Keith S. Howe

A framework for the economic analysis of disease in farm livestock

Abstract Economic studies on disease in farm livestock have focused largely on cost/benefit analyses of control programs or gross estimates of the costs due to particular diseases. Neither offers an adequate basis to guide economic decisions. This paper develops a framework with a more rigorous underpinning in economic concepts and principles. First, the total economic cost of a disease is explained in terms of two distinct components: (i) output losses following disease occurrence; (ii) expenditures made to treat disease or prevent its occurrence. We then develop the general relationship between these two components, calling it the ‘loss-expenditure frontier’, and use it to define the economically optimal level of disease costs. This shows that the relevant measures of the economic cost of disease are not the total cost figures usually estimated. The paper explains how, in principle, the loss-expenditure frontier can provide the appropriate information for decisions on disease control, and demonstrates this using survey data on subclinical mastitis in the UK dairy national herd.

Economic principles for resource allocation decisions at national level to mitigate the effects of disease in farm animal populations.

SUMMARY This paper originated in a project to develop a practical, generic tool for the economic evaluation of surveillance for farm animal diseases at national level by a state veterinary service. Fundamental to that process is integration of epidemiological and economic perspectives. Using a generalized example of epidemic disease, we show that an epidemic curve maps into its economic equivalent, a disease mitigation function, that traces the relationship between value losses avoided and mitigation resources expended. Crucially, elementary economic principles show that mitigation, defined as loss reduction achieved by surveillance and intervention, must be explicitly conceptualized as a three-variable process, and the relative contributions of surveillance and intervention resources investigated with regard to the substitution possibilities between them. Modelling the resultant mitigation surfaces for different diseases should become a standard approach to animal health policy analysis for economic efficiency, a contribution to the evolving agenda for animal health economics research.

An economic model to evaluate the mitigation programme for bovine viral diarrhoea in Switzerland

Economic analyses are indispensable as sources of information to help policy makers make decisions about mitigation resource use. The aim of this study was to conduct an economic evaluation of the Swiss national mitigation programme for bovine viral diarrhoea virus (BVDV), which was implemented in 2008 and concludes in 2017. The eradication phase of the mitigation programme comprised testing and slaughtering of all persistently infected (PI) animals found. First, the whole population was antigen tested and all PI cattle removed. Since October 2008, all newborn calves have been subject to antigen testing to identify and slaughter PI calves. All mothers of PI calves were retested and slaughtered if the test was positive. Antigen testing in calves and elimination of virus-carriers was envisaged to be conducted until the end of 2011. Subsequently, a surveillance programme will document disease freedom or detect disease if it recurs. Four alternative surveillance strategies based on antibody testing in blood from newborn calves and/or milk from primiparous cows were proposed by Federal Veterinary Office servants in charge of the BVDV mitigation programme. A simple economic spreadsheet model was developed to estimate and compare the costs and benefits of the BVDV mitigation programme. In an independent project, the impact of the mitigation programme on the disease dynamics in the population was simulated using a stochastic compartment model. Mitigation costs accrued from materials, labour, and processes such as handling and testing samples, and recording results. Benefits were disease costs avoided by having the mitigation programme in place compared to a baseline of endemic disease equilibrium. Cumulative eradication costs and benefits were estimated to determine the break-even point for the eradication component of the programme. The margin over eradication cost therefore equalled the maximum expenditure potentially available for surveillance without the net benefit from the mitigation programme overall becoming zero. Costs of the four surveillance strategies and the net benefit of the mitigation programme were estimated. Simulations were run for the years 2008-2017 with 20,000 iterations in @Risk for Excel. The mean baseline disease costs were estimated to be 16.04 m CHF (1 Swiss Franc, CHF=0.73 € at the time of analysis) (90% central range, CR: 14.71-17.39 m CHF) in 2008 and 14.89 m CHF (90% CR: 13.72-16.08 m CHF) in 2009. The break-even point was estimated to be reached in 2012 and the margin over eradication cost 63.15m CHF (90% CR: 53.72-72.82 m CHF). The discounted cost for each surveillance strategy was found to be smaller than the margin, so the mitigation programme overall is expected to have a positive net economic benefit irrespective of the strategy adopted. For economic efficiency, the least cost surveillance alternative must be selected.

