A Potential Influenza Pandemic: Possible Macroeconomic Effects and Policy Issues

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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

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CBOs Mission

• Budget projections under current laws and
  policies
• Analysis of the Presidents budgetary proposals
• Estimates of budgetary costs of legislation
  approved by Congressional committees
• Reports that analyze issues that are significant
  for the budget

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CBOs 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

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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

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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)

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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

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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

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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).

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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

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Challenges in the Flu Vaccine Market

• Vaccine Supply
• Vaccine Demand
• Vaccine Allocation

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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

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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

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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

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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

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Administrations plan

• Requested 7.1 billion (FY06 FY08)
• Congress provided
• 3.8 billion for FY2006
• 2.3 billion for FY2007
• ?? FY2008

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Administrations 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)

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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

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Develop Domestic Production Capacity

• Egg-Based Vaccine Production
• Goal - 20 of future capacity
• Would have to increase sevenfold
• 531 million of FY2006 funds

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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

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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

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Congressional Budget Office

• Questions and Answers
• For more information, visit www.cbo.gov