Economic Costs of Tobacco Use
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Policy Brief | April 2019 Economic Costs of Tobacco Use Introduction below 1% of gross domestic product (GDP). The total global economic cost of smoking is Tobacco use accounted for more than seven estimated at around $US 1.85 trillion, or around million deaths globally in 2015 (around five 1.8% of global GDP. Therefore, a significant million men and two million women). Around increase in tobacco taxes can help close the gap 80% of the deaths attributed to tobacco use between the cost of tobacco use and the revenue occurred in low- and middle-income countries generated from taxes on tobacco sales. (LMICs). 1 Tobacco use imposes a significant economic burden on a country, including the This policy brief discusses various categories of costs of healthcare to treat the diseases caused economic costs of tobacco use and presents the by tobacco and the lost productivity resulting available global evidence. It is based on the U.S. from tobacco-attributable morbidity and NCI and WHO 2016 Monograph, “The 2 mortality. 2, 3 Economics of Tobacco and Tobacco Control” and several other published sources. A For every person who dies due to tobacco use, at companion technical note published under the least 30 people live with a serious tobacco- same title provides more detail on the various related illness. Smoking causes cancer, heart methodologies applied in estimating the disease, stroke, lung disease, diabetes, and economic costs of tobacco use. chronic obstructive pulmonary disease, which includes emphysema and chronic bronchitis. Categories of economic costs Smoking also increases the risk for tuberculosis, of tobacco use certain eye diseases, and problems of the immune system, including rheumatoid arthritis. 4 While there are several categories of costs of Estimates of the economic costs of tobacco use tobacco use, most studies focus on direct and are relevant not only for determining the indirect costs. economic burden on a country, and for its Direct versus indirect costs financial planning, but also for pushing policymakers to implement effective tobacco Direct costs of tobacco use refer to the monetary value of goods and services consumed as a result control programs to reduce consumption, 5 especially increases in tobacco taxes. Despite of tobacco use and related illnesses, and consist that, reliable estimates of the economic costs of of healthcare costs (e.g., physician and other tobacco use still do not exist in many countries— service fees, medical supplies, medicines, etc.) especially in LMICs. Current levels of tobacco and non-healthcare costs (e.g., transportation, taxes fall short of recovering the true cost of food supplements, etc.). Indirect costs include tobacco use to national economies. In most the value of lost productivity and lost lives LMICs, the collection from tobacco taxes is resulting from illnesses related to tobacco use. Tobacconomics Policy Brief | www.tobacconomics.org | @tobacconomics Internal versus external costs vary widely across countries. Studies conducted In estimating the costs of tobacco use, total costs in LMICs mostly rely on more limited data and, should include both costs borne by the tobacco therefore apply less sophisticated methods than consumer (e.g., spending on tobacco purchases, those conducted in high-income countries healthcare costs incurred by the smoker), and (HICs). the uncompensated costs borne by others (e.g., A systematic review of studies conducted in healthcare costs as a result of exposure to various countries between 1990 and 2011 2 finds secondhand smoke). that direct and indirect smoking-related costs in Tangible versus intangible costs LMICs account for between 0.1% of GDP in Lao PDR to 3.4% of GDP in the Philippines, while Another category of economic costs direct costs alone range from 0.1% of GDP in distinguishes between tangible and intangible Mexico to 1.4% of GDP in Estonia (Figure 1). For costs of tobacco use. Tangible costs are HICs, direct and indirect costs account for measurable and easy to identify, such as between 0.3% and 2% of GDP, while direct costs healthcare costs and productivity losses. When range from 0.1% to 1% of GDP (Figure 2). A few tangible costs are reduced, they release financial studies have estimated the economic cost of resources which can be used for other purposes. smokeless tobacco; for example, the estimated Intangible costs, such as the value of lost life, or economic cost of smokeless tobacco-related pain and suffering due to illness, are far more cancers in Sri Lanka was $US 121.2 million in difficult to quantify. Unlike tangible costs, 2015 (or 0.15% of GDP), 7 while the economic reducing intangible costs does not release any cost of bidi consumption in India in 2017 was immediate financial resources for alternative estimated at INR 805.5 billion (or 0.48% of uses, but it increases welfare. Due to the GDP). 