The Global Costs of an Influenza Pandemic By Warwick J. McKibbin and Alexandra A. Sidorenko The deaths of 187 people in 12 countries through May 2007 from Type A (H5N1) avian infl uenza has raised fears that bird fl u could trigger the next infl uenza pandemic – perhaps even Tone on the scale of the Spanish fl u that swept the world in 1918. While we are in some ways better prepared to deal with a pub- lic-health emergency on this scale than we were a century ago, the integrated nature of the global economy – the dependence on global markets for goods, services and capital – may leave us more vulnerable to a pandemic’s accompanying economic shocks. We can estimate the economic consequences of pan- demics, based on computer simulations incorporating what we know about infl uenza transmission and the likely response by governments, as well as by markets. left: iain masterton/alamy; right: john stanmeyer/vii right: iain masterton/alamy; left: 18 The Milken Institute Review tk Third Quarter 2007 19 influenza pandemic an insightful account of the events of 1918. some grim facts The natural reservoirs of infl uenza A are Infl uenza pandemics have been recorded for humans and waterfowl. Pigs can be infected more than three centuries, a period in which by both human and avian strains, providing there have been 10 probable and three possi- a mixing bowl for virus “reassortment” – cre- ble outbreaks. The fl u is not the deadliest of ating a strain that can be passed easily from all infectious diseases – smallpox, various human to human. The high density of the hemorrhagic fevers and rabies kill a much human population and its proximity to pigs higher proportion of those who contract and waterfowl make Asia a likely source of a them. But it is spread more easily, and hence future pandemic strain. has the capacity to infect a larger proportion But efforts to predict fl u pandemics have of the population. In the parlance of epidemi- not succeeded. The best one can do is look to ologists, its “attack rate” is high. the record, which suggests an interval of 10 to The emergence of a flu pandemic is virtually as unpredictable as an earthquake. Thus, the most we can do is to be alert and be prepared. Infl uenza Type A, the category to which 40 years between major outbreaks. Another H5N1 belongs, is both the most common and pandemic, it seems, is overdue. the least stable of the known human infl uen- If a pandemic strain does emerge, its za viruses. Its evolutionary skills include an spread could be unprecedentedly rapid, ability to change rapidly and to use animals as thanks to mass travel by airplane. Border- reservoirs in which to exchange genes. Three control measures might postpone the arrival known infl uenza pandemics in the 20th cen- of infection, but don’t offer much hope of tury – the Spanish infl uenza of 1918-19, the stopping its transmission. An effective vac- Asian infl uenza of 1957-58 and the Hong cine would not be available until months after Kong infl uenza of 1968-69 – were caused by the onset of the pandemic, since a vaccine infl uenza A viruses. The gravity of clinical accurately targeted for Type A virus can’t be symptoms of the Spanish fl u, which dispro- prepared ahead of time. portionally killed young adults, made it the Moreover, fl u-vaccine manufacturing ca- “deadliest plague in history,” according to pacity is concentrated in a handful of devel- John Barry, the author of The Great Infl uenza, oped countries, and it would be diffi cult to gear up to the scale required to check a pan- demic with billions of potential victims. Cur- WARWICK MCKIBBIN is an economist who heads the rent vaccine technology crucially depends on Australian National University’s Center for Applied Macro- the availability of fertilized chicken eggs, economic Analysis and is a senior fellow at The Lowy Insti- tute for International Policy in Sydney and the Brookings whose supply may be limited during the pan- Institution in Washington. ALEXANDRA SIDORENKO is demic. And if the pandemic is caused by a a health economist at the Australian National University’s National Center for Epidemiology and Population Health highly pathogenic virus, like H5N1, the tech- and the Australian Center for Economic Research on Health. nology will be diffi cult to manage safely. 