Externalities in Infectious Disease

Ramanan LaxminarayanResources for the Future

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Overview

• Common theme – externalities– Across sub-populations– Across institutions– Across national borders

• Antibiotic resistant hospital infections

• Antimalarial resistance

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1999 2000 2001 2002 2003 2004 2005

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Estimated MRSA-related hospitalization rate*, 1999–2005 United States

Klein, Smith, Laxminarayan, Emerg Infect Dis, Dec 2007

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Hospital Incentives

• Antibiotics are a substitute for infection control

• Antibiotics are billable to payers (unlike infection control)

• Hospitals may actually benefit from longer stays

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Who pays for these infections?

• Medicare/Medicaid bear greatest burden of additional cost

• 76% of 11,668 HAIs in 2004 billed to federal Medicare ($1 billion cost)

• Rest to Medicaid ($372 million cost)

• $20 billion burden on Medicare nationwide

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Is the scale of the problem, the hospital?

• Hospitals are “sources” for colonization with resistant pathogens

• Health facilities often “share” patients (humans are the vector)

• Positive external benefits of active surveillance and infection control

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Hospital 1 Hospital 2

Community

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Smith, Levin, Laxminarayan PNAS, 2005

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Smith, Levin, Laxminarayan, 2005 PNAS

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Multi-institution epidemics

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Smith, Levin, Laxminarayan, 2005 PNAS

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Regional coordination

• Dutch experience: frequency of MRSA infections is < 0.5% after an intensive ‘‘search-and-destroy’’ campaign, compared with 50% in some areas

• In Siouxland (Iowa, Nebraska, S. Dakota), an epidemic of VRE was reversed

• Regionally coordinated response to epidemic• Does this explain higher prevalence of ARB in

areas with high concentration of health care institutions?

• Will this work in the United States?

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Hospital 1 Hospital 2

Community

Subsidize Infection controlIn hospital 1

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Hospital 1 Hospital 2

Community

Subsidize Infection controlIn hospital 2

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Using treatment subsidies

• Greater infection control in the subsidized hospital

• Indirect network effect on unsubsidized hospital

• Which hospital to subsidize depends on economic returns to infection control within that hospital

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How do hospitals respond to subsidy?

Cooperators

Spend more than they would have without subsidy

Free riders

Spend less than they would have without subsidy (but overall infection control increases to small extent)

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How do hospitals respond to greater infection control in other hospitals?

Cooperators

Increase infection control

Free riders

Lower infection control

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Cooperator Free-rider

Community

Subsidize infection controlIn cooperator

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Cooperator Free-rider

Community

Subsidize infection controlIn free-rider

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Result

A. Subsidizing cooperators increases their infection control but decreases infection control in free-riders

B. Subsidizing free-riders makes a small difference to their infection level but increases infection control in cooperators

Indirect (network) effects outweigh direct effects so solution is to subsidize free riders

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Summary

1. Drug resistant hospital infections are increasing

2. Economic incentives strongly influence incentives for hospital infection control

3. Regional coordination and hospital subsidies can lower prevalence of drug resistant hospital infections

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www.extendingthecure.org

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Global spread of chloroquine-resistant strains of P. falciparum

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Qinghaosu

• Artemisinin and derivatives extensively tested in China beginning in late 1970s

• Used widely to treat malaria by 1980s in China, 1990s in other Asian countries

• Very rapid-acting, well-tolerated, minimal toxicity

• Short half-lives necessitate combination therapy

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Slide Courtesy: Phil Rosenthal

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No Country is an Island

• Misuse or artemisinin monotherapy in any single country could have consequences for malaria control worldwide

• Need for global strategy to ensure that resistance is delayed to extent possible

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Global subsidy for Artemisinin Combinations (ACTs)

• Global subsidy for artemisinin drugs

• Make ACTs as cheap as chloroquine

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What would a subsidy do?

• Save lives and lower burden of malaria

• Discourage monotherapy by lowering price of ACTs

• Stimulate the ACT market and allow for lower prices by ensuring a stable demand

• Maintain the impetus to produce new antimalarial drugs

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Why a global subsidy?

• Allow ACTs to flow through both public and private sector channels

• Give the international community leverage to discourage production of monotherapies

• Minimize administrative costs of subsidy

• Minimize incentives for counterfeit drugs, diversion and smuggling of ACTs

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Could a subsidy increase the likelihood of resistance?• Possible if the effect of a subsidy on

lowering monotherapies is less than effect on increasing ACT use (and overuse)

• Depends on how ACT use and Artemisinin/partner drug monotherapy change in response to the subsidy

Laxminarayan, Over, Smith, World Bank Policy Research Paper, 2005

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Main Findings

• Regardless of the degree of responsiveness of antimalarial consumption to price, a subsidy to ACT would save lives even if it hastened the arrival of parasite resistance to artemisinin-based drugs.

• Consequences of a delay in instituting a subsidy

• Multiple first line treatments

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Other applications

• Financing malaria elimination

• Species conservation in transnational parks

• Reporting of disease outbreaks

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Summary

• Infectious diseases involve externalities

• Challenge is in incentivizing sub-populations to behave in ways that are not consistent with their self-interest

• Useful application of game theory to infectious disease models