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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

2 www.bridgingthegapresearch.org

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


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


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)


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)


Cigarette Prices, Cigarette Sales & Lung Cancer


Source: Medscape


• 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

Food Prices and Obesity Trends


Selected Food Price & Obesity Trends


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


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


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


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

Food Prices, Consumption and Obesity


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.


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


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


• 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.

Sugar Sweetened Beverage Taxes and Obesity


y = 16.44ln(x) + 6.1142 R² = 0.6656

40

45

50

55

60

65

70

10 15 20 25 30 35 40

%

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% 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


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

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Carb. Bev. % Obese, Youth

Carbonated Beverage Prices & Youth Obesity Prevalence 1999-2009, Inflation Adjusted


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%).


State sales taxes on selected beverages, January 1, 2011


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.


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

Pricing Policies to Promote Activity


• 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/


• 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/

Summary & Conclusions


• 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



• 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



• 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



ImpacTeen

http://www.impacteen.org

Bridging the Gap

http://www.bridgingthegapresearch.org

Contact: [email protected]

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