Global Health Economics: Concepts and Applicationsor “Cool Things Justin Likes about Global Health Economics”

Justin BerkTTUHSC SOM Global Health Elective1/28/12

What is economics?

The social science that analyzes the production, distribution, and consumption of goods and services

The study of how people choose to use available resources

The study of behavior

The study of incentives

An example

or

My Kingdom for a Horse?

Supply and Demand Activity

Supplier: You just created a new medical invention: a talking stethoscope. You can set one price for it.

Consumers: 5 of you would be interested in this invention.

1 is willing to spend $501 is willing to spend $401 is willing to spend $301 is willing to spend $201 is willing to spend $10

What price will the supplier set?

Supply and Demand

Law of Demand – the higher the price of the good, the less people demand the good

Law of Supply – the higher the price of the good, the more items you want to sell.

Price Demand Supply Revenues

$50 1 5 $50

$40 2 4 $80

$30 3 3 $90

$20 4 2 $80

$10 5 1 $50

Red Shoes• http://vimeo.com/27046074

Global Pharmaceutical R&D• 1 country is willing to spend $5B for chronic care lifestyle

technologies

• 50 countries are willing to spend $500M for chronic care lifestyle technologies

• 100 countries are willing to spend $10M for life-saving medicines that cure disease.

You’re the CEO of Pfizer. It costs over $1B to develop a drug.

Where do you allocate your R&D funds?

Why Health Care Economics is Different

Infinite demand:•Life or death decision

Outcome uncertainty

Information Asymmetry

Moral hazard

Social Externalities

Health care is not health

Third party payers

Moral HazardPeople insulated from risk behave differently than people exposed to risk.

RAND Health Insurance Experiment4 fee-for service plans:- Free care- 25% co-pay- 50% co-pay- 95% co-pay

Wealth is Health

UK Whitehall Study

Health and Wealth: A Bi-Directional Relationship

Strong Economic Performance

Higher Individual Incomes

Purchasing of health

promoting goods and

services

Improved Health

Economics to Health

Good health

Human Capital

Increases

Individual Productiv

ity Increases

Overall Economic Growth

Rate Increases

Health to Economics

Top 10 Causes of Death in Low-Income Countries

1. Lower respiratory infections 2. Diarrheal Disease3. HIV/AIDS4. Ischemic heart disease5. Malaria6. Stroke / Cerebrovascular disease7. TB8. Low birth weight / Prematurity9. Birth asphyxia / trauma10. Neonatal infections

We have cures!

Why are people still dying?

Poverty

Infrastructure

Clean water

No educationWar

Brain drain

Basic resources

Economic Development is Health

Health care

Politics

Education

Infrastructure

Governance

Foreign policy

Top 5 Public Health Jobs(that have nothing to do with public health)

1. Teachers• Education improves economy, decreases risky behavior• Most studies suggest more important than race and income

2. Engineers• Drill for water, build roads, develop energy infrastructure

3. Politicians (kinda)• Good governance serves enormous factor for health development• (It’s usually negative.)

4. City Planners• Create walking cities with access to healthy foods etc.

5. Journalists / Writers• Inspire world leaders, increase awareness, mobilize social groups• Martin Luther King, Thomas Paine, Nicholas Kristof, Oprah

Discussion:Issues in Global Health Economics

Structural Adjustment Plans

Measures to promote market fundamentalism• Privatization of state-owned industry• Deregulation• Austerity (cutting expenditures)

Tobacco

Tobacco and smoking have a number of negative effects:• Tobacco smoking kills• Tobacco exacerbates poverty• Tobacco contributes to world hunger by diverting prime

land away from food production• Tobacco production damages the environment• Tobacco reduces economic productivity

Developing world has 80% of tobacco related deaths.

How do you address this?

Emergency Aid

The village of Williamsville has been hit by a major typhoon. Farm land has been devastated. People are starving.

There are two ways to get food to those in need:• A private farming company operates in the neighboring town

of Simón. They know people are desperate and will pay huge amounts for food and water. They see this as a business opportunity and are willing to cross risky terrain to deliver the goods for high profit.

• A coalition of NGOs and foreign aid can deliver food and water for free.

Economic Development for Dummies

Need for foreign aid to overcome poverty and enter global marketplace

Foreign aid causes harms. “Searchers” better than “Planners.”

Military interventions to guarantee democracy, International Charters, preferential trade

Development assistance = dependency, corruption, poor governance

Cool Global Health Business Solutions

Charity:water• http://vimeo.com/22566556

• Marketing• Recruiting human capital• Financing

Grameen Bank

Micro-loans to the

impoverished

Promotes entrepreneurship and skill use

Peer pressure within loan

groups

Women receive 95% of loans

Borrowers have company

equity

96% recovery rate

2006: Nobel Peace Prize

2011: government

take-over

Riders for Health• http://vimeo.com/31962921

• Overcoming infrastructure challenges• Avoids costs through prevention• Improves supply chain logistics• Improves quality and speed of care

CFWShopsApproximately 20,000 children die each day because they lack access to essential drugs that often cost less than a cup of coffee.

A short list of preventable and treatable diseases accounts for approximately 70% of childhood illness and death.

• Entreprenuers provided blue-prints for a micro-franchise • like McDonald’s

Three-Point Franchise Test• Standardization• Scalable• Economies of scale

Advocate for Change

Clinton Foundation

• 2007: Deep price reductions for AIDS medications

Green Light Committee (PIH, MSF, CDC)

• proved that MDR-TB could be treated in low-income countries • negotiated mass price reductions from more than $30,000 per patient per

year to less than $3,000.

How to Save the World

1) Make cool YouTube videos.

2) Small loans.

3) Ride motorcycles.

4) Copy McDonald’s.

5) Yell a lot.

Cool Resources• EpiAnalysis blog• http://epianalysis.wordpress.com/

• Acumen Fund (non-profit venture capital)• http://www.acumenfund.org/

• Unite for Sight• http://www.uniteforsight.org/

• Partners in Health• http://www.pih.org/

• Global Issues Blog• http://www.globalissues.org/article/588/global-health-overview

• Quora• http://www.quora.com/