Economics of animal health

A little theory and some applications

Who am I

Born on a dairy farm

Animal science at Wageningen University

●Epidemiology (simulation model of management regarding cystic ovaries)

●Economics (long term effects of herd health management programs)

PhD at Fac. Veterinary Medicine (AI to diagnose mastitis)

Working in field of animal health managementIn between Wageningen University and Faculty of Vet. Med. (since 2001)

@henkhogeveen

animal-health-management.blogspot.com

www.slideshare.net/henkhogeveen

Wageningen

Utrecht

Leusden

Animal diseases are a ……….

Welfare problem

Human health problem (one health)

Nuisance to the farmer

Animal diseases are a:

Welfare problem

Human health problem (one health)

Nuisance to the farmer

But also an economic problem ….

Outline

Disease control: optimization

Modeling disease

The cow level: reproduction

The herd level: trypanosomosis - costs

The herd level: mastitis - prevention

Final remarks

Maximization

Veterinarians want to maximize animal health

●If there is a vaccine, use it

●If there is a (better) treatment, use it

●In case of doubt: treat (better safe than sorry)

Medical doctors also want to maximize health

●And minimize risk of infection

Microbiologists want to maximize detection●If there are more precise tests, use it

But ……. Is it optimal?

There is more than only the health of animals:

●Money

●Time

●Availability of drugs or vaccin

So measures need to be balanced

Economic effects of diseases

Expenditures (additional resources) ●Drugs

●Veterinarian

●Labour

●Expenditures to control disease

Losses (decrease in production)●Decreased production level

●Discarded milk

●Changes in milk price (milk quality)

●Culling

Total costs

Expenditures + losses

Often overlooked

90 % of studies only look at losses

Farmers tend to look at expenditures

We need to optimize

Source: McInerney et al., Prev. Vet. Med, 1992

Control vs failure

Control expenditures (€)

Output losses (€)

Source: McInerney et al., Prev. Vet. Med, 1992

High losses, low control expenditures

Control vs failure

Control expenditures (€)

Output losses (€)

Source: McInerney et al., Prev. Vet. Med, 1992

Low losses, high control expenditures

Control vs failure

Control expenditures (€)

Output losses (€)

Source: McInerney et al., Prev. Vet. Med, 1992

Optimal

Control vs failure

Control expenditures (€)

Output losses (€)

Types of animal diseases

Production diseases

●On-farm optimization

●Externalities

●E.g., mastitis, lameness, trypanosomosis

Endemic contagious diseases

●On-farm control decision

● Interaction between farms

●E.g., BVD, Aujeszky’s disease

Notifiable contagious diseases

●Regional control decisions (eradication)

●Surveillance

●E.g., FMD, AI, Rinderpest

The management problem

Consequences animal health

Epidemiological consequences

Veterinary knowledge of diseases

The management problem

Consequences animal welfare

Consequences human health

Consequences animal health

Epidemiological consequences

Knowledge about externalities

The management problem

Consequences animal welfare

Consequences human health

Costs of intervention

Consequences animal health

Epidemiological consequences

Decisons become increasingly complex

Decision maker

ObjectivesAvailable resources

Consequences animal welfare

Consequences human health

Costs of intervention

Consequences animal health

Epidemiological consequences

Levels of decision making

Individual animals

● Treatment

● Culling

● Interaction

Groups of animals (herd/farm)

● Prevention

● Eradication

Sector

● Control

● Eradication

Region

● Control

● Eradication

Levels of decision making

Individual animals

● Treatment

● Culling

● Interaction

Groups of animals (herd/farm)

● Prevention

● Eradication

Sector

● Control

● Eradication

Region

● Control

● Eradication

Farmer, supported by advisor

Farmer’s organisationProcessors

Government

Decision maker

Outline

Disease control: optimization

Modeling disease

The cow level: reproduction

The herd level: trypanosomosis - costs

The herd level: mastitis - prevention

Final remarks

Modelling to estimate effects of diseases and disease control

Simulation model

Input data based on data, literature, expertise

Relatively cheap

Pragmatic approach

Bio-economic modelling: economics combined with detailed physiological basis

Models ……. do not capture the complexity of the real situation

Models……. are sometimes nicer than reality (too good to be true)

Some terminology

Static vs dynamic●behaviour over time

Deterministic vs stochastic●definite predictions or averages (deterministic)

●output is probability distributions (stochastic)

●variability of the system uncertainty of knowledge

Spatial●Space effects play a role

Optimization vs simulation●optimum solution, given an objective

●outcome given a pre-defined set of input

AHE is about money right?

