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Addiction Medicine

Estimating the public economic consequences of introducing varenicline smoking cessation therapy in South Korea using a fiscal analytic framework

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Pages 571-576 | Received 20 Nov 2017, Accepted 21 Jan 2018, Published online: 13 Feb 2018
 

Abstract

Background and aims: Smoking gives rise to many cross-sectorial public costs and benefits for government. Costs arise from increased healthcare spending and work-related social benefits, while smoking itself provides significant revenue for government from tobacco taxes. To better understand the public economic impact of smoking and smoking cessation therapies, this study developed a government perspective framework for assessing smoking-attributable morbidity and mortality and associated public costs. This framework includes changes in lifetime tax revenue and health costs, as well as changes in tobacco tax revenue, from fewer smokers.

Methods: A modified generational accounting framework was developed to assess relationships between smoking-attributable morbidity and mortality and public economic consequences of smoking, including lifetime tax revenue gains/losses, government social transfers, and health spending. Based on the current prevalence of smoking in South Korean males, a cohort model was developed for smokers, former-smokers, and never-smokers. The model simulated the lifetime discounted fiscal transfers for different age cohorts in 5 year age bands, and the return on investment (ROI) from smoking cessation therapy.

Results: Former smokers are estimated to generate higher lifetime earnings and direct tax revenues and lower lifetime healthcare costs due to the reduction of smoking-attributable mortality and morbidity compared to smokers, even after accounting for reduced tobacco taxes paid. Based on the costs of public investments in varenicline, this study estimated a ROI from 1.4–1.7, depending on treatment age, with higher ROI in younger cohorts, with an average ROI of 1.6 for those aged less than 65.

Conclusions: This analysis suggests that reductions in smoking can generate positive public economic benefits for government, even after accounting for lost tobacco tax revenues. The results described here are likely applicable to countries having similar underlying smoking prevalence, comparable taxation rates, and social benefit protection provided to individuals with smoking-related conditions.

Transparency

Declaration of funding

This study was sponsored by Pfizer, Inc., New York, NY.

Declaration of financial relationships

CLB is an employee and stockholder of Pfizer, Inc. MPC and NK are employees of Global Market Access Solutions (GMAS). GMAS received funding from Pfizer for conducting this study and for the development of this manuscript. JME peer reviewers on this manuscript have no relevant financial or other relationships to disclose.

Previous presentation

Work from a previously conducted analysis using South Korean fiscal data on smoking policy was presented at the International Society for Pharmacoeconomics and Outcomes Research meeting in Singapore 2016. The results described here are an updated analysis, and have not been previously presented.

Acknowledgments

No assistance in the preparation of this article is declared.

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