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According to the World Health Organization (WHO), in 2017, total global spending on health reached US$7.8 trillion and, by 2020, this figure had leapt to $9 trillion as governments raced to contain the first wave of COVID-19. The WHO estimates that worldwide spending on health in 2020 amounted to 10.8 per cent of the gross global domestic product (GDP). Despite successful COVID-19 vaccine rollouts and less lethal virus strains, the global health burden remains severe. For example, annual global cancer spending is projected to nearly double to US$375 billion by 2027, according to health data company IQVIA.
In light of these challenges, the UK Department for Business, Innovation and Skills emphasizes the importance of regenerative medicine (RM) in shifting the focus from conventional pain management and palliative care to more curative approaches. RM holds the potential to significantly reduce health care costs, both directly and indirectly. This potential was further highlighted in a report from the World Governments Summit 2024, which pointed out that the widespread adoption of RM could offer substantial economic benefits globally. By providing more effective and potentially curative treatments, RM can alleviate the burden of chronic diseases, reduce hospitalization rates, and minimize the need for long-term care. These advancements not only promise significant cost savings but also improve the efficiency of health-care systems, ultimately contributing to overall economic stability and growth.
Direct and indirect cost savings from RM
A thriving cell therapy and RM industry can stimulate economic growth in the short and long term. Based on Kirschtein et al’s. definition, direct costs are those associated with the use of medical care in the prevention, diagnosis and treatment of disease, along with continuing care, rehabilitation, or terminal care of patients. Indirect costs are the value of time lost from employment or other productive activities due to mortality or morbidity. The industry’s dependency on supporting sectors, such as transport and logistics, indirectly promotes growth by increasing business transactions (revenue) and driving demand (job creation). With strong leadership and appropriate strategic initiatives in place, the direct outcomes of a robust RM sector include significant cost reductions in long-term health care, especially for treating chronic diseases like heart failure, diabetes, stroke, Parkinson’s disease and spinal cord injuries.
Figure 1 Economic benefits of investment in the Canadian stem cell industry as reported by KPMG
For instance, age-related macular degeneration (AMD) affects 1.75 million people in the U.S., and this number is projected to rise to 2.95 million by 2020. Current treatments are available for the neovascular (“wet”) form but not for the atrophic (“dry”) form. The economic impact of AMD is considerable, with the total U.S. loss to GDP estimated at $24.4 billion annually due to productivity losses. Studies suggest that RM offers promising treatments that could mitigate these losses. The estimated potential annual cost savings of approximately $250 billion from RM treatments for conditions like heart failure, stroke and diabetes include both direct treatment costs and indirect costs such as lost productivity.
In the Canadian context, KPMG notes the development of a novel cell therapy for diabetes, with the number of Canadians living with diabetes expected to reach 4.8 million by 2014, underscoring the potential impact of RM on public health. Diabetes consumes 3.5 percent of Canadian public health care spending, with direct health care and indirect economic costs expected to surpass CA$16 billion by 2020. The transformational potential of stem cells to cure diabetes, by restoring insulin production, could mitigate a significant share of health-care expenditures related to complications, long-term disabilities and premature mortality, as well as bring significant indirect economic benefits to patients and society as a whole.
The indirect costs mentioned include the value of time lost from work or housekeeping by family members or friends who assist patients. Additionally, there are “other related direct costs,” borne by patients or others, but not included in the National Health Expenditure Plan. These categories are crucial for a comprehensive assessment of the economic impact of RM, as they account for often overlooked expenses that contribute to the total cost burden.
Economic multiplier effects of RM
Jose Alberro reported on the local and global economic returns from research in stem cells at the California Institute for Regenerative Medicine (CIRM). He argues that building facilities and acquiring equipment have significant economic impacts not only during the construction phase but also beyond the completion of these projects. The correct way to measure these one-time economic impacts is to recognize that their contribution extends beyond direct disbursements. For example, building a laboratory requires specialized equipment, which necessitates purchasing raw materials like steel, iron and coal. This process creates a cascading economic effect, known as indirect impacts, resulting from the production of inputs needed to support the production of the directly acquired goods and services. Furthermore, these activities lead to induced impacts, as the goods and services manufactured or sold within California contribute to the state’s economy by generating additional employment and economic activity. This concept can also be applied to funding used for training individuals or conducting research, where jobs created by such funding also have multiplying effects on the economy.
Another economic impact, analyzed by Laurence Baker, is the additional tax revenue generated from spending associated with Proposition 71, which supports CIRM. This includes income and sales tax revenues from new employment and purchases resulting from CIRM spending, such as hiring researchers, buying new equipment, and awarding construction contracts. The analysis involves computing the amount of new economic activity generated by CIRM spending, using economic multipliers from the IMPLAN economic modelling program. These multipliers reflect the ripple effects of spending throughout the economy. For example, for every dollar spent on construction for new facilities, an additional 80 cents in economic activity is created, while research spending generates an additional 93 cents. These estimates highlight the broader economic benefits of Proposition 71’s funding, including increased tax revenues and enhanced economic activity within California.
The IMPLAN model’s data, based on recent regional economic information, quantifies the linkages between various sectors of the state economy and assesses the local economic impacts, excluding any activity generated in other states. The model’s findings underscore the significant economic contribution of CIRM’s activities to the California economy, emphasizing the importance of continued investment in RM infrastructure and research. Additionally, the model accounts for various factors, such as the movement of goods and services and the resulting job creation in the local market. This comprehensive analysis illustrates the wide-ranging benefits of investments in the RM sector, not just in terms of immediate job creation and infrastructure development but also in fostering long-term economic growth and stability. The inclusion of induced effects, such as the increased consumption of local goods and services by the newly employed workforce, further amplifies the economic impact, making a strong case for sustained support and expansion of initiatives like Proposition 71.
The economic impact and comprehensive cost-benefit analysis of RM underscore its transformative potential in health care and broader economic contexts. As highlighted by global spending data, the health-care burden remains significant despite advances in medical technologies and treatments. RM offers a promising avenue to address these challenges by shifting focus from conventional symptom management to curative approaches, potentially reducing long-term health-care costs. The direct benefits of RM include lowering the costs associated with chronic disease management, reducing hospitalization rates, and decreasing the need for long-term care facilities.
Indirectly, RM stimulates economic growth through job creation, both within the health-care sector and in supporting industries such as logistics, construction and manufacturing. The investments in infrastructure and research, as exemplified by CIRM, generate significant economic returns, including increased tax revenues and local economic activity. These benefits are amplified by the economic multipliers, which account for the cascading effects of initial spending on broader economic activity.
Laya Kiani
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