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A Potential Influenza Pandemic: Possible Macroeconomic Effects and Policy Issues

A Potential Influenza Pandemic: Possible Macroeconomic Effects and Policy Issues. Julie Somers Congressional Budget Office Prepared for the Ninth Annual Pipeline Project Conference, July 15, 2006. CBO’s Mission. Budget projections under current laws and policies

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A Potential Influenza Pandemic: Possible Macroeconomic Effects and Policy Issues

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  1. A Potential Influenza Pandemic: Possible Macroeconomic Effects and Policy Issues Julie Somers Congressional Budget Office Prepared for the Ninth Annual Pipeline Project Conference, July 15, 2006

  2. 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

  3. 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

  4. 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

  5. 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)

  6. 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

  7. 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

  8. 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).

  9. 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

  10. Challenges in the Flu Vaccine Market • Vaccine Supply • Vaccine Demand • Vaccine Allocation

  11. 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

  12. 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

  13. 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

  14. 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

  15. Administration’s plan • Requested $7.1 billion (FY06 – FY08) • Congress provided • $3.8 billion for FY2006 • $2.3 billion for FY2007 • ?? FY2008

  16. 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)

  17. 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

  18. Develop Domestic Production Capacity • Egg-Based Vaccine Production • Goal - 20% of future capacity • Would have to increase sevenfold • $531 million of FY2006 funds

  19. 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

  20. Develop Domestic Production Capacity • Cell-Based Vaccine Production • May take much longer to develop • May delay adoption of better techniques • Adjuvants • DNA-based vaccines • Requires on-going government support • Universal vaccination against seasonal flu • Stockpiles of prepandemic vaccine • Provide seasonal flu vaccine to developing countries

  21. Congressional Budget Office Questions and Answers For more information, visit: www.cbo.gov

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