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Pricing Strategies for Reducing Obesity
2011 Leadership for Health Communities Childhood Obesity Prevention Summit
Making the Connection: Effective Approaches to Preventing Childhood Obesity
Washington DC, September 8, 2011
Frank J. Chaloupka, PhD
Distinguished Professor of Economics and Public Health
University of Illinois at Chicago
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Overview
• Why Pricing Strategies?
• What Pricing Strategies?
• Food Prices, Consumption and Obesity
• Beverage Taxes, Consumption and Obesity
• Pricing Policies to Promote Activity
Thanks to Lisa Powell, Jamie Chriqui, and other Bridging
the Gap colleagues
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Cigarette Prices & Cigarette Sales
1970-2010, Inflation Adjusted
Source: Tax Burden on Tobacco, BLS, and author’s calculations
$1.60
$2.10
$2.60
$3.10
$3.60
$4.10
$4.60
$5.10
$5.60
14500
16500
18500
20500
22500
24500
26500
28500
30500
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Pri
ce (
Ju
l..
2011 d
oll
ars
)
Sale
s (
millio
n p
acks)
Year
Sales Price
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Cigarette Prices & Adult Smoking Prevalence 2009
Source: Tax Burden on Tobacco, BRFSS, and author’s calculations
y = -0.0132x + 25.518 R² = 0.1729
9
11
13
15
17
19
21
23
25
350 400 450 500 550 600 650 700 750 800 850
Pre
va
len
ce
Average price, (in cents)
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Cigarette Prices & Youth Smoking Prevalence
2009
Source: Tax Burden on Tobacco, YRBS, and author’s calculations
y = -0.0129x + 25.34 R² = 0.1721
7
9
11
13
15
17
19
21
23
25
27
350 400 450 500 550 600 650 700 750 800 850
Pre
va
len
ce
Average price (in cents)
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Cigarette Prices, Cigarette Sales & Lung Cancer
1980-2006, Inflation Adjusted
Source: Medscape
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• Increases in prices of less healthy foods & beverages
• taxes, elimination of corn subsidies, disallow purchases under food assistance programs
• Reductions in prices of healthier foods & beverages
• subsidies, expanded or favored treatment under food assistance programs, purchasing cooperatives
• Increases in the costs of sedentary behaviors • taxes on video games, etc.; increased health & life insurance premiums
• Reductions in the costs of physical activity • tax credits for fitness programs, health club memberships, etc. ; exempt sports equipment from sales taxes
Pricing Policies to Curb Obesity
Source: Powell and Chaloupka, 2009; Chaloupka et al., 2009
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Selected Food Price & Obesity Trends
1961-2009, Inflation Adjusted
Source: BLS; NHES-I 1960-62; NHANES, 1971-74, 1976-80, 1988-94, 1999-2000, 2001-02, 2003-04, 2005-06
10
15
20
25
30
35
190
210
230
250
270
290
310
330
1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Fruits & Veg Fresh Fruits & Veg % Obese
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Selected Food Price & Obesity Trends 1978-2009, Inflation Adjusted
Source: BLS; NHES-I 1960-62; NHANES, 1971-74, 1976-80, 1988-94, 1999-2000, 2001-02, 2003-04, 2005-06
13
18
23
28
33
140
150
160
170
180
190
200
210
220
230
240
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008
Carb. Bev. Sweets % Obese
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Selected Food Prices & Youth Obesity Trends 1971-2009, Inflation Adjusted
Source: BLS; NHANES, 1971-74, 1976-80, 1988-94, 1999-2000, 2001-02, 2003-04, 2005-06
3.9
5.9
7.9
9.9
11.9
13.9
15.9
17.9
19.9
207
227
247
267
287
307
327
1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
Fruits & Veg Fresh Fruits & Veg 2-5 6-11 12-19
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Selected Food Prices & Youth Obesity Trends 1971-2009, Inflation Adjusted
Source: BLS; NHANES, 1971-74, 1976-80, 1988-94, 1999-2000, 2001-02, 2003-04, 2005-06
0
5
10
15
20
25
140
160
180
200
220
240
260
1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
Carb. Bev. Sweets Fast Food 2-5 6-11 12-19
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A recent review of studies on the impact of food and beverage prices on consumption
of various products; estimates suggest 10% own-price increase would reduce:
• Cereal consumption by 5.2%
• Fruit consumption by 7.0%
• Vegetable consumption by 5.9%
• Soft drink consumption by 7.8%
• Sweets consumption by 3.5%
• Food away from home consumption by 8.1%
Source: Andreyeva, T, M Long, and K. D. Brownell, "The impact of food prices on consumption: a systematic review of research on price
elasticity of demand for food." American Journal of Public Health. 100 (2010): 216-222.