Economic evaluation of the surveillance and intervention programme for bluetongue virus serotype 8 in Switzerland

Empirical analyses founded on sound economic principles are essential in advising policy makers on the efficiency of resource use for disease mitigation. Surveillance and intervention are resource-using activities directed at mitigation. Surveillance helps to offset negative disease effects by promoting successful intervention. Intervention is the process of implementing measures (e.g. vaccination or medication) to reduce or remove a hazard in a population. The scale and ratios in which the two are combined affect the efficiency of mitigation, its costs, benefits, and thus net effect on societys well-being. The Swiss national mitigation programme for bluetongue virus serotype 8 was used as case study to investigate the economic efficiency of mitigation. In 2008, Switzerland implemented a vaccination programme to avoid and reduce disease and infection in its ruminant population. To monitor the vaccination programme and the vector dynamics, a surveillance system consisting of serological and entomological surveillance was established. Retrospective analyses for the years 2008-2009 and prospective analyses for the years 2010-2012 were conducted to investigate if the mitigation programme was economically beneficial. In the retrospective analysis, the implemented programme (=comparative scenario) was compared to a hypothesised baseline scenario of voluntary vaccination and surveillance. In the prospective analysis, the comparative scenario assumed to continue was compared to two baseline scenarios: one of voluntary vaccination combined with surveillance and one of no vaccination combined with surveillance. For each scenario, monetary surveillance, intervention and disease costs were calculated. The comparison of baseline and comparative scenarios yielded estimates for the total benefit (=disease costs avoided), margin over intervention cost and the net value of the programme. For 2008-2009, in aggregate, the mean biannual total benefit was 17.46 m Swiss francs (CHF) (1CHF=0.66€ at the time of analysis) and the mean net benefit after subtraction of the intervention and surveillance cost was 3.95 m CHF. For the three years 2010-2012, overall net costs were estimated at 12.93 m and 8.11 m CHF, respectively, for comparison of the implemented mitigation programme with the two baseline scenarios. It was concluded that the surveillance and intervention programme implemented in 2008-2009 was economically beneficial, while its continuation in the same form in 2010-2012 would produce net costs. These costs were due to the mean intervention cost remaining constant at a level of approximately 11 m CHF per year while the mean total benefit would be gradually reduced in 2010-2012 due to the reduced occurrence of disease in a fully vaccinated population.

A qualitative approach to measure the effectiveness of active avian influenza virus surveillance with respect to its cost: a case study from Switzerland.

The aim of the project was to apply cost-effectiveness analysis to the economic appraisal of avian influenza virus (AIV) surveillance, using the implemented surveillance programme in Switzerland as a case study. First a qualitative risk assessment approach was used to assess the expected impact of surveillance on the transmission and spread of AIV. The effectiveness of surveillance was expressed as the difference in defined probabilities between a scenario with surveillance and a scenario without surveillance. The following probabilities were modelled (i) transmission of highly pathogenic AIV (HPAIV) from wild birds to poultry, (ii) mutation from low pathogenic AIV (LPAIV) into HPAIV in poultry, and (iii) transmission of HPAIV to other poultry holdings given a primary outbreak. The cost-effectiveness ratio was defined conventionally as the difference in surveillance costs (ΔC) divided by the change in probability (ΔP), the technical objective, on the presumption that surveillance diminishes the respective probabilities. However, results indicated that surveillance in both wild birds and poultry was not expected to change the probabilities of primary and secondary AIV outbreaks in Switzerland. The overall surveillance costs incurred were estimated at 31,000 €/year, which, to be a rational investment of resources, must still reflect the value policy makers attribute to other benefits from having surveillance (e.g. peace of mind). The advantage of the approach adopted is that it is practical, transparent, and thus able to clarify for policy makers the key variables to be taken into account when evaluating the economic efficiency of resources invested in surveillance, prevention and intervention to exclude AIV.

A Framework for Categorization of the Economic Impacts of Outbreaks of Highly Contagious Livestock Diseases.

A framework for categorization of economic impacts of outbreaks of highly contagious livestock diseases (HCLD) is presented. This framework interprets veterinary measures to control HCLD outbreaks with reference to economic definitions of costs and benefits, and the implications for value losses both for different stakeholders affected and society as a whole. Four cost categories are identified, that is virus control-related direct costs (DC), spread prevention and zoning-related direct consequential costs (DCC), market and price disruption-related costs during (indirect consequential costs, ICC) and after the outbreak (aftermath costs, AC). The framework is used to review existing literature on cost estimation for different stakeholders. This review shows considerable differences between studies, making comparison of results difficult and susceptible to misunderstanding. It is concluded that the framework provides a logical basis for all future analyses of the economic impacts of HCLD.

A case for agricultural support in Central and Eastern Europe

Abstract Despite the fact that most of the economies of Central and Eastern Europe have introduced radical agrarian reform, including in most cases the disbanding of the state and collective farm system, agriculture in the region remains in deep recession. The successful development of private farming in the region is dependent upon developed market economies opening up their economies to food and agricultural imports from Central and Eastern Europe. Given that this is unlikely in the short term, state support tor agriculture seems unavoidable and can be justified if limited to the extent that world market prices are distorted downwards by the protectionist policies of the developed market economies.