What about

●Human disease (zoönoses)

●Welfare

●The environment

●…….

Express these in money ……

Different methods

Cost-minization analysis

Cost-effectiveness analysis

Cost-utility analysis

Cost-benefit analysis

Differ in: measurement of effect

utility benefit

Cost minimization analysis

equal effectiveness of all programs under review (same outcome)

only monetary costs●Net costs:

●Program costs (K)●Monetary benefits (∆W)

{K - ∆W}

Cost effectiveness analysis

Single non-monetary effect ●usually expressed in physical units such as e.g.:

●# infected animals; ●# days with illness; ●…

All other effects expressed in monetary units

Cost-effectiveness ratio●Net costs:

●Program costs (K)●Monetary benefits (∆W)

●Single non-monetary benefit (∆ SE){K - ∆W}

∆SE

Ranking the alternatives

Effectiveness

Cos

ts

Low costsHigh effective

High costsLow effective

High costsHigh effective

Low costsLow effective

Maximalacceptable budget

Minimal accepableeffectiveness

Not worth considering

Worth considering

Best possibilities

Cost utility analysis

Variation of Cost effectiveness analysis, weighing

Single combined measurement of non-monetary effects into one single metric unit; e.g. QALY

all other effects expressed in monetary units

Cost-utility ratio

●Net costs:

●Program costs (K)

●Monetary benefits (∆W)

●Single combined non-monetary benefit (∆CE)

{K - ∆W} ∆CE

Cos benefit analysis

All effects are measured and expressed in monetary terms

Some times difficult (e.g., animal welfare, human health, etc. )

Evaluation: Net value

Benefit- cost ratio

{K - ∆W}

∆WK

Outline

Disease control: optimization

Modeling disease

The cow level: reproduction

The herd level: trypanosomosis - costs

The herd level: mastitis - prevention

Final remarks

Two decisions around reproduction

When do I start with inseminations

When do I stop with insemination

Difficult calculation

Cow factors

●First ovulation

●Probability of detection

●Probability of conception

●Milk production level

●Reproductive disorders

Economical factors

●Milk price

●Costs of insemination

●Costs of culling

●Costs of calving management

36

A complexsystem of

dynamics andinteractions

Model

Monte Carlo stochastic simulation

Interactions and dynamics at cow level

Time steps of 1 week

Different VWP (6-15 wks) for the same cow

Input for Dutch situation (Inchaisri et al., 2010)

●Literature

●Expertise

Stochastic dynamic modelling

• Breed

• Parity

• Month of calving

• Milk production

• Farm level

• Relative performance

• Persistence

Cow

START OF CYCLE

39

Calf

Ovulation

Oestrusdetected

Insemination

Conception

yes

yes

yes

yes

no

no

no

no

cow

Probabilitiesbased on cow

factors

Average results

Voluntary waiting periods

6 wk 7 wk 9 wk 11 wk 13 wk 15 wkFirst insemination

10.9 11.5 13.1 14.8 16.8 18.5Calving interval

391 393 401 410 421 433MP/cow/year (kg)

8200 8188 8157 8112 8056 7997Insemations

1.89 1.86 1.78 1.74 1.70 1.69Calves/cow/year

0.93 0.93 0.91 0.89 0.87 0.84

Not pregnant (%) 0.018 0.019 0.021 0.025 0.030 0.037

40

Economic consequences (€/cow/year)

Voluntary waiting periods

7 wks 9 wks 11 wks 13 wks 15 wksMilk production

2.2 8.9 18.3 32.4 46.4

Calves 0.1 0.3 0.6 1.0 1.7

Culling 0.4 1.6 3.4 6.3 10.1

Inseminations -0.5 -1.6 -2.0 -2.8 -3.1

Calf Management

-0.1 -0.5 -1.0 -1.8 -2.9

Net total 2.1 8.6 19.0 34.2 52.2  (-16-22) (-11-32) (-6-53) (4-78) (13-106)

41

Average

0

10

20

30

40

50

60

6 7 8 9 10 11 12 13 14 15VWP (weeks)

Net

loss

es (

€/co

w/y

ear)

Outline

Disease control: optimization

Modeling disease

The cow level: reproduction

The herd level: trypanosomosis - costs

The herd level: mastitis - prevention

Final remarks

Trypanosomosis

Model of Esther Wafula

Calculations at the herd level (costs of disease)

