economics of animal health: a little theory and some applications
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Economics of animal health
A little theory and some applications
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 managementIn between Wageningen University and Faculty of Vet. Med. (since 2001)
@henkhogeveen
animal-health-management.blogspot.com
www.slideshare.net/henkhogeveen
Wageningen
Utrecht
Leusden
Animal diseases are a ……….
Welfare problem
Human health problem (one health)
Nuisance to the farmer
Animal diseases are a:
Welfare problem
Human health problem (one health)
Nuisance to the farmer
But also an economic problem ….
Outline
Disease control: optimization
Modeling disease
The cow level: reproduction
The herd level: trypanosomosis - costs
The herd level: mastitis - prevention
Final remarks
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
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
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
Total costs
Expenditures + losses
Often overlooked
90 % of studies only look at losses
Farmers tend to look at expenditures
We need to optimize
Source: McInerney et al., Prev. Vet. Med, 1992
Control vs failure
Control expenditures (€)
Output losses (€)
Source: McInerney et al., Prev. Vet. Med, 1992
High losses, low control expenditures
Control vs failure
Control expenditures (€)
Output losses (€)
Source: McInerney et al., Prev. Vet. Med, 1992
Low losses, high control expenditures
Control vs failure
Control expenditures (€)
Output losses (€)
Source: McInerney et al., Prev. Vet. Med, 1992
Optimal
Control vs failure
Control expenditures (€)
Output losses (€)
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
The management problem
Consequences animal health
Epidemiological consequences
Veterinary knowledge of diseases
The management problem
Consequences animal welfare
Consequences human health
Consequences animal health
Epidemiological consequences
Knowledge about externalities
The management problem
Consequences animal welfare
Consequences human health
Costs of intervention
Consequences animal health
Epidemiological consequences
Decisons become increasingly complex
Decision maker
ObjectivesAvailable resources
Consequences animal welfare
Consequences human health
Costs of intervention
Consequences animal health
Epidemiological consequences
Levels of decision making
Individual animals
● Treatment
● Culling
● Interaction
Groups of animals (herd/farm)
● Prevention
● Eradication
Sector
● Control
● Eradication
Region
● Control
● Eradication
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 organisationProcessors
Government
Decision maker
Outline
Disease control: optimization
Modeling disease
The cow level: reproduction
The herd level: trypanosomosis - costs
The herd level: mastitis - prevention
Final remarks
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
Models ……. do not capture the complexity of the real situation
Models……. are sometimes nicer than reality (too good to be true)
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
AHE is about money right?
What about
●Human disease (zoönoses)
●Welfare
●The environment
●…….
Express these in money ……
Different methods
Cost-minization analysis
Cost-effectiveness analysis
Cost-utility analysis
Cost-benefit analysis
Differ in: measurement of effect
utility benefit
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}
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
Ranking the alternatives
Effectiveness
Cos
ts
Low costsHigh effective
High costsLow effective
High costsHigh effective
Low costsLow effective
Maximalacceptable budget
Minimal accepableeffectiveness
Not worth considering
Worth considering
Best possibilities
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
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}
∆WK
Outline
Disease control: optimization
Modeling disease
The cow level: reproduction
The herd level: trypanosomosis - costs
The herd level: mastitis - prevention
Final remarks
Two decisions around reproduction
When do I start with inseminations
When do I stop with insemination
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 complexsystem of
dynamics andinteractions
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
Stochastic dynamic modelling
• Breed
• Parity
• Month of calving
• Milk production
• Farm level
• Relative performance
• Persistence
Cow
START OF CYCLE
39
Calf
Ovulation
Oestrusdetected
Insemination
Conception
yes
yes
yes
yes
no
no
no
no
cow
Probabilitiesbased on cow
factors
Average results
Voluntary waiting periods
6 wk 7 wk 9 wk 11 wk 13 wk 15 wkFirst insemination
10.9 11.5 13.1 14.8 16.8 18.5Calving interval
391 393 401 410 421 433MP/cow/year (kg)
8200 8188 8157 8112 8056 7997Insemations
1.89 1.86 1.78 1.74 1.70 1.69Calves/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
Economic consequences (€/cow/year)
Voluntary waiting periods
7 wks 9 wks 11 wks 13 wks 15 wksMilk 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
Average
0
10
20
30
40
50
60
6 7 8 9 10 11 12 13 14 15VWP (weeks)
Net
loss
es (
€/co
w/y
ear)
Outline
Disease control: optimization
Modeling disease
The cow level: reproduction
The herd level: trypanosomosis - costs
The herd level: mastitis - prevention
Final remarks
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
Model structure
Parameterization
Based on literature
Data collection (interviews with experts)
Own expertise
Prevalence over the year
January
February
March
April
May
June Ju
ly
August
September
October
November
December
0
5
10
15
20
25
30
0510152025303540
Mixed production system
Clinical Subclinical Prevalence
January
February
March
April
May
June Ju
ly
August
September
October
November
December
0
5
10
15
20
25
0
10
20
30
40
50
Agro-Pastoral production system
Clinical Subclinical Prevalence
January
February
March
AprilMay
June Ju
ly
August
September
October
November
December
0
10
20
30
40
50
60
70
051015202530354045
Pastoral production system
Clinical Subclinical Prevalence
Total costs (KES * 1.000 per farm per year)
Veterinary fees Extra labour/feeds
Milk losses Cost of Drugs Mortality Traction Abortion
2
4
6
8
10
Pastoral production sys-tem
Agro pastoral Production system
Mixed Production system
Cost
s per
cow
(KES
* 1
,000
)
Total costs:Pastoral production system: 679 (447-849)Mixed production system: 234 (105-373)Agro pastoral production system: 139 (60-222)
Outline
Disease control: optimization
Modeling disease
The cow level: reproduction
The herd level: trypanosomosis - costs
The herd level: mastitis - prevention
Final remarks
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)
Remember this one?
High losses, low control expenditures
Low losses, high control expenditures
Optimal
Preventive costs (€)
Failure costs(€)
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)
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
=
=
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
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
Failure costs vs preventive costs
Outline
Disease control: optimization
Modeling disease
The cow level: reproduction
The herd level: trypanosomosis - costs
The herd level: mastitis - prevention
Final remarks
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)
Rea
l co
sts
(€/c
ow
)
46 under estimators
Huijps et al., 2008
There is more than economics
Money is only one motivator
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
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
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
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.nlh.hogeveen@uu.nl
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