20 The Milken Institute Review Epidemiologists always remind us to ex- used by courts to determine damages, goes pect the unexpected with infl uenza. The emer- like this: using estimates of mortality and gence of a fl u pandemic is virtually as unpre- morbidity, one calculates the loss of future in- dictable as an earthquake. Thus, the most we come during a working lifetime. Then one can do is to be alert and be prepared. adds in the loss of time and income by spous- Since 1970, many countries have invested es or relatives who must care for them, along in the development of national-preparedness with the cost of medical care and supporting plans, along with a global surveillance system services. that includes a network of laboratories capa- This approach has always been limited in ble of identifying the virus. Challenges sur- the sense that it doesn’t include the intangible rounding pandemic-preparedness planning value people place on their own lives. But it is include increasing the emergency capacity of becoming increasingly evident that conven- critical-care facilities, building antiviral drug tional analysis is inappropriate even on its stockpiles and, of course, improving the abil- own terms for infectious diseases that have ity to produce massive quantities of vaccine large numbers of victims and that lack a vac- very quickly. All these measures are costly and cine. Examples include the HIV/AIDS, Severe need to be justifi ed on the grounds of the ex- Acute Respiratory Syndrome (SARS) and in- pected benefi ts. Which is where economics fl uenza pandemics. The impact of these three fi ts in. diseases provide insight into the wider eco- nomic consequences of their spread. how much does a disease cost? HIV infection mostly affects the young Conventional analysis of the tangible eco- and has a long-term demographic effect chine nouvelle/sipa nomic costs of death and disability, the sort through decreased fertility and healthy-life Third Quarter 2007 21 PREDICTED DEATHS IN EACH REGION (THOUSANDS) MILD MODERATE SEVERE ULTRA NUMBER %POPULATION NUMBER %POPULATION NUMBER %POPULATION NUMBER %POPULATION US 20.2 0.007% 201.9 0.07% 1,009.3 0.35% 2018.6 0.70% Japan 21.5 0.017 214.6 0.17 1,073.1 0.84 2146.2 1.68 UK 7.6 0.013 76.0 0.13 380.0 0.64 759.9 1.28 Europe 56.5 0.010 565.5 0.10 2,827.4 0.50 5654.9 1.00 Canada 3.1 0.010 30.9 0.10 154.5 0.49 309.1 0.99 Australia 2.1 0.011 21.4 0.11 107.1 0.54 214.2 1.09 New Zealand 0.5 0.013 5.2 0.13 25.8 0.65 51.5 1.31 Indonesia 114.3 0.054 1,142.5 0.54 5,712.6 2.70 11,425.1 5.39 Malaysia 10.9 0.045 108.9 0.45 544.5 2.24 1,089.1 4.48 Philippines 41.5 0.052 415.5 0.52 2,077.5 2.60 4,155.0 5.20 Singapore 1.4 0.035 14.4 0.35 72.0 1.73 144.1 3.46 Thailand 16.2 0.026 162.1 0.26 810.3 1.32 1,620.5 2.63 China 284.9 0.022 2,848.6 0.22 14,242.8 1.11 28,485.6 2.22 India 242.4 0.023 2,423.6 0.23 12,118.1 1.16 24,236.1 2.31 Taiwan 5.6 0.025 55.9 0.25 279.4 1.24 558.8 2.48 Korea 11.8 0.025 117.5 0.25 587.6 1.23 1,175.2 2.47 Hong Kong 1.6 0.024 16.4 0.24 82.0 1.21 163.9 2.42 LDCs 330.9 0.022 3,308.6 0.22 16,543.1 1.08 33,086.2 2.15 EEFSU 67.1 0.013 670.7 0.13 3,353.7 0.66 6,707.3 1.32 OPEC 181.6 0.035 1,816.3 0.35 9,081.5 1.77 18,163.1 3.54 TOTAL 1,421.6 0.022 14,216.5 0.22 71,082.3 1.10 142,164.5 2.21 source: The authors expectancy. The virus affects households, costs of hypothetical infl uenza pandemics. businesses and governments through lower Martin Meltzer, Nancy Cox and Keiji Fukuda household incomes, loss of labor supply and of the Centers for Disease Control and Pre- increased government spending for health vention put the fi gure for the U.S. economy at care and support for orphans. $73-167 billion. The Asian Development The fl u virus is far more contagious than Bank staff produced an estimate of a 2.6 to HIV, and the onset of an epidemic is sudden 6.5 percent loss for Asia’s GDP and 0.6 per- and unexpected. Hence, if the world’s re- cent for global GDP. Yet another study, by the sponse to SARS is any indication, the spread U.S.