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Evidence from MTF: Community Food Environment and Youth Fruit and Vegetable Consumption and BMI
•Find that:
• Youth in communities with lower fruit and vegetable prices
have more frequent fruit & vegetable consumption and lower
BMI
• Youth in communities with lower fast food prices have less
frequent fruit & vegetable consumption, higher BMI, and are
more likely to be overweight
•10 percent rise in fast food prices would increase probability
of frequent F&V consumption by 3%, reduce BMI by 0.4%
and lower probability of being overweight by 5.9%
Source: Powell, et al., Advances in Health Economics and Health Services Research, 2007
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Evidence from MTF: Community Food Environment and Youth BMI
•Find that:
•Impact of both fast food and fruit & vegetable
prices greatest among youth in top of BMI
distribution (most at risk group)
•Above 90th percentile, fast food price impact 4 times
larger than average effect for full sample
•Above 95th percentile, fruit & vegetable price impact 5
times larger than average effect
•Little impact of prices at low/mid-ranges of BMI
•Supermarket availability inversely associated with BMI
at all levels, with greater impact on upper end
Source: Auld and Powell, Economica, 2009
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• Raised/lowered prices of 68 widely consumed foods and beverages by
12.5% and 25%
• Taxes on high calorie, low nutrient density foods:
• Reduced purchases of high calorie, low nutrient foods
• Increased purchases of low calorie, high nutrient foods
• Increased proportion of protein, reduced proportion of fat purchased
• Reduced overall calories purchased
• Subsidies on low calorie, high nutrient density foods:
• Increased purchases of low calorie, high nutrient foods
• Increased purchases of high calorie, low nutrient foods
• Increased purchases of fat, protein, and carbohydrates
• Increased overall calories purchased
• Suggests that taxing less healthy foods will reduce calories and weight, while
subsidies unlikely to have significant impact
Experimental Evidence
Source: Epstein LH, Dearing KK, Roba LG, Finkelstein E (2010). The influence of taxes and subsidies on energy
purchased in an experimental purchasing study. Psychological Science 21(3):406-414.
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y = 16.44ln(x) + 6.1142 R² = 0.6656
40
45
50
55
60
65
70
10 15 20 25 30 35 40
%
o
f
A
d
u
l
t
s
W
h
o
A
r
e
O
v
e
r
w
e
i
g
h
t
o
r
O
b
e
s
e
% Adults Drinking One or More Sodas per Day
Soda Consumption and Weight Outcomes California Counties, 2005
Source: CA Center for Public Health Advocacy & UCLA Center for Health Policy Research 2009
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Sources: Bureau of Labor Statistics, Youth Risk Behavior Surveillance System on-line, and authors' calculations
10.4
10.9
11.4
11.9
12.4
12.9
144
146
148
150
152
154
1999 2001 2003 2005 2007 2009
P
e
r
c
e
n
t
O
b
e
s
e
I
n
f
l
a
t
i
o
n
A
d
j
u
s
t
e
d
C
a
r
b
o
n
a
t
e
d
B
e
v
e
r
a
g
e
P
r
i
c
e
I
n
d
e
x
Carb. Bev. % Obese, Youth
Carbonated Beverage Prices & Youth Obesity Prevalence 1999-2009, Inflation Adjusted
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Note: Three states also impose a mandatory statewide local tax that is not reflected in the above data: CA (1%), UT (1.25%), VA (1%).
