Government subsidies for health foods offer healthcare savings
European governments reduce the costs of dealing with obesity by a
third, according to an economic analysis presented last week.
The research is part of an EU-funded project called Lipgene, investigating foods that reduce incidence of the metabolic syndrome. The researchers are concentrating on changing the fat profile of animal products like milk and meat to increase their CLA content, as well as developing a plant source of omega-3 fatty acids.
These fatty acids have been associated with reduced body fat and an improved lipid profile, two areas that can lead to metabolic syndrome.
However while scientists work on these fats, economists involved in the project are looking at how much impact such foods could make on at-risk populations, given the higher costs of healthy foods.
They predict that without government intervention, healthy lipid-modified food will be condemned to a series of small niches in the market. But subsidies targeting 20 per cent of the population could cut EU health costs by more than €6 billion.
"My concern was that if you've got these products on the market, you will only reach a small segment of the population. And it tends to be people in the lower social class who are at risk of heart disease that will not be able to meet higher costs of these products," Dr James Fry, managing director of UK consultancy LMC International, told NutraIngredients.com.
Speaking at a seminar in Brussels last week, Dr Fry outlined that total supply costs for milk, meat or eggs with high CLA or omega-3 levels are 10-60 per cent more than for conventional alternatives.
The extra costs come from the feed needed to enhance levels of these fats in animals, the costs associated with reduced productivity in eggs for example, and higher unit costs because of the smaller scale of operations.
There are also identity preservation (IP) costs. IP is required to preserve the composition of the product and prevent cross-contamination with less valuable products, which would dilute the value of the health food.
Dr Fry revealed how these extra costs lead to a niche market. Phytosterol spreads, for example, have 7 per cent of the market in the UK, with buyers paying a near 300 per cent premium at retailers. Healthy eggs have 3-4 per cent of the US market, with premia of close to 200 per cent.
"The cost penalty for niche products with 2-3 per cent of the market vis-à-vis conventional products with over 90 per cent varies from 35-85 per cent for the products considered in the Lipgene project," according to the analysis.
But a number of policy options available to governments could have a real impact on their healthcare costs, rather than condemning these health foods to a niche segment of the population.
For example, targeting subsidies to specific users could be a cheaper intervention than an across-the-board subsidy, and also runs less risk of bidding up the prices of special ingredients for lipid-modified foods.
LMC used data on obesity prevalence to gain a proxy for the costs of metabolic syndrome. It is estimated that the direct and indirect costs of obesity within the EU were in the region of €32.8 billion in 2002, although the costs of the metabolic syndrome are likely to be higher.
The extra costs associated with the production of meats and eggs with favourable fatty acid profiles and modified fat spreads would be around €10 billion for the EU15.
But if subsidies are directed towards only 20 per cent of the EU population, covering extra production costs would come to €6 billion per year.
"If a targeted approach reduces the incidence of the consequences of the metabolic syndrome by one fifth, the overall annual EU health costs of obesity/metabolic syndrome would be cut be over €6 billion, yielding a small net advantage," said Dr Fry.
He noted that the trade-offs will only become better defined as the project generates scientific results for the efficacy of lipid-modified foods.
"The magnitude of benefits is not yet quantified, this is the missing piece of the puzzle."
But Dr Fry added that there is real incentive for governments to consider subsidizing health foods.
"As of 1 January, a Dutch private insurance company is offering vouchers for the purchase of ProActiv margarine. They have clearly done their cost-benefit analysis, and found this to be a cheaper option than statins," he said.
"If a private insurance company recognizes the value in this approach, why shouldn't governments?"
