Swine flu vaccines and elasticity of supply
The scale of the ordering of swine flu vaccinations by governments across the world is eye-wateringly large! GlaxoSmithKline plc - one of the world’s biggest pharma companies has reported that governments around the world have so far ordered 440 million doses of its pandemic swine-flu vaccine Pandemrix. GlaxoSmithKline has been engaged in a tense race to get new swine flu vaccines onto the market fighting the likes of Sanofi-Aventis, Novartis AG and AstraZeneca to win contracts for public health programmes. For students of the price mechanism it is a fascinating example of many supply and demand concepts at work:
The challenge of scaling up production to meet huge levels of demand - this has involved out-sourcing
The relative importance of fixed and variable costs in developing and manufacturing/distributing a new drug
The elasticity of supply of vaccines to meet short term health requirements
The oligopolistic race to win and protect market share
Economies of scale in production
The balance of power between the major buyers and the multinational drug suppliers
Price discrimination tactics
The Guardian reports that:
“The company makes the vaccine in Dresden and Quebec but the demand is so great – about 60% higher than for usual seasonal vaccines – that it is also outsourcing production to third-party manufacturers.”
According to the Wall Street Journal
“Glaxo hasn’t released information on cost per dose of the vaccine. However, Chief Executive Andrew Witty said in July that Glaxo was charging wealthy nations $10.26 per H1N1 vaccine shot and developing countries less. The drug maker is also donating 50 million doses to the World Health Organization.”
The Independent reports that
“The United States has begun a massive campaign aiming to vaccinate 250 million people against the illness by year’s end.”
And the Times reports that “total booked orders for the drug are worth about £2.2 billion — a significant sales and profit windfall as a result of the swine flu epidemic”
Demographic change - the rise of the ‘oldest old’
The ONS published a focus on the elderly last week and some of the summary changes in age structure for the UK population can be found here. One of their key findings is that the number of people living beyond 85 years of age is set to grow rapidly in the years ahead. This will have important effects on the pattern of demand for different goods and services and the pressures on health and welfare services. Students might use some of these figures to tease out some of the likely consequences for the British economy going forward and also for the effects on our quality of life as we age According to the ONS,
“The fastest population increase has been in the number of those aged 85 and over, the ’oldest old‘. In 1983, there were just over 600,000 people in the UK aged 85 and over. Since then the numbers have more than doubled reaching 1.3 million in 2008. By 2033 the number of people aged 85 and over is projected to more than double again to reach 3.2 million, and to account for 5 per cent of the total population.”
Half of new born babies can expect to live to 100! This BBC video is sure to promote some discussion.
Here is the link to the ONS ageing population interactive map
Scots may lead the way in setting minimum price for alcohol
The smoking ban first came in north of the border and now we find that the Scottish government has been proactive in trying to curb the economic and social costs of high alcohol consumption and binge drinking. Establishing a minimum price per unit of alcohol seems like an obvious economic approach to the issue and this report by Colin Blane looks at the plan for a minimum price of 40p per unit - making a bottle of wine at least £3.60.If it works the number of hospital admissions could be cut by many thousands per year. Will Scotland become the first country in Europe to go down this path? This short video piece would make a good starter resource for a lesson on intervention options and an evaluation of their potential impacts.
Economics of Healthcare - Introductory AS Microeconomics
I won’t be alone in choosing the thorny issue of healthcare as an introductory topic in AS microeconomics when we kick off next week. The agenda is vast and it is a topic that can be returned to on a regular basis as students accumulate a body of knowledge, concepts and fine-tune their evaluation skills. There is a streamed presentation available here
read more...»The Price of Life
What is a year of your life worth? The Appraisals Board at the National Institute for Health and Clinical Excellence (NICE) is charged with evaluating the benefits of a variety of drugs and treatments before they are provided on the NHS. This BBC documentary investigates the issues involved in the provision of a treatment for Myeloma, Revlimid.
read more...»Questions in Behavioural Economics - Presumed Consent for Organ Donation
Keshav Dimri considers whether we should move towards a system of presumed consent for organ donation and brings into play behavioural economics concepts such as framing and default behaviour.
read more...»Finding affordable food
This short BBC article reports on a new study from the World Cancer Research Fund which claims that it is possible to eat a healthy diet even when family budgets are stretched close to breaking point.
