This project is funded through the Economics of Tobacco Control Research Initiative, an IDRC and Cancer Research UK co-funding partnership launched in October 2017. The objective is to generate evidence that provides the economic rationale for the prevention of tobacco-related diseases and the research uptake by policy actors that allows for the adoption of tobacco-control policies across low and middle-income countries.
The health, economic and social burden of tobacco in Latin America and the expected gains of tobacco taxation
Including productivity loss burden and illicit trade effects in the estimation of tobacco attributable costs to derive optimal taxation scenarios in 8 Latin American countries.
The general aim of this project was to provide comprehensive burden estimates to best inform decision-making on tobacco taxation policies in 8 Latin American countries (Argentina, Brazil, Chile, Colombia, Costa Rica, Peru, Ecuador and Mexico).
A previous study led by the Institute for Clinical Effectiveness and Health Policy demonstrated that tax revenues from tobacco products cover just 36% of the smoking-attributable health expenditures in the region. Still, these costs do not include the indirect costs on the economy such as loss of productivity in the workplace or the potential effects of illicit trade, leading to a significant underestimation of the economic and disease-burden related to tobacco.
The potential effects of the tobacco tax policy on illicit trade and the consequent tax evasion could constitute barriers to tax hike implementation in Latin American countries. Decision-makers need accurate and rigorous estimates of the health burden of tobacco and the potential illicit trade effects in the region to strengthen policies and optimally increase tobacco taxes.
In the Latin American region, tobacco consumption is responsible for nearly 351,000 deaths per year, and associated disease rates have not changed substantially since 2004.
The direct medical costs attributable to smoking are USD23 billion per year, representing 8% of total health expenditures in the region and 0.6% of its Gross Domestic Product (GDP).
Productivity loss costs (for patients and caregivers) constitute 54% of the total economic burden of which 40% is represented by informal (unpaid) caregiving.
How to reduce the healthcare and labour productivity loss costs of smoking while generating fiscal revenues?
A 50% increase in tobacco prices will save more than USD51 billion in the region over 10 years.
Treating and supporting patients represents a high cost to society.
The total economic burden attributable to tobacco consumption is 4% of the regional gross domestic product (GDP). About 46% of this burden is explained by direct medical costs. As for the indirect costs, informal caregivers account for 40%, while productivity losses due to early death or disability are responsible for 60%.
The burden on caregivers is approximately USD10 billion in this region, representing 0.3% of the GDP.
What is at the heart of the problem are the deaths caused by tobacco, both a human tragedy and a notable cost to society.
Tobacco is responsible for 351,000 deaths in the 8 countries considered, representing 12% of the total deaths in the region.
This increase in cigarette prices in the countries of the region would prevent 204,000 deaths and increase tax revenues by USD21 million over a 10-year period. Further, this increase would generate an economic benefit of USD63 million, taking into account direct medical costs, labor productivity loss costs and informal care costs.
Price increases through tobacco taxes (especially taxes) can generate great returns for the countries, both social and economic.
The increase in tobacco prices could generate a total economic benefit of USD63 billion over 10 years in the region. The total benefits are attributed to savings on direct health costs (28%), increased tax revenues (34%) and by avoiding indirect costs (38%).
Team and partners list
Andrés Pichon Riviere, MD, MSc, PhD, Institute for Clinical Effectiveness and Health Policy (IECS), Buenos Aires, Argentina and Alfredo Palacios, MSc, Centre for Health Economics (CHE), University of York, York, United Kingdom
Methodology and references
How do we estimate the informal care costs?
Two approaches were explored: the opportunity cost (OC) and good (GP). The OC calculates the value of informal care by multiplying the hours of sacrificed activities by an hourly wage. Often informal caregiving hours could have been used for paid work. The GP method calculates the value of informal care by multiplying the number of hours spent on informal care by a value per hour for each care task performed. In the GP method, the value of informal care per hour is based on the price of a market substitute.
Why do we use this method?
The care of people who suffer from chronic diseases not only demands healthcare services but also long-term home care, which is generally provided by relatives, friends and/or neighbours. Usually, informal care requires the investment of many unpaid hours, representing a substantial opportunity cost for caregivers.
Informal care makes an important contribution to societal welfare. However, it may involve substantial time costs and can have a considerably negative effect on the economic opportunities, health and well-being of informal caregivers. These costs and effects of informal caregiving are often excluded in economic evaluations of health and healthcare interventions.
What about the data?
To estimate the use of time, a compilation of data from an exhaustive literature review and econometric estimation was carried out. This data was validated through a survey of professional caregivers and interviews with experts. The national household surveys databases were processed to obtain the average wage per hour of a proxy of informal caregiver.
Promoting key learnings
Celebrating the culmination of over a decade of partnerships, research and advocacy, a webinar was planned in partnership with Cancer Research UK, “Demystifying the Economics of Tobacco Control: Knowledge, policy and everything in between,” and broadcast live on June 29, 2022.
This webinar represented an opportunity to demystify the process of knowledge translation, to share key learnings from our research teams across the globe and to discuss the emerging opportunities for continued and meaningful impact.
The Call for Concept Notes on the Economics of Tobacco Control in Low and Middle- Income Countries offered up to CAD1 million over a maximum of four years to support evidence-based research on the economic rationale for the adoption of tobacco-control policies across LMICs in four regions: Asia, Latin America and the Caribbean, the Middle East and North Africa, and sub-Saharan Africa.
By targeting collaborative, applied economics research, the Initiative aimed to support the implementation of effective fiscal and other policy measures to help prevent tobacco-related diseases and save lives.