a potential influenza pandemic: possible macroeconomic effects and policy issues
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A Potential Influenza Pandemic: Possible Macroeconomic Effects and Policy Issues
Julie SomersCongressional Budget Office
Prepared for the Ninth Annual Pipeline Project Conference, July 15, 2006
CBO’s Mission Budget projections under
current laws and policies Analysis of the President’s
budgetary proposals Estimates of budgetary costs of
legislation approved by Congressional committees
Reports that analyze issues that are significant for the budget
CBO’s Work on Pandemic Influenza December 2005 with update May
2006 Requested by Senate Majority
Leader, Frist Update requested by Frist and
Senator Gregg, Chairman of the Senate Budget Committee
Pandemic Influenza Background Influenza pandemics - caused by
new flu viruses that have adapted to efficient human to human transmission
Three pandemics occurred in previous century “Spanish Influenza” in 1918 “Asian Influenza” in 1957 “Hong Kong Influenza” in 1968
Avian Influenza Background Avian Influenza – large group of
different flu viruses that primarily affects birds
H5N1 strain has pandemic potential In 1997, H5N1 jumped to humans –
18 cases; 6 deaths Since then, H5N1 has spread among
birds throughout Asia, to Europe and Africa (229 human cases and 131 deaths)
Possible Macroeconomic Effects: Assumptions Severe Scenario
Comparable to pandemic of 1918 Attack Rate = 30%; Case Fatality Rate =
2.5% 90 million infected; 2 million deaths
Mild Scenario Comparable to pandemics of 1957 and
1968 Attack Rate = 25%; Case Fatality Rate =
~0.1% 75 million infected; 100,000 deaths
Possible Macroeconomic Effects: Results Severe Scenario – GDP declines 5%,
relative to baseline Supply-Side: workers who take ill miss 3
weeks of work. Demand-Side: 80% falloff in entertainment
industries (for one quarter); 10% for retail trade and manufacturing
Mild Scenario – GDP declines 1.5%, relative to baseline Supply-Side: workers who take ill miss ~4
days of work Demand-Side: 20% falloff in entertainment
industries; 3% for retail trade and manufacturing
Options to Prevent or Mitigate Flu Pandemic Options fall into Four Broad
Categories Detecting and controlling viruses at
their source, Developing and using vaccines, Developing and using antiviral drugs
and other medications, and Building the capacity of the health care
system (facilities, equipment, and people).
Options to Prevent or Mitigate Flu Pandemic Risk of Inaction and Risk of
Action Risk of Inaction: Pandemic occurs
that could have been prevented or mitigated
Risk of Action: Cost, diverts resources from other priorities, and could be damaging by itself
Challenges in the Flu Vaccine Market Vaccine Supply Vaccine Demand Vaccine Allocation
Challenges in the Flu Vaccine Market Vaccine Supply
Declining numbers of manufacturers, shortages, slow pace of technical improvement
Egg-based production process requires 6-9 month
Production cannot be scaled up quickly
Challenges in the Flu Vaccine Market Vaccine Supply
Vaccines are biologics (made from living cells), production process vulnerable to contamination
High regulatory costs Vaccine non storable – flu strains
change from year to year
Challenges in the Flu Vaccine Market Vaccine Demand
Hard to predict from year to year Smaller than socially optimal
Vaccine Allocation Priority Groups CDC rather than market incentives
allocates flu vaccine in times of shortage discouraging the establishment of reserve capacity
Threat of a pandemic exacerbates challenges U.S. demand will jump from ~86
million to ~300 million Current U.S. domestic production
capacity could produce pandemic vaccine for only 8 million people, less than 3% of the population.
Production lag → vaccinating survivors
Administration’s plan Requested $7.1 billion (FY06 –
FY08) Congress provided
$3.8 billion for FY2006 $2.3 billion for FY2007 ?? FY2008
Administration’s plan Stockpile prepandemic vaccines
adequate to immunize 20 million persons against influenza strains that present a pandemic threat (Address production lag)
Develop domestic production capacity by 2011 sufficient to provide vaccine for the entire U.S. population within 6 months of a pandemic outbreak (Address capacity limitation)
Stockpiling Prepandemic Vaccines 8 million doses purchased for $240
million Not a perfect match, hope for
cross-protection Increase manufacturers’ experience Rate of stockpiling slow Shelf life 12 to 18 months –
restocked or used
Develop Domestic Production Capacity Egg-Based Vaccine Production
Goal - 20% of future capacity Would have to increase sevenfold $531 million of FY2006 funds
Develop Domestic Production Capacity Cell-Based Vaccine Production
Goal – 80% of future capacity Readily scalable ~$1 billion of FY2006 funds Future funding to companies
successful in first round
Develop Domestic Production Capacity Cell-Based Vaccine Production
May take much longer to develop May delay adoption of better
techniquesAdjuvantsDNA-based vaccines
Requires on-going government supportUniversal vaccination against seasonal fluStockpiles of prepandemic vaccineProvide seasonal flu vaccine to developing
countries
Congressional Budget Office
Questions and Answers
For more information, visit: www.cbo.gov
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