Tobacco Control: A Blue-Chip investment

1. Tobacco Control: A Blue-Chip investment Michelle Scollo, Co-Director, VicHealth Centre for Tobacco Control

2. Definition of Blue Chip investment A valuable stock that has proven itselfThe Investment FAQ Shares in the largest, safestcompanies IRIS Stock with a solid record & reputation for quality management/products Investorwords.com

3. Tobacco control in Australia • Is it really a Blue Chip investment? • Are governments investing enough? • What are the barriers to greater government commitment & how can we overcome them?

4. 1. Tobacco control a Blue Chip investment because • Costs are immense…..

5. Est. social costs for Aus, 1998–99 Collins & Lapsley,Counting the cost: estimates of the social costs of drug abuse in Australia in 1998-9, CDHA, 2002, Table 27, p 59

6. Premature deaths due to tobacco use, 1998 1-34 yrs 179 35-64 yrs 4,042 65+ yrs 14,798 Total 19,019 Ridolfo & Stevenson, The quantification of drug-caused morbidity and mortality in Australia, 1998, AIHW, 2001

7. Tobacco control a Blue Chip investment because 2. Interventions work ……….. to reduce tobacco use.

8. Male smoking rates, Sydney & Melbourne, before & after launch of Quit Campaigns Launch of Vic Quit Campaign Launch of NSW Quit for Life Pierce, Macaskill & Hill, AJPH, 1990

9. Impact, National Tobacco Campaign, Aus 97–98 Hill et al, Enumerated survey, NTC Evaluation Vol 2, DHAC, 2000

10. Anti-smoking expenditure vs. children’s smoking prevalence in Australia, 1983/4 - 1996/7 Hill, White et al. Secondary School Smoking & Alcohol Surveys. Scollo M. Contributions to tobacco control State & Fed, Gov & non-government organisations, 2001, Unpublished data

11. Per capita consumption of tobacco products in Australia, 1901–2002 US Surgeon General’s report Broadcast bans Quit Campaigns begin Smokefree polices; health warnings; press and outdoor advertising bans ABS Customs and Excise receipts 1901-2000

12. Adult smoking rates Australia, Males & females 1974 – 2000 Male Male Female Female Hill et al, MJA, NTC Eval surveys

13. Tobacco control a Blue Chip investment because 2. Interventions work ……….. to reduce tobacco use & deaths and disease.

14. Trends in Lung Cancer Mortalityin Australia 1910-14 to 1995-96 Age standardised mortality rate per 100,000 PY Males Females

15. Death rates for coronary heart disease and stroke, 1950–98 Rate per 100,000 AIHW National Mortality Database

16. Tobacco control a Blue Chip investment because 3. Savings have been significant…..

17. Economic evaluations of Australian Quit Campaigns • Carter et al evaluation of NTC 1997 – costs offsets of $39m (3% discount rate)

18. Impact of NTC 1997: Est. reduction in deaths, disease & health costs Expenditure, phase 1 NTC $9m Drop in prevalence 1.4% Decline in incidence & health care costs … 5 - 20 yr lags 0.63% to 1.76% Present value* cost offsets $39m * 3% discount rate Carter et al, Trial of PMBA to assist Cancer Control planning in Australia, CHPE, 2000

19. Economic evaluations of Australian Quit Campaigns • Carter et al evaluation of NTC 1997 – costs offsets of $39m (3% discount rate) 2. Collins & Lapsley’s evaluation of Vic & WA Quit Campaigns

20. PV* Spending on Quit Vic, 87-97 $61.5 m Net Present Value*, Savings+ $911 m Benefit:cost ratio 15.8 to 1 (Internal rate of return37.9%) * 6% discount rate + assuming Quit responsible for 20% of reduction in prevalence Valuation of cost savings Quit Vic 87-97 Collins & Lapsley, Social Costs of Tobacco in Victoria, and Social Benefits of Quit Vic, VSHP, 1999

21. Economic evaluations of Australian Quit Campaigns • Carter et al evaluation of NTC 1997 – cost offsets of $39m (3% discount rate) • Collins & Lapsley’s evaluation of Vic & WA Quit Campaigns 3. Applied Economics evaluation for CDH&A of impact of Australian anti-smoking campaigns to 1995

22. Est. benefits of tobacco control campaigns Australia, 1971-2010 PV* Quit campaigns + $ 176 m NPV* benefits due to Campaigns^ $ 8,427 m Benefit:cost ratio 50:1 * 5% discount rate + extra 20% to allow for regulatory enforcement & drug education ^assuming campaigns responsible for only 10% of total impact on consumption Abelson, Presentation to 2nd Nat Tobacco Control Conf, April 2003

23. Est. reductions in public spending due to tobacco control campaigns Australia, 1971-2010 PV* Quit campaigns + $ 176 m NPV* benefits public health care expenditure^ $ 344 m Benefit:cost ratio 2:1 * 5% discount rate + extra 20% to allow for regulatory enforcement & drug education ^assuming campaigns responsible for only 10% of total impact on consumption Abelson, Presentation to 2nd Nat Tobacco Control Conf, April 2003

