The cost-effectiveness of control costs associated with a hypothetical outbreak of Foot-and-Mouth Disease (FMD) in a dairy intensive region of Ireland Emma Dillon University of Dublin, Trinity College. Supervisors: Prof. Alan Matthews, Dr. Fiona Thorne Teagasc RERC Student Day, 1 st June Funding: Teagasc Walsh Fellowship, Irish Research Council for Humanities and Social Sciences

Overview Introduction Motivation & Objectives FMD control & eradication The Trading Environment Methodology Epidemiological Model – Spreadmodel Empirical analysis – a dairy intensive region Conclusion & Future Work - GTAP

Introduction Epidemiology & Economics: Separate scientific areas but complementary when the goal is the efficient management of animal health (FAO). Epidemiological Model Economic Model Cost-effectiveness analysis

Objectives Evaluate the cost-effectiveness of alternative control strategies for a number of simulated outbreaks, examining for the first time the potential role of emergency vaccination in Ireland. Model path of disease spread outlining direct and indirect costs associated with control using: –Stamping-out (SO) –SO + Emergency vaccination (SOEV)

Motivation 2001 outbreak – vulnerability exposed Increasing threat of transboundary animal diseases - Globalisation - Wider Market integration - Increased animal movement Risk implicit with trade can be estimated, reduced & managed – A global approach is needed EU Directive (2003/85/EC) – SO IPs & DCPs Change in OIE trade rules – Free trade status Is emergency vaccination a real alternative?

Epidemiological background FMD – most economically damaging disease -Direct effect on livestock production -Subsequent trade effects -Other indirect/downstream effects Routine vaccination ended in Europe in 1992 in light of CBA which found stamping out to be: - Safer - Cheaper - More in tune with the Single Market 2001 outbreak - criticism of Culling policy… Lack of consensus on whether or not EV can eradicate.

FMD in Ireland First introduced in outbreaks since 2001 outbreak - a lucky escape? -Single holding -Stringent movement restrictions -Wider European outbreak Overall Economic impact on agricultural sector was positive Export values up €63m in 2001 But cost to Exchequer €107m Tourism losses €210m for first 6 months

Empirical Analysis Economic impact of a hypothetical outbreak in country’s largest county, Cork. 10.1% of country’s farms 14,199 cattle herds 1,023,268 animals Average herd size = 74 Cattle – major source of spread

FMD control and eradication FMD control and eradication Culling (SO) – destruction of livestock believed to be infected or exposed to infection: carcasses subsequently disposed of rather than processed for food (slaughter). Emergency Vaccination (EV) – immunisation of susceptible animals commenced after an initial outbreak is confirmed - suppressive or protective Recent Directive allows for its use as adjunct to the basic culling policy (SOEV).

Emergency vaccination is carried out from the infected premises (IP) for a certain radius (10km) and from the outside perimeter in to prevent the disease from from spreading outside this area. In theory may it have a role in “closing in” on the disease, creating a cordon of protective animals that can effectively stop diffusion of disease.

The Trading Environment OIE code – recognition of disease free status. In reality markets may not re-open immediately – a basis to renegotiate resumption of trade. Zoning and regionalisation – a lifeline. World beef trade segmented between FMD endemic and FMD free – Price differential. FMD disease status: an important determinant of international trade in livestock products – an effective barrier to higher price markets. Irish agricultural & agri-food exports €7,140m in 2004 – hugely dependent on export trade.

Methodology Combine an epidemiological and an economic module to assess the control costs associated with both strategies. Potential costs associated with a disease control programme: - Direct costs (relatively easily identifiable) - Eradication costs - Production losses - Indirect costs (more difficult to identify) - Trade restrictions - Knock-on effects for non-agricultural sector

Direct costs associated with disease control Stamping- Out (SO) Emergency Vaccination (EV) Direct expenditure on disease control (Resource costs incurred by farmers and relevant public authorities – extra resources used in the control and ultimate eradication of the disease e.g. services, personnel, drugs, equipment) -Animal deaths/lost production -Slaughter and disposal -Drugs/vaccine -Cleaning and disinfection -Quarantine restrictions -Surveillance costs -Other e.g. transportation -Compensation costs xx x xx x

Indirect Costs associated with control strategy Stamping- Out (SO) Emergency Vaccination (EV) Indirect/induced effects (Disruption to other industries due to the chosen elimination strategy on dairy/livestock industries in the infected area etc.) -Trade restrictions and change in the extent and value of imports by trading partners i.e. revenue forgone as a result of denied access to markets. -Production losses outside of agriculture as a consequence of its control -Additional costs to farmers – gap between compensation paid and true value. x xx ? xx x ?