8 difficulty in quantifying intangible costs, most are underestimated, indicating that the burden The estimates of costs associated with of tobacco use on the economy is even higher secondhand smoke exposure are very limited. A than estimates may suggest. 2009 study in the U.S. estimates the total annual costs of treatment of conditions associated with Avoidable versus unavoidable costs secondhand smoke exposure in the state of Total costs of tobacco use are also made up of North Carolina (NC) to be $US 293.3 million, or avoidable and unavoidable costs. Avoidable costs 0.07% of NC GDP. 9 A similar estimate for the are those which could be reduced or eliminated state of Minnesota (MN) in 2008 was $US 228.7 at any time as a result of reduced tobacco million (or 0.08% of MN GDP). 10 In Hong Kong, 6 consumption. Unavoidable costs refer to already direct medical cost and productivity loss from existing tobacco-related illnesses and new cases secondhand smoke in 1998 was estimated at resulting from past or current tobacco use. $US 688 million (or 0.41% of GDP). After adding the value of attributable lives lost, the Global evidence on the economic cost was estimated to be $US 9.4 billion (or 5.6% costs of tobacco use of GDP). 11 Estimates of economic costs Estimates based on the existing evidence on the economic costs of tobacco use in terms of GDP Tobacconomics Policy Brief | www.tobacconomics.org | @tobacconomics Figure 1 Estimates of direct and indirect costs of smoking in LMICs (% of GDP) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 ) )* )* )* )* ** ) ) )* ) ) ) )* ** ) ) 07 4 6 2 9 ) 05 08 4 11 08 11 8 ) 98 03 - 0 0 0 9 98 0 0 0 0 0 0 9 04 9 0 06 0 0 0 9 9 (2 (2 0 (2 (2 (2 9 0 (1 (2 0 (2 (2 (2 (1 1 (2 (1 2 2 o d c r ( n a a m n ia a ( ry es ( ic n li a g ta in si a no d ni h a n R x la b m n is h y tn a In o es g pi D e ai pu n o k C la ie b st d un p P M h e ya K be a V e E la ili o T R g z M L g H h a h M on U n P L c H a ze B C Source: NCI WHO (2016) 2 and Hoang Anh et al., (2016) 26 * Estimate includes only direct costs; ** Estimate includes costs attributed to SHS exposure Figure 2 Estimates of direct and indirect costs of smoking in HICs (% of GDP) 2.5 2.0 1.5 1.0 0.5 0.0 * * ) ) ) * * ) * * * * ) 8) 6) 7 8 7 9) * 3 0) )* )* 7) 9 0 0 00 00 99 9 )* 00 9 2 4 0 99 0 0 2 2 1 9 5 2 9 00 -0 0 1 (2 (2 ( f ( ( (1 -0 ( (1 2 0 (2 ( l n o re s 4 y d ( 0 d rk e K e o d 0 an n a 20 n a ra U ed ep p n 20 la d ( la m Is w R a la ( rm a a A r n S , g r a e e an S e e a in he li G Z C U itz D re S et tra w w o N us e S K A N Source: NCI WHO (2016) * Estimate includes only direct costs; ** Estimate includes costs attributed to SHS exposure Based on data from 152 countries, Goodchild et (0.9% of global GDP). The LMICs account for al., (2018) 13 estimate the total global economic almost 40% of the global cost estimate, with cost of smoking in 2012 at around $US 1.85 direct costs being between 3.8% and 4.0% of trillion, or around 1.8% of global GDP (Figure 3). total health spending in these countries (Figure The direct costs were estimated at around $US 4). The estimated total economic costs of 467.3 billion, which represented around 5.6% of smoking in LMICs range from 1.1% to 1.7% of global health expenditures (Figure 4), or 0.5% of GDP, with the highest costs being estimated in global GDP, while the estimated indirect costs the Americas and Europe at 2.4% and 2.5% of were $US 446.3 billion for disability (0.4% of GDP, respectively (Figure 3). global GDP) and $US 938.6 billion for mortality Tobacconomics Policy Brief | www.tobacconomics.org | @tobacconomics Figure 3 Economic costs of smoking by country-income group and WHO region, 2012 (% of GDP) 2.5 2.5 2.4 2.2 2.0 1.8 World (1.8) 1.7 1.5 1.2 1.1 1.0 1.0 0.9 0.6 0.5 0.0 LIC LMIC UMIC HIC EMR AFR WPR SEAR EUR AMR Source: Goodchild et al., (2018) Figure 4 Smoking-attributable direct healthcare spending by country-income group and WHO region, 2012 (% of total healthcare spending) 7.0 6.5 6.6 6.4 6.0 World (5.6) 5.0 4.0 4.1 3.8 3.8 4.0 3.5 3.6 3.0 1.9 2.0 1.0 0.0 LIC LMIC UMIC HIC EMR AFR WPR SEAR EUR AMR Source: Goodchild et al., (2018) Lost productivity resulting from absenteeism non-smokers in the U.S.