1. Externalities in Infectious Disease Ramanan Laxminarayan Resources for the Future

2. 2 Overview Common theme – externalities –Across sub-populations –Across institutions –Across national borders Antibiotic resistant hospital infections Antimalarial resistance

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4. 4 Estimated MRSA-related hospitalization rate*, 1999–2005 United States Klein, Smith, Laxminarayan, Emerg Infect Dis, Dec 2007

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9. 9 Hospital Incentives Antibiotics are a substitute for infection control Antibiotics are billable to payers (unlike infection control) Hospitals may actually benefit from longer stays

10. 10 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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12. 12 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

13. 13 Hospital 1 Hospital 2 Community

14. 14 Smith, Levin, Laxminarayan PNAS, 2005

15. 15 Smith, Levin, Laxminarayan, 2005 PNAS

16. 16 Multi-institution epidemics

17. 17 Smith, Levin, Laxminarayan, 2005 PNAS

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20. 20 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?

21. 21 Hospital 1 Hospital 2 Community Subsidize Infection control In hospital 1

22. 22 Hospital 1 Hospital 2 Community Subsidize Infection control In hospital 2

23. 23 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

24. 24 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)

25. 25 How do hospitals respond to greater infection control in other hospitals? Cooperators Increase infection control Free riders Lower infection control

26. 26 Cooperator Free-rider Community Subsidize infection control In cooperator

27. 27 Cooperator Free-rider Community Subsidize infection control In free-rider

28. 28 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

29. 29 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

30. 30 www.extendingthecure.org

31. 31 Global spread of chloroquine-resistant strains of P. falciparum

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35. 35 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 35 Slide Courtesy: Phil Rosenthal

36. 36 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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40. 40 Global subsidy for Artemisinin Combinations (ACTs) Global subsidy for artemisinin drugs Make ACTs as cheap as chloroquine

41. 41 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

42. 42 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

43. 43 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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47. 47 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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49. 49 Other applications Financing malaria elimination Species conservation in transnational parks Reporting of disease outbreaks

50. 50 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