January 2002
Thinking Economically About the Risks of Anthrax and Smallpox
by John R. Graham
In the wake of the tragedy of September 11, Health Canada has taken specific steps to protect Canadians against deliberate infections of anthrax and smallpox. While both diseases can have deadly effects, they are very different from each other. Thinking economically about these differences leads to different conclusions about how to manage the risk of their outbreak in Canada.
Anthrax
Anthrax, a bacterium, can infect people through the skin, breathing, or eating (Weir). However, anthrax probably cannot be passed from person to person (US CDC, 2001a). Inhaled anthrax, delivered by mail, has already killed a number of Americans since September 11. These deaths caused a brief panic. Spilled pudding-mix, doughnut-sugar, and even confetti were being reported as anthrax (Fumento). In Vancouver, one patient whose doctor refused to test her for anthrax threatened to sue him (CBC). The anthrax panic led to some curious, and not yet fully explained behavior by Allan Rock, Canada's Health Minister, and his functionaries.
Mr. Rock allocated $5.6 million to buy doxycycline and cyprofloxin to counter a bacterial attack (e.g. anthrax), as well as antidotes for those exposed to chemicals or gases (Health Canada, 2001a, 2001b). Although Bayer Canada has exclusive rights to manufacture and sell cyprofloxin in Canada, Health Canada also ordered a generic version of the drug from Apotex. Apotex is a Canadian manufacturer who has previously, unsuccessfully, tried to quash Bayer's patent through litigation.
After a few days of public outcry about the Health Minister's breaking the Patent Act, the Ministry backtracked, confirming that it recognized Bayer's patent and would buy cyprofloxin exclusively from that company. However, it appears that Health Canada must also pay Apotex the previously negotiated price, while receiving no cyprofloxin from that company (Health Canada, 2001c)!
So, Health Canada's most widely reported anti-terrorist precaution so far is not very impressive. However, besides the issue of disregarding intellectual property, the whole muddle begs the question of whether Health Canada should be "stockpiling" antibiotics at all. Although the National Emergency Services Stockpile does have physical depots of medical supplies, the antibiotics will not be stored there. Because they expire some time after manufacture, the "stockpile" must be rotated at the manufacturer's premises. What the government has actually paid for is a guarantee that Bayer will supply one million tablets of cyprofloxin within 48 hours upon request (Health Canada, 2001c, 2001d).
However, in the wake of the American anthrax deaths, citizens have been ordering antibiotics themselves (Economist; Zuger). Canada is fortunate to have a capitalist distribution system for prescription drugs taken by outpatients: manufacturers, wholesalers, and pharmacies are governed by the profit motive. If Canadians demand antibiotics for anthrax, we can be confident that these private agents will supply it without Health Canada's intervention.
In fact, if the government has any role to play in the consumption of antibiotics, it is probably to stifle demand somewhat. This is because the free market for cyprofloxin produces negative externalities, that is, although buyers and sellers of the antibiotic are perfectly capable of satisfying their wants, other persons may suffer by their actions (Ellison and Hellerstein). Bacteria evolve in response to antibiotics. If people use cyprofloxin as a precaution, they risk causing the mutation of other bacteria. Cyprofloxin has a greater such effect than penicillin does. One common strain of pneumonia is already resistant to it (Zuger). So, the attention focussed on cyprofloxin by the Health Minister's controversial actions may have increased risks to Canadians' health by encouraging people to consume too much cyprofloxin.
Smallpox
The economics of smallpox, a virus, are quite the opposite. Traditionally, about 30 percent of smallpox victims died of it, but at least one community of aboriginal Canadians suffered mortality of 60 percent in an outbreak that occurred soon after European contact (McIntyre; US CDC, 2001b). It is contagious. Given the current threat, one can imagine "smallpox martyrs," having previously infected themselves, coughing and sneezing on people in subways and elevators (Murdock). There is no cure (US CDC, 2001b).
Although modern smallpox vaccines have potentially lethal side effects in identifiable people, such as AIDS or cancer victims, and fetuses, they are so successful that smallpox was eliminated from humanity in 1977 (Murdock). Contrary to antibiotics, smallpox vaccines have positive externalities. Because their vaccinated neighbours cannot get smallpox, the unvaccinated benefit from the vaccine even though they have not paid for it. People who dislike needles will free ride on other citizens' immunity. This leads to a credible argument for vaccination-subsidies, if not coercion, by the government.
