See the ugly cost of the next big flu pandemic. We can do more to prepare.

Summary: Epidemics of Ebola and Zika remind us of a danger too long ignored in favor of more glamorous model-based threats like global warming and fear-based nightmare jihadis with WMDs. Recurring epidemics are facts of history. Here 3 economists, including Larry Summers, look at the likely consequences of another influenza epidemic (like that of 1918, which devastated the world). Why are we not making more efforts to prepare?

“The Inclusive Cost of Pandemic Influenza Risk“

Victoria Y. Fan, Dean T. Jamison, and Lawrence H. Summers
National Bureau of Economic Research, March 2016

In any given year a small likelihood exists that the world will again suffer a very severe flu pandemic akin to the one of 1918. Even a moderately severe pandemic, of which at least 6 have occurred since 1700, could lead to 2 million or more excess deaths. World Bank and other work has assessed the probable income loss from a severe pandemic at 4-5% of global GNI. The economics literature points to a very high intrinsic value of mortality risk, a value that GNI fails to capture. In this paper we use findings from that literature to generate an estimate of pandemic cost that is inclusive of both income loss and the cost of elevated mortality.

We present results on an expected annual basis using reasonable (although highly uncertain) estimates of the annual probabilities of pandemics in two bands of severity. We find:

Expected pandemic deaths exceed 700,000 per year worldwide with an associated annual mortality cost of estimated at $490 billion. We use published figures to estimate expected income loss at $80 billion per year and hence the inclusive cost to be $570 billion per year or 0.7% of global income (range: 0.4-1.0%).

For moderately severe pandemics about 40% of inclusive cost results from income loss. For severe pandemics this fraction declines to 12%: the intrinsic cost of elevated mortality becomes completely dominant.

The estimates of mortality cost as a % of GNI range from around 1.6% in lower-middle income countries down to 0.3% in high-income countries, mostly as a result of much higher pandemic death rates in lower-income environments.

The distribution of pandemic severity has an exceptionally fat tail: about 95% of the expected cost results from pandemics that would be expected to kill over 7 million people worldwide.

Excerpt (references omitted)

The recent Ebola outbreak in Guinea, Liberia and Sierra Leone reminded the world that enormous economic and human costs result from the uncontrolled spread of deadly infection. Less noticed was that a pandemic with characteristics similar to that of influenza in 1918 would have killed about 10 times as many people in those three countries as did Ebola. Worldwide the death total from such a pandemic would be on the order of 2500 times higher than WHO’s estimate of a little over 11,300 Ebola deaths through the end of the epidemic on March 17, 2016.

…The historical record suggests that the 1918 influenza was an outlier among outliers, with unusual circumstances including the co-occurrence of World War I. No other influenza pandemic on record had such devastatingly high mortality rates, with estimates ranging from 20 million to 50 million (or more) excess deaths over the period 1918-20, but concentrated in 1918. (20 million deaths would comprise 1.1% of the world’s 1918 population.)

In addition to the severe pandemic of 1918 the sparse record suggests that there have been about 12-17 other pandemics since 1700. Of these we identify six as having substantial excess mortality, with mortality rates in the range of 3-8 SMU — see Table 1 (SMU: standardized mortality unit; 1 SMU means 0.01% of the population). While the world may be expected to experience moderately severe to severe pandemics several times each century, there is consensus among influenza experts that an event on the very severe scale of the 1918 pandemic may be plausible but remains historically and biologically unpredictable.

A modelling exercise for the insurance industry concluded that the ‘return period’ would be 100-200 years for a 1918-type pandemic, but acknowledged major uncertainty. While a biological replica of the 1918 flu would no doubt result in lower mortality rates than occurred in 1918, both that study and other analysts point to the possibility that exceptionally transmissible and virulent viruses could lead to global death rates substantially higher than in 1918.

… Next, using the UN’s current “World Population Prospects” (United Nations, 2015) age distributions of populations and life tables, we calculated excess deaths and the estimated reduction in life expectancy using these age-specific mortality rates. Table 3 shows the results for our severity categories.

Footnotes to table 3

Very substantial uncertainty adheres to all numbers in rows 2-4 of this table. …
‘Relative severity’ indicates severity in each income group relative to the high-income group. …

Conclusions

World Bank studies estimate that around 5% of global income as the probable income loss from a 1918-severity pandemic. In this paper we estimate the intrinsic cost of the excess deaths from potential pandemics and add that to income loss to provide an estimate of the expected annual inclusive cost of a very severe pandemic. Our estimate of the expected number of pandemic deaths per year is 720,000 (subject to major uncertainty).

It remains for other efforts to assess the costs and probable impact of investments to reduce the likelihood or probable severity of a pandemic. These investments potentially range from R&D toward a universal flu vaccine through pre-investment in manufacturing capacity for (or stockpiling of) drugs and vaccines to implementing global programs to immunize humans, swine and birds against seasonal flu. Important investments along these lines are indeed being made. It is our sense, however, that given this paper’s cost estimates for pandemic risk the economic benefits of further investments are likely to substantially exceed their costs.

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I leave it to you to compare the trivial sums we spend on programs to prevent and mitigate epidemics with the vast — almost uncountable — sums we spend on our wars, both waging them and preparing for the next one.

About the authors

Dean Jamison is a Senior Fellow in Global Health Sciences at UCSF and an Emeritus Professor of Global Health at the U of Washington. He previously held academic appointments at Harvard and UCLA and was an economist on the staff of the World Bank. Bio here.

Victoria Fan is an economist now working as an Asst Prof of Health Policy and Management at the U of Hawaii. Bio here.

Lawrence H. Summers is an eminent economist, now Prof Emeritus at the Harvard Kennedy School of Government. See Wikipedia.

For More Information

There are other bio-threats other than the flu: “Fears rise over yellow fever’s next move” by Declan Butler, Nature, 13 April 2016 — “Scientists warn vaccine stocks would be overwhelmed in the event of large urban outbreaks.” Also see “Superbugs are on track to kill 10 million people by 2050 if things don’t change—fast” by David Cox at Quartz, 12 April 2016.

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