24. Tobacco control a Blue Chip investment because 3. Savings have been significant….. & could be larger still.

25. Potential health care savings: $45m net investment over next three Budgets Early gains • < perinatal care costs • Continuing returns • < $100m for CVD treatment costs from year 10 : $610m over next 15 yrs • Maturing investments • > $1.15b in cancer, CVD & COLD, next 30 yrs Scollo & Carter, 2001 , assuming 2.5% discount rates

26. PBS costs attributable to smoking, for CVD disease in 2001-2002 • $126 m • 9.7 % of CVD drug costs • 3.0 % of PBS drug costs $26.1 $25.9 $43.0 $31.1 Bainbridge Consulting, Impact of tobacco on the PBS, 2003

27. Bainbridge Consulting, Impact of tobacco on the PBS, 2003

28. Economics of intervention: mass media producing a 5% decrease in smoking prevalence • Cost savings over 40 years • $4.5 billion • $1.14 billion (discounted at 5% pa) • Mass media • 3 year program: $10m, $15m, $20m • Ongoing: $5m per year • 5 year & 10 year lags for effects on costs • NPV = $1 billion • IRR = 33% • Payback period = 8 years (2011) Bainbridge Consulting, Impact of tobacco on the PBS, 2003

29. Tobacco control in Australia • Is tobacco control really a Blue Chip investment? Yes: with strong growth potential. 2. Are governments investing enough?

30. Spending in Australia is less than justified by • Scale of the problem

31. Numbers who died in 1998 due to smoking compared with other causes ABS. Causes of Death 1998, 1999; Ridolfo & Stevenson, The quantification of drug-caused morbidity and mortality in Australia, 1998, AIHW, 2001

32. % of total disease burden attributed to tobacco, c.f. other risk factors Mathers et al.The Burden of Disease & Injury in Australia, AIHW, 1999

33. Hospital bed weeks due to drug use, Australia 1998-99

34. Federal Budget Measures: Commitment to public health programs c.f. with deaths ABS. Causes of Death 1998, 1999; Ridolfo & Stevenson, The quantification of drug-caused morbidity and mortality in Australia, 1998 ed AIHW, 2001; Federal Budget papers,

35. 2. International benchmarks Spending less than justified by

36. Per capita commitments to tobacco control in English-speaking countries, $US, 2000 Australia, CBRC compilation; Canada, Health, Finance and Solicitor General’s joint announcement, April 5, 2001. Ireland, Media release, Irish Minister for Health , UK White Paper, Smoking Kills US, CDC, Investment in Tobacco Control, State Highlights, 2001 . Canadian figures do not include several major increases in allocations announced in April 2001 provincial budgets. US figures exclude national expenditure by national and local NGOs, for instance the American and state cancer councils, heart foundations and lung associations. For all countries, figures exclude insurance coverage for pharmacological treatments.

37. Per capita tobacco control expenditure in Australia compared to US States, 1999-2000 US CDC: Investment in Tobacco Control, State Highlights, 2000

38. Expenditure in selected US versus Australian states, year 2000-01, $US US CDC: Investment in Tobacco Control, State Highlights, 2000

39. 3. Levels demonstrated to sustain results Spending less than justified by …

40. Changes in per capita cigarette sales in states with large, comprehensive tobacco control campaigns versus the rest of the US Farelly, Pechacek & Chaloupka, Impact of tobacco control expenditure on aggregate cigarette sales, NBER 2002

41. 4. Recommendations of independent international bodies Spending less than justified by

42. Current Aus tobacco control expenditure vs CDC recommendations Component Current spending, AUD $m CDC Rec, AUD $m Cessation programs/ treatments $60 $111 All other components $28 $359

43. 5. Comparisons with successful business and government marketers Spending less than justified by

44. Telstra $ 130 McDonalds $ 60 Village Warner $ 55 Ford $ 75 Victorian Transport Accident Commission ($3.50 pc,equiv to nat) $ 56 Quit Campaigns $ 19 Marketing budgets, major Australian advertisers, AUD $m Advertising Industry Annual Client Lists, 2000

45. The scale of problem International benchmarks Levels demonstrated to sustain results Recommendations of independent international bodies Comparisons with successful business and government marketers Spending on tobacco control in Aus is less than justified by 6. Economic analysis

46. Potential rates of return from WA Target 15 Target smoking prevalence 15% If insist on social rate of return of 10%, … then Could justify spending of up to $87m … ten times the level currently being spent per capita in Australia Collins & Lapsley, Social Costs of Tobacco In WA & the Social Benefits of reducing Smoking, CFWA, 2001

47. Tobacco control in Australia • Tobacco control really is a Blue Chip investment, with strong growth potential. 2. Governments aren’t holding nearly enough “shares”. 3. What are the barriers to greater government commitment & how can we overcome them?

48. 3. Barriers to investment in tobacco control • Poor marketing • Poor timing of requests • Lack of clarity about what we want • Failure to address objections • Ideological • Perceptions of past success on small funding, problem already being ‘solved’ • Fears about inefficiency of hypothecation

49. The Blue Chip “Prospectus”

50. Contents of Blue Chip ‘Prospectus’ In line with • substantial harm caused & social costs incurred & • high prevalence of • youth initiation • poorly informed and/or dependent users …we need 1. Comprehensive regulation & 2. Commercially realistic funding for (effective) education campaigns & treatment of tobacco dependence