What are the impacts of increasing taxes on cigarettes?

Responsible researcher: Viviane Pires Ribeiro

Article title: BURDEN OF SMOKING IN BRAZIL AND POTENTIAL BENEFIT OF INCREASING TAXES ON CIGARETTES FOR THE ECONOMY AND THE REDUCTION OF DEATHS AND ILLNESS

Article authors: Marcia Pinto, Ariel Bardach, Alfredo Palacios, Aline Biz, Andrea Alcaraz, Belen Rodriguez, Federico Augustovski and Andres Pichon-Riviere

Location of intervention: Brazilian semi-arid

Sample size: 558,789 deaths

Sector: Healthcare

Type of Intervention : Analysis of direct and indirect costs associated with the main tobacco-related diseases

Variable of main interest: Cost of smoking

Evaluation method: Experimental Evaluation (RCT)

Assessment Context

Smoking is the main risk factor for death from chronic non-communicable diseases in the world, responsible for 6 million deaths per year. Of this total, approximately 603 thousand deaths are attributable to passive smoking, of which 28% in children. In 2019, around 4 in 5 smokers lived in low- and middle-income countries, causing losses related to reduced productivity and high family outlays, factors that contribute to the resurgence of poverty.

On the world stage, Brazil stands out for its National Tobacco Control Policy, which includes the guidelines of the World Health Organization's Framework Convention on Tobacco Control, ratified by the country more than ten years ago. Even though it is one of the leaders in the number of smokers, Brazil registered a significant reduction in the prevalence between men and women of 56.5% and 55.8% in the period from 1990 to 2015. However, the magnitude of the disease burden associated with Smoking is still high, with around 147 thousand deaths and 2.69 million years of life lost per year and an annual cost of 23.37 billion reais for the health system.

Intervention Details

Pinto et al. (2019) estimate the burden of mortality, morbidity and costs for society associated with smoking in 2015 and the potential impact generated on health outcomes and the economy from the increase in cigarette prices through taxes. To this end, the authors used demographic data obtained from the population projection for 2015 from the Brazilian Institute of Geography and Statistics (IBGE), considering each individual in the cohorts by sex and age between 35 and 100 years.

The relative risk of developing each disease in smokers and ex-smokers in relation to non-smokers was obtained from the Cancer Prevention Study II (CPS-II) study. The lethality calculated by the model for certain conditions such as acute myocardial infarction (AMI), angina pectoris and stroke was compared with available national statistics on coronary ischemic disease or cerebrovascular diseases. When dividing the death data grouped by ICD-10 codes by the Brazilian population, the absolute risk of mortality by causes, sex and age was obtained. For the lethality of neoplasms, the authors obtained specific prognostic data by type of cancer, age and sex, using Globocan. Due to the unavailability of data on hospitalizations by sex, age and ICD-10 supplementary health code, it was necessary to correct data from the Unified Health System in order to include all hospitalizations in 2015 in the country.

Methodology Details

To perform the analysis, Pinto et al. (2019) used two models: (i) disease burden model associated with smoking, which allowed estimating the impact in terms of mortality, morbidity and cost to society; and (ii) tax model, applied to measure how a price increase would prevent deaths, illnesses and costs to society based on different scenarios of cigarette price increases over ten years. Subsequently, the authors estimated the increase in tax revenue for the government generated by the increase in taxes.

The first model is a first-order Monte Carlo microsimulation mathematical model that, through a probabilistic simulation of each individual, incorporated the natural history, direct and indirect costs and loss of quality of life associated with the main tobacco-related diseases. The diseases selected were: ischemic and non-ischemic heart diseases, chronic obstructive pulmonary disease (COPD), pneumonia and influenza, cerebrovascular accident (CVA) and the following types of cancer: lung, mouth and pharynx, esophagus, stomach, pancreas, kidneys and renal pelvis, larynx, bladder, cervix, and myeloid leukemia.

While the second model was created based on the application of percentage increases on cigarette prices. The authors calculated the expected impact on health outcomes using the national context to define three price increase scenarios: short, medium and long term. In this way, the impact on health outcomes was calculated as the difference observed between both estimates of deaths, occurrence of events, loss of years of life, disability and direct and indirect costs.

Results                                    

The results show that in 2015, smoking was responsible for 156,337 deaths, 4.2 million years of life lost, 229,071 acute myocardial infarctions, 59,509 strokes and 77,500 cancer diagnoses. The total cost was R$56.9 billion, of which 70% corresponded to the direct cost associated with health care and the remainder to the indirect cost due to loss of productivity due to premature death and disability. Passive smoking and perinatal causes totaled a cost of R$4.5 billion.

In ten years, the impact produced by increases in the price of cigarettes expressed in economic benefits would vary from R$55.1 billion (25% increase) to R$128.8 billion (75% increase). A 50% increase in the price of cigarettes would prevent 136,482 deaths, 507,451 cases of cardiovascular disease, 64,382 cases of cancer and 100,365 strokes. The estimated economic benefit would be R$97.9 billion.

Public Policy Lessons

In recent years, Brazil has adopted a policy of increasing taxes on cigarettes. ad valorem rate for cigarettes came into force in the country , in addition to a policy of minimum prices per pack. The results found by Pinto et al. (2019) point out that increasing prices would generate benefits in revenue (increase of up to R$50 billion in 10 years). However, the success of the price and tax policy to avoid costs, deaths and illnesses presupposes the joint involvement of the government areas of health, finance and justice due to the volume of the illegal cigarette market in the country.

Therefore, cost-effective measures to prevent deaths and illnesses due to smoking must be intensified to generate benefits for Brazilian society. In this context, the authors emphasize that the costs to society reflect an important opportunity cost and compensation for damages is an opportune topic for debate on the tobacco control agenda. Such resources can be invested in the full implementation of the World Health Organization's Framework Convention on Tobacco Control, but they should not be restricted to this purpose alone, as other public policies could benefit from this compensation.

Reference

PINTO, M. et al. Burden of smoking in Brazil and potential benefit of increasing taxes on cigarettes for the economy and reducing deaths and illnesses. Public Health Notebooks, v. 35, p. e00129118, 2019.