Epidemiological Model Spreadmodel: epidemiological model of disease spread with an economics component. Output of epidemiological module linked to the economic module, tracking various costs of hypothetical outbreaks & related control strategies. Based on a stochastic state-transition model. State-transition models derive (or assume) probabilities between different ‘states’ (i.e. health conditions) and use these to trace course of epidemic. Transition probabilities represent the probability that an individual will move to state j in next period when presently in state i.

Epidemiological Model contd. Five possible ‘states’ modelled in Spreadmodel – susceptible, latent, infected, immune or dead. Herds shift (make transitions) among these states. Probabilities (input parameters) determine whether or not disease transmission occurs from simulated contact among infected and susceptible herds. Three categories of spread simulated: -Infection as a consequence of direct contact between susceptibles and contagious animals. -Spread through indirect means (vehicles, people etc.) -Airborne

Pathways in the State Transition Model Source: Schoenbaum (2000)

Simulation Herds are unit of concern (14,199) but number of animals (1,023,268) taken in to account with a probability density function representing herd sizes. At beginning of each replicate one herd at centre of general circle is said to be latent or incubating, all other herds are susceptible. General circle around initial outbreak assumed to have a radius of 70 km. Two scenarios: -SO (culling only policy): herds within a 3km of IP -SO + EV: EV carried out within a 10km radius of IP

Simulation Results Results tend to confirm the general consensus on the use of EV in an Irish context i.e. any benefits (control cost savings) are outweighed by subsequent trade losses. In theory EV may have a role in dampening down the disease, potentially shortening the length of an outbreak, however this is clearly not the case here. Results in this case in fact show EV does not shorten the duration of the outbreak and in this instance actually exacerbates costs. The mean total cost is €317.3m higher when vaccination is deployed, the bulk of this excess coming from gross trade losses.

Simulation Results contd. Control cost savings undoubtedly made using EV: -17 fewer herds & 915 fewer animals culled -Cleaning & disinfection costs €424,261 less -Surveillance visits costs €167,580 less -Carcass disposal costs €212,541 more with SO -Indemnification cost savings of €720,121 with (Figures relatively small, outbreak is duration short) Although logistical costs are reduced trade losses outweigh this and employment of EV in this context is not cost effective.

Issues… Very Large Gross Trade Losses figure – especially when vaccination is employed. Excessive? Negligible difference in Days to trade resumption between the two control strategies. Intuitively not surprising that time out of markets is similar – herds are culled in both cases (eventually). Therefore difference lies in the volume of trade affected? Duration of the outbreak - EV does not appear to be closing in on the outbreak as expected…

Conclusion Given the significance of agricultural trade for this region the implications of adopting a campaign of emergency vaccination (EV) here would seem to be too great. A culling policy (SO) appears to be more cost- effective in this case. A number of issues arise therefore it should be noted that these are preliminary results and are merely shown to illustrate the method used.

Future Work Extend analysis to look at regions of differing herd density and type – results may be different. Implications of protective vaccination as opposed to suppressive vaccination? Sensitivity analysis – parameter values (looking in particular at trade costs associated) - Simulate effect of trade ban using multi-regional partial or general equilibrium model. Knock-on effects for the economy (e.g.tourism) – a CGE approach Despite these caveats, the use of EV to control the disease seems unjustified in this case.

GTAP (Global Trade Analysis Project) GTAP: a multi-regional AGE model capturing world economic activity in 57 different industries of 66 regions. Analytical approach looking at the economy as a complete system of interdependent components (industries, households, investors, government, importers, and exporters). Economic shocks on one component create ripple effects throughout the system. Effect of FMD outbreak can be thought of in terms of various different shocks to the economy.

GTAP contd. Three sets of shocks: 1)Those directly affecting agriculture sector. -Ban on exports and movement restrictions -Cull of livestock 2)Those directly affecting tourism. -Fall in overseas and domestic visitors 3)Those associated with government policies to control and compensate farmers for outbreak. -Disposal costs -Compensation payments

Thank You for your attention. Questions & Comments are welcome…