After the cyprofloxin fiasco, Health Canada is taking no risk of messing up its order for smallpox vaccine. It has sent a request for information (RFI) to approximately 300 pharmaceutical manufacturers (Health Canada, 2001e). The RFI poses questions about materials currently at hand, patents and licenses, production capacity, and research and development. Of course, Canadians want safe smallpox vaccines, but given that the original vaccine was discovered over 200 years ago, let's hope that Health Canada does not wrap too much red tape around the purchase of new supplies.
Conclusion
Generally, therefore, the government should probably discourage the inappropriate use of antibiotics to prevent anthrax, but encourage the use of smallpox vaccine. However, these generalities do not help us quantify the risks of infection in the absence of specific information about the terrorist threat.
Governments tend to manage risk in response to the most fearful elements in society, and over-socialize risks that people can manage themselves (Stanbury). Nevertheless, the government probably has superior information about potential terrorism than its citizens do, so we must defer to its judgment to some degree. The government must do some of our cost-benefit analyses for us. Mr. Rock has taken the promising step of creating a National Advisory Committee on Chemical, Biological, Radio- Nuclear Safety, Security and Research (Health Canada 2001f). The government would best serve the people by communicating the evolving threat of a terrorist attack in a timely and responsible manner, so that Canadians can respond to the risk in ways that they think are appropriate.
References
CBC (2001). "Authorities Feed Public Panic, Says Security Expert." Available at www.cbc.ca as at December 7. Vancouver, BC: CBC Radio (October 24).
The Economist (2001). "The anthrax threat." Available at www.economist.com/ uk/agenda as at December 7. The Economist Global Agenda (October 29).
Ellison, Sara Fisher, and Judith K. Hellerstein (1999). "The Economics of Antibiotics: An Exploratory Study." In Measuring the Prices of Medical Treatments. Triplett, Jack E. (ed.). Washington, DC: The Brookings Institution: 118-151.
Fumento, Michael (2001). "A Dose of Anthrax Reality." Available at www.nation- alreview.com/comment-fumentoprint 102201.html as at December 7. National Review Online (October 22).
Health Canada (2001a). News release. "New health security initiatives to protect Canadians." Ottawa, ON: Health Canada (October 18).
Health Canada (2001b). Backgrounder. "Pharmaceuticals being purchased for the National Emergency Stockpile System (NESS)." Ottawa, ON: Health Canada (October).
Health Canada (2001c). News Release. "Health Canada and Bayer Inc. Confirm Supply Agreement for Ciprofloxacin Hydrochloride." Ottawa, ON: Health Canada (October 22).
Health Canada (2001d). Backgrounder. "The National Emergency Services Stockpile System (NESS)." Ottawa (October).
Health Canada (2001e). News release. "Health Canada Solicits Information from Smallpox Vaccine Manufacturers." Ottawa, ON: Health Canada (Dec. 1).
Health Canada (2001f). News Release. "Minister Rock announces creation of the National Advisory Committee on chemical, biological, radio-nuclear safety, security and research." Ottawa, ON (Nov 13).
McIntyre, J.W. (1999). "Smallpox and its Control in Canada." Canadian Medical Association Journal 161(12): 1543-7 (December 14).
Murdock, Deroy (2001). "Stockpiling for Smallpox: Distribute the Vaccines Instead." Available at www.nation al- review.com/murdock/murdockprint112601.html as at December 7. National Review Online (November 26).
Stanbury, W.T. (2000). "Reforming Risk Regulation in Canada: The Next Policy Frontier?" In Safe Enough? Managing Risk and Regulation, Jones, Laura (ed.). Vancouver, BC: The Fraser Institute: 195-269.
US CDC (2001a). Facts About Anthrax. Atlanta, GA: US Center for Disease Control and Prevention (September).
US CDC (2001b). Facts About Smallpox. Atlanta, GA: US Center for Disease Control and Prevention (September).
Weir, Erica (2001). "Anthrax: Walking the Fine Line Between Precaution and Panic." Canadian Medical Association Journal 165(11): 1528 (November 27).
Zuger, Abigail (2001). "Experts Say Cipro Overuse Could Lead to Problems." New York Times (October 19).
John R. Graham (johng@fraserinstitute.ca) is Director of Pharmaceutical Policy Research at The Fraser Institute. He earned his B.A. (Hons) in Economics and Commerce at the Royal Military College of Canada and his MBA at the London Business School, University of London.
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