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MONDAY, JANUARY 25, 2010
Economics of Flu Vaccines
by Colleen O'Rourke
In the last few months, the H1N1 influenza
virus, or “swine flu,” has been dominating the news, and many people are worried about
access to flu vaccines or “flu shots.” (That is, unless you work for Goldman Sachs, who got
first dibs. But don’t they always?)
Unlike other viral diseases, flu viruses constantly mutate, or change into new “strains.” A
vaccine that works to protect against a specific strain one year will probably not work to
prevent against a new strain the next year. Because of this, hundreds of hours of lab work
are devoted each year to identifying specific flu strains, developing a vaccine against them,
and then producing that vaccine in large enough quantities to distribute to the population.
This year, the efforts of flu vaccination labs have been split, with only some of the labs
producing vaccines against the "regular" flu, and the rest working on vaccines against the
specific H1N1 swine flu strain. Because of this, the supplies of the regular flu vaccine are
greatly reduced, and the supplies of the H1N1 vaccine are limited. Since both vaccines are
necessary to completely protect against the flu, the amount of both vaccines is not enough
to inoculate the same number of people who would normally have been covered by the
"regular" flu vaccine alone in previous years.
Given the scarcity of both traditional and swine flu vaccines, how should the existing vaccine
be distributed? If the goal is to maximize societal health, the flu vaccine should first be
given to those whose health would benefit from it the most, who are people at risk of
complications and death from the flu, including young children, the elderly, and the
immuno-compromised. On the other hand, if the goal is to minimize the cost of the flu to an
economy, the most productive and important members of society should get the first
vaccine.
To a certain extent, extreme examples on both ends are small in number and easy to take
care of. For example, health care employees are at greater risk of contracting any disease
and, consequently, of infecting those whose health is vulnerable. So it’s clear they should be
the first in line to get the vaccine. But what about people who don’t have such critical jobs
(and keep in mind that you probably qualify as one of these people)? This topic relates not
only to the health of the economy, but your personal health as well.
Discussion Questions:
1. Do you think that the goal of those who control flu vaccine policy should be to get the
best health outcome, to minimize the cost to GDP, or some combination of the two? What
public health policies would achieve your preferred policy goal?
2. Assume that society does want to maximize productivity in dollar terms rather than
health outcomes. Now, take into consideration the fact that those who do get sick might
require expensive medical treatment, the cost of which will be partially borne by society.
How does this alter the analysis of who should receive the vaccines?
3. Economists often are fond of markets as allocation mechanisms because the forces of
supply and demand determine a price that allocates goods to those who are willing to pay
for them the most. How would a market for flu vaccine work? Why is it different from a
market for non-life-affecting goods and services, like books or cars?
4. Firms (especially ones with high-productivity employees) value their employees’ health.
It is estimated that that the total yearly economic cost of the flu in the U.S. is over $80
billion. Many companies have started to recognize this and have made attempts to protect
their own economic interest by paying for or providing flu vaccines to their
employees. As a result, employees who otherwise may not have been vaccinated (since
the unsubsidized cost exceeds the expected health benefit) are more likely to accept the
free vaccine. Is this efficient? Is it equitable?
5. Vaccines have a limited shelf-life – that is, they can only be used for a particular period of
time if they are to be effective. For this reason, the timing of development, production, and
distribution of flu vaccines in the United States is largely based on the pattern of the flu
season in previous years. Go to Google Flu Trends to see a graph comparing the incidence
of flu activity in the United States this year with previous years. How does the current flu
season differ from previous years? If you were in charge of setting production policy for
2010, what might you change in order to produce the correct amount of vaccine for each
strain of flu at the appropriate time?
Labels: Costs of Production, Health Care, Market Failure, Tradeoffs
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