“Increases in food prices, and pressures on the family budget because of continuing economic problems, may prompt people to buy less fruit and vegetables because they think they are too expensive and are worried about wastage.”
Canny consumers can save money by buying fruits and vegetables in season, making good use of price offers and searching for cheaper frozen vegetables and canned fruit.
The article links to some important AS micro issues:
read more...»
Could this be the UK’s first “fat tax”?
Should obese people be charged extra for their excess weight? Ryanair’s passengers think so…
read more...»Cash Incentives for Healthy Options
I often use Stephen Landsburg’s famous quote which claims that the whole of Economics can be summed up in four words “people respond to incentives” - so it was interesting to read in my morning newspaper that the Department of Health is considering rolling out a wider programme of cash incentives for people who can demonstrably show that they are making progress towards a healthier lifestyle.
Nicholas Timmins writes in the Financial Times that
“In Dundee, smokers are being offered £12.50 a week by the NHS if carbon monoxide testing shows they have quit. In Essex, pregnant women can claim a £20 food voucher from the NHS after stopping smoking for one week, £40 after four weeks and another £40 at the end of a year if they have still quit. Brighton offers children £15 for quitting smoking for 28 days, while overweight patients in Kent are also being offered incentives for losing weight.”
This short paragraph could form the basis of an excellent discussion about different forms of government intervention designed to affect health outcomes. I try to focus on three key words when teaching the impact of government intervention. Policies tend to work best when they are EFFECTIVE, EFFICIENT and EQUITABLE.
So what roles can direct financial incentives from the taxpayer for people to quit smoking, lose weight or eat better have both in the short term and over a longer time horizon?
If such incentives work what will be the longer term benefits for the health service and for the tax payer?
Are they better than regulations, taxation and attempts to improve information?
Is it fair to appear to reward unhealthy behaviour? What of those tax payers who do not smoke, maintain a healthy diet and weight and who make few if any claims on the health and welfare system?
Can the law of unintended consequences come into play? If you pay teenagers to stop smoking, will more of them start in the first place?
How will the cash payments be used?
USA triples the tax on cigarettes
I will resist the temptation to roll out the usual cigarette puns .... smokers fuming over tax rise etc etc ...but the news that the Federal tax on puffing away has risen so much remains of interest to economists….
The US government has introduced a huge rise in the tax on cigarettes - reported here by the BBC. For a 10-pack carton, the tax leapt to 10.06 dollars from 3.90 dollars.
It is a good example of how large scale increases in indirect taxes are needed to have a significant impact on demand and the timing of the tax hike is also interesting - is it better to raise taxes during an economic slump when household budgets are under great strain? Does this give people just the right incentive when they might be considering cutting back or stopping altogether? Note too that the article mentions how the extra tax revenue will be used - to pay for health care for uninsured children - an example of ‘earmarked’ or hypothecated taxation at work. Always assuming of course that the tax jump does lead to more revenue coming in.
Keep in mind that this is a federal tax and that individual states can (and do) levy their own supplementary duties on packets or cartons of cigarettes. With the combined city, state and recently raised federal tax, smokers in New York City pay about $10 per pack - $4 higher than in many southern states and a clear incentive for smuggling!
Higher taxes, health warnings, bans on smoking in public has reduced per capita consumption in the USA from almost 4,300 annually in 1965 to below 1,700 now but the market remains highly profitable.
The Law of Unintended Consequences at Staffordshire hospitals
Government intervention is carried out with the best of intentions, but can result in unintended consequences with resulting government failure (a deepening of the market failure or even worse a new failure which may arise). The case of the failures at the Staffordshire General Hospital reported yesterday gives a tragic example of this. A report by the Healthcare Commission, which is a regulator for the NHS, said there were deficiencies at “virtually every stage” of emergency care at the hospital, and up to 400 patients died as a result. This BBC report highlights a dreadful list of errors at the hospital’s Accident and Emergency department from the use of receptionists to carry out initial checks on patients to heart monitors being turned off on wards because nurses did not know how to use them. Various factors are identified as having led to this failure, the government’s target for patients to be seen within four hours at A&E which meant patients could be taken to “dumping grounds” to avoid breaching the target. The situation was only recognised after complaints from residents were backed up by statistics showing a high death rate.
read more...»
