed physiological basis
  • 24. Models ……. do not capture the complexity of the real situation
  • 25. Models……. are sometimes nicer than reality (too good to be true)
  • 26. Some terminology Static vs dynamic ● behaviour over time Deterministic vs stochastic ● definite predictions or averages (deterministic) ● output is probability distributions (stochastic) ● variability of the system uncertainty of knowledge Spatial ● Space effects play a role Optimization vs simulation ● optimum solution, given an objective ● outcome given a pre-defined set of input
  • 27. AHE is about money right?  What about ● Human disease (zoönoses) ● Welfare ● The environment ● …….  Express these in money ……
  • 28. Different methods  Cost-minization analysis  Cost-effectiveness analysis  Cost-utility analysis  Cost-benefit analysis Differ in: measurement of effect utility
  • 29. Cost minimization analysis equal effectiveness of all programs under review (same outcome)  only monetary costs ● Net costs: ● Program costs (K) ● Monetary benefits (∆W) {K - ∆W}
  • 30. Cost effectiveness analysis  Single non-monetary effect ● usually expressed in physical units such as e.g.: ● # infected animals; ● # days with illness; ● …  All other effects expressed in monetary units  Cost-effectiveness ratio ● Net costs: ● Program costs (K) ● Monetary benefits (∆W) ● Single non-monetary benefit (∆ SE) {K - ∆W} ∆SE
  • 31. Ranking the alternatives Effectiveness Costs Low costs High effective High costs Low effective High costs High effective Low costs Low effective Maximal acceptable budget Minimal accepable effectiveness Not worth considering Worth considering Best possibilities
  • 32. Cost utility analysis  Variation of Cost effectiveness analysis, weighing  Single combined measurement of non-monetary effects into one single metric unit; e.g. QALY  all other effects expressed in monetary units  Cost-utility ratio ● Net costs: ● Program costs (K) ● Monetary benefits (∆W) ● Single combined non-monetary benefit (∆CE) {K - ∆W} ∆CE
  • 33. Cos benefit analysis All effects are measured and expressed in monetary terms Some times difficult (e.g., animal welfare, human health, etc. ) Evaluation: Net value Benefit- cost ratio {K - ∆W} ∆W K
  • 34. Outline  Disease control: optimization  Modeling disease  The cow level: reproduction  The herd level: trypanosomosis - costs  The herd level: mastitis - prevention  Final remarks
  • 35. Two decisions around reproduction  When do I start with inseminations  When do I stop with insemination
  • 36. Difficult calculation Cow factors ● First ovulation ● Probability of detection ● Probability of conception ● Milk production level ● Reproductive disorders Economical factors ● Milk price ● Costs of insemination ● Costs of culling ● Costs of calving management 36 A complex system of dynamics and interactions
  • 37. Model  Monte Carlo stochastic simulation  Interactions and dynamics at cow level  Time steps of 1 week  Different VWP (6-15 wks) for the same cow  Input for Dutch situation (Inchaisri et al., 2010) ● Literature ● Expertise
  • 38. Stochastic dynamic modelling • Breed • Parity • Month of calving • Milk production • Farm level • Relative performance • Persistence Cow START OF CYCLE
  • 39. 39 Calf Ovulation Oestrus detected Insemination Conception yes yes yes yes no no no no cow Probabilities based on cow factors
  • 40. Average results Voluntary waiting periods 6 wk 7 wk 9 wk 11 wk 13 wk 15 wk First insemination 10.9 11.5 13.1 14.8 16.8 18.5 Calving interval 391 393 401 410 421 433 MP/cow/year (kg) 8200 8188 8157 8112 8056 7997 Insemations 1.89 1.86 1.78 1.74 1.70 1.69 Calves/cow/year 0.93 0.93 0.91 0.89 0.87 0.84 Not pregnant (%) 0.018 0.019 0.021 0.025 0.030 0.037 40
  • 41. Economic consequences (€/cow/year) Voluntary waiting periods 7 wks 9 wks 11 wks 13 wks 15 wks Milk production 2.2 8.9 18.3 32.4 46.4 Calves 0.1 0.3 0.6 1.0 1.7 Culling 0.4 1.6 3.4 6.3 10.1 Inseminations -0.5 -1.6 -2.0 -2.8 -3.1 Calf Management -0.1 -0.5 -1.0 -1.8 -2.9 Net total 2.1 8.6 19.0 34.2 52.2 (-16-22) (-11-32) (-6-53) (4-78) (13-106) 41
  • 42. Average 0 10 20 30 40 50 60 6 7 8 9 10 11 12 13 14 15 VWP(weeks) Netlosses(€/cow/year)
  • 43. Outline  Disease control: optimization  Modeling disease  The cow level: reproduction  The herd level: trypanosomosis - costs  The herd level: mastitis - prevention  Final remarks