Basis is the individual cow

Multi-process modelling: individual cows simulated at the same time -> herd level

Stochastic Monte Carlo model

Model structure

Parameterization

Based on literature

Data collection (interviews with experts)

Own expertise

Prevalence over the year

January

February

March

April

May

June Ju

ly

August

September

October

November

December

0

5

10

15

20

25

30

0510152025303540

Mixed production system

Clinical Subclinical Prevalence

January

February

March

April

May

June Ju

ly

August

September

October

November

December

0

5

10

15

20

25

0

10

20

30

40

50

Agro-Pastoral production system

Clinical Subclinical Prevalence

January

February

March

AprilMay

June Ju

ly

August

September

October

November

December

0

10

20

30

40

50

60

70

051015202530354045

Pastoral production system

Clinical Subclinical Prevalence

Total costs (KES * 1.000 per farm per year)

Veterinary fees Extra labour/feeds

Milk losses Cost of Drugs Mortality Traction Abortion

2

4

6

8

10

Pastoral production sys-tem

Agro pastoral Production system

Mixed Production system

Cost

s per

cow

(KES

* 1

,000

)

Total costs:Pastoral production system: 679 (447-849)Mixed production system: 234 (105-373)Agro pastoral production system: 139 (60-222)

Outline

Disease control: optimization

Modeling disease

The cow level: reproduction

The herd level: trypanosomosis - costs

The herd level: mastitis - prevention

Final remarks

Costs of mastitis

Mastitis is a costly disease

Estimiations between € 55 – 97 per cow per year

●The Netherlands: €78/cow/year (Huijps et al.,2008)

●USA: €61/cow/year (Bar et al., 2008)

●Sweden: €97/cow/year (Hagnestam- Nielsen and Østergaard, (2009)

●The Netherlands: €84/cow/year (Halasa et al., 2009)

●Sweden: €55/cow/year (Nielsen et al., 2010)

Remember this one?

High losses, low control expenditures

Low losses, high control expenditures

Optimal

Preventive costs (€)

Failure costs(€)

Material

Questionaire dataset of 189 farms (Santman-Berends et al., 2011)

●General questions

●Livestock management

●Lactating cows

●Milking process

●Feed

Pathogen dataset of 120 farms

●Pathogens present on individual farms

Milk recording services dataset of 120 fairy farms

●Testday records (e.g. milk production, SCC)

Normative calculations losses

Clinical losses: based on Huijps et al., 2008

Clinical milk production losses + Discarded milk + Medication + Labour + Veterinarian + Culling

Subclinical losses: based on Halasa et al., 2009

=

=

Costs of prevention

When present the following were calculated according to Huijps et al. (2010):

●Cleaning cubicles

●Cleaning lanes

●Drying off

●Pre-stripping

●Clean dirty udders

●Milker gloves

●Clean cluster after clinical case

●Milk high SCC cow last

●Post milking teat disinfection

●Fixing cows after milking

Estimated costs (€/cow/year) for mastitis

Average 5% percentile

95% percentile

Clinical mastitis 62 16 151

Subclinical mastitis 14 9 21

Failure costs mastitis

76 26 164

Prevention costs 88 43 131

Costs of mastitis 164 99 281

Failure costs vs preventive costs

Outline

Disease control: optimization

Modeling disease

The cow level: reproduction

The herd level: trypanosomosis - costs

The herd level: mastitis - prevention

Final remarks

Farmers underestimate costs of disease

0

20

40

60

80

100

120

140

160

180

200

0 20 40 60 80 100 120 140 160 180 200

Expected costs (€ per cow)

Rea

l co

sts

(€/c

ow

)

46 under estimators

Huijps et al., 2008

There is more than economics

Money is only one motivator

Veterinarians and economics

Important to know the economics of your services

●Production diseases

●Find optimum of control and failure costs

●Know that farmers underestimate losses

●To support decisions when resources are scarse

Veterinarians are no economists

Yes you are right

But you should know something about it

Understand farmers

Understand the economics of your advice

Interpret calculations that are available

Veterinarians should know something about economics

Two courses on economics

Part of MSc education Veterinary Epidemiology and Economics, Utrecht University (www.msc-epidemiology.nl)

Economic concepts and theories for the veterinary sciences

Applied economic modelling for the veterinary sciences

Available on-line: www.elevatehealth.eu

Thank you for your attention Change in output with different levels of veterinary input

and all other factors equal

@henkhogeveen

animal-health-management.blogspot.com

henk.hogeveen@wur.nlh.hogeveen@uu.nl