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USDA study on SSB and other beverage consumption estimates that a 10% price increase in SSB prices would result in the following changes in consumption :
Own-price effect:
• SSBs: -12.6%
Cross-price effects:
• Diet beverages: - 4.6%
• Skim milk: +2.0%
• Low-fat milk: +1.2%
• Whole milk: +2.2%
• Juices: +5.6%
• Coffee/tea: -3.8%
• Bottled water: +7.5%
Source: Smith, T. A., B.-H. Lin, and J-Y Lee. Taxing caloric sweetened beverages: Potential effects on beverage consumption, calorie
intake, and obesity. Economic Research Report Number 100. 2010. United States Department of Agriculture, Economic Research Service.
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Evidence on Soda Taxes and Weight
• Generally modest associations between existing soda taxes and body
weight, obesity
• based on the existing low state sales tax rates applied to all carbonated
beverages which range up to just 7%
• Complicated by substitution to other caloric beverages and other sources of
calories in response to taxes on some beverages
• Sizable, sugar-sweetened beverage taxes (e.g. 1-2 cents per ounce)
likely to have measureable effects on BMI and obesity prevalence
• Greater impact on youth, lower-income, and higher weight populations
• Would generate significant revenues that could support obesity prevention
and reduction programs
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• Provincial/Federal income tax credits for costs of enrolling in organized
physical activity program
• Some provinces have gone further with a refundable credit for those who do not
owe income tax
• Federal tax credit for public transit passes
• 5-6% uptake of various credits
• Little reason to expect tax credits to significantly increase activity and reduce
obesity
• Modest credits relative to costs (~15%)
• Disconnect between time of spending and when credit is claimed
• Substitution of one type of activity to another with little or no net increase in
activity
• Used by those already active
• Significant lost tax revenues
Canadian Experience
Source: von Tigerstrom B, Larre T, Sauder JA (2011). Using the tax system to promote physical activity: critical
analysis of Canadian initiatives. American Journal of Public Health, 101(8):e10-e16/
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• Exemption of some products/services from provincial sales taxes
• Bicycles, bike parts; recreational and athletic programs
• Likely to have more of an impact than tax credits, but unlikely to have
significant impact
• Reduction in price immediate
• Relatively modest price affect
• Substitution among different types of activity in response to which are treated
favorably
• Need to consider whether or not the funds foregone by tax credits, rebates,
exemptions could have been spent more effectively on other programs
targeting obesity
Canadian Experience
Source: von Tigerstrom B, Larre T, Sauder JA (2011). Using the tax system to promote physical activity: critical
analysis of Canadian initiatives. American Journal of Public Health, 101(8):e10-e16/
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• Sizable taxes on less healthy foods/beverages:
• Significantly reduce consumption of taxed products
• Would almost certainly have population level impact on obesity,
particularly among high risk populations
• Generate significant revenues that could be used to support
obesity prevention and reduction programs
• Sugar-sweetened beverage excise tax of 1-2 cents per ounce
most promising
Summary & Conclusions
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• Subsidies for healthier foods/beverages:
• Significantly increase consumption of subsidized products
• May increase consumption of other, less healthy products
• Net impact on diet, caloric intake and weight likely positive,
but likely less than for comparable tax
• Costly to implement
• Subsidies of fruits & vegetables through food assistance
programs most promising
Summary & Conclusions
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• Pricing policies to promote activity:
• Few have been tried, little evidence of impact
• Costly
• Unlikely to have population level impact on obesity
• Much more research needed
Summary & Conclusions
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ImpacTeen
http://www.impacteen.org
Bridging the Gap
http://www.bridgingthegapresearch.org
Contact: [email protected]