  • 44. Trypanosomosis  Model of Esther Wafula  Calculations at the herd level (costs of disease)  Basis is the individual cow  Multi-process modelling: individual cows simulated at the same time -> herd level  Stochastic Monte Carlo model
  • 45. Model structure
  • 46. Parameterization  Based on literature  Data collection (interviews with experts)  Own expertise
  • 47. Prevalence over the year 0 5 10 15 20 25 30 35 40 0 5 10 15 20 25 30 Mixed production system Clinical Subclinical Prevalence 0 10 20 30 40 50 0 5 10 15 20 25 Agro-Pastoral production system Clinical Subclinical Prevalence 0 5 10 15 20 25 30 35 40 45 0 10 20 30 40 50 60 70 Pastoral production system Clinical Subclinical Prevalence
  • 48. Total costs (KES * 1.000 per farm per year) 1 2 3 4 5 6 7 8 9 10 Veterinary fees Extra labour/feeds Milk losses Cost of Drugs Mortality Traction Abortion Costspercow(KES*1,000) Pastoral production system Agro pastoral Production system Mixed Production system Total costs: Pastoral production system: 679 (447-849) Mixed production system: 234 (105-373) Agro pastoral production system: 139 (60-222)
  • 49. Outline  Disease control: optimization  Modeling disease  The cow level: reproduction  The herd level: trypanosomosis - costs  The herd level: mastitis - prevention  Final remarks
  • 50. Costs of mastitis  Mastitis is a costly disease  Estimiations between € 55 – 97 per cow per year ● The Netherlands: €78/cow/year (Huijps et al.,2008) ● USA: €61/cow/year (Bar et al., 2008) ● Sweden: €97/cow/year (Hagnestam- Nielsen and Østergaard, (2009) ● The Netherlands: €84/cow/year (Halasa et al., 2009) ● Sweden: €55/cow/year (Nielsen et al., 2010)
  • 51. Remember this one? High losses, low control expenditures Low losses, high control expenditures Optimal Preventive costs (€) Failure costs (€)
  • 52. Material  Questionaire dataset of 189 farms (Santman-Berends et al., 2011) ● General questions ● Livestock management ● Lactating cows ● Milking process ● Feed  Pathogen dataset of 120 farms ● Pathogens present on individual farms  Milk recording services dataset of 120 fairy farms ● Testday records (e.g. milk production, SCC)
  • 53. Normative calculations losses Clinical losses: based on Huijps et al., 2008 Clinical milk production losses + Discarded milk + Medication + Labour + Veterinarian + Culling Subclinical losses: based on Halasa et al., 2009 𝑆𝑀𝑙𝑜𝑠𝑠𝑖= 𝑘=1 𝑛 (−1 ∗ (0.78 + ln 𝑆𝐶𝐶 𝑘 𝑖 ∗ −0.20 ∗ 𝑃𝑒𝑟𝑖𝑜𝑑𝑖,𝑘 𝑆𝑀𝑙𝑜𝑠𝑠𝑗= 𝑘=1 𝑛 (−1 ∗ (1.62 + ln 𝑆𝐶𝐶 𝑘 𝑗 ∗ −0.20 ∗ 𝑃𝑒𝑟𝑖𝑜𝑑𝑗,𝑘
  • 54. Costs of prevention  When present the following were calculated according to Huijps et al. (2010): ● Cleaning cubicles ● Cleaning lanes ● Drying off ● Pre-stripping ● Clean dirty udders ● Milker gloves ● Clean cluster after clinical case ● Milk high SCC cow last ● Post milking teat disinfection ● Fixing cows after milking
  • 55. Estimated costs (€/cow/year) for mastitis Average 5% percentile 95% percentile Clinical mastitis 62 16 151 Subclinical mastitis 14 9 21 Failure costs mastitis 76 26 164 Prevention costs 88 43 131 Costs of mastitis 164 99 281
  • 56. Failure costs vs preventive costs
  • 57. Outline  Disease control: optimization  Modeling disease  The cow level: reproduction  The herd level: trypanosomosis - costs  The herd level: mastitis - prevention  Final remarks
  • 58. Farmers underestimate costs of disease 0 20 40 60 80 100 120 140 160 180 200 0 20 40 60 80 100 120 140 160 180 200 Expected costs (€ per cow) Realcosts(€/cow) 46 under estimators Huijps et al.,
  • 59. There is more than economics  Money is only one motivator
  • 60. Veterinarians and economics  Important to know the economics of your services ● Production diseases ● Find optimum of control and failure costs ● Know that farmers underestimate losses ● To support decisions when resources are scarse
  • 61. Veterinarians are no economists  Yes you are right  But you should know something about it  Understand farmers  Understand the economics of your advice  Interpret calculations that are available  Veterinarians should know something about economics
  • 62. Two courses on economics  Part of MSc education Veterinary Epidemiology and Economics, Utrecht University (www.msc- epidemiology.nl)  Economic concepts and theories for the veterinary sciences  Applied economic modelling for the veterinary sciences  Available on-line: www.elevatehealth.eu
  • 63. Thank you for your attention  Change in output with different levels of veterinary input and all other factors equal @henkhogeveen animal-health-management.blogspot.com henk.hogeveen@wur.nl h.hogeveen@uu.nl