What are the economic benefits and costs of food fortification?

To begin to gain some sense of the merits of investing scarce public resources in fortification or other micro-nutrient prevention efforts, one needs to understand the economic benefits and costs of these efforts and then be able to compare these costs and benefits with those of other micronutrient and human resource investments.

Economic benefits

Most public health researchers are aware of the vast literature that reviews most carefully the effects of iron-deficiency anaemia, vitamin A deficiency, and iodine-deficiency disorders on health and behaviour. I briefly summarize this literature, as well as the way an economist might evaluate each of these effects.

The largest and most systematic research has focused on the effects of vitamin A deficiency on morbidity and mortality. A large number of studies have examined most systematically, under varying disease and ecological conditions, the effects of vitamin A deficiency or elimination of vitamin A deficiency on morbidity and mortality patterns [3]. Table 1 summarizes the results in terms of their effects on mortality rates for preschool children.

The effects of iron-deficiency anaemia on adult physical performance have been understood for decades, but more recent studies in a number of countries under varying conditions lead us to understand that improvement of haemoglobin status in adult workers, particularly adults in piece work or highly structured production conditions, will enhance economic performance in terms of actual productivity. These studies, conducted mainly among road-construction workers, tea-plantation pickers, rubber-plantation workers, and workers in similar types of occupations, provide a consistent picture indicating that an improved adult haemoglobin status of 1% is associated with a 1% to 2% increase in labour productivity. Levin et al.[4] have reviewed these studies. An earlier World Bank report by Levin [5] examines these studies in more detail.

TABLE 1. Economic costs and benefits of food fortification: Linkage of micronutrient deficiency of vitamin A to improved health and productivity

Levin et al. [4] also reviewed briefly the vast literature on the relationship between iron-deficiency anaemia and iron supplementation as it affects cognitive function and learning or aspects of learning of infants, preschool, and school-age children. Although there are certainly questions regarding some of the conclusions, this literature, which is dominated by the work of Pollitt [6] and his colleagues, Lozoff [7], and Walter [8], provides ample evidence of an important effect of iron-deficiency anaemia and of iron supplementation on recall, concentration, and a few other dimensions of learning and cognitive function.

There is an equally extensive literature that links iodine-deficiency disorders, particularly endemic goitre, to cretinism and reproductive failure. Under severe conditions, stillbirths, spontaneous abortions, and congenital abnormalities occur significantly often. The largest single cause of preventable brain damage and mental retardation is often assumed to be iodine-deficiency disorders.

However, it is probably the more subtle effects of iodine-deficiency disorders on cognitive function that represent the major cost of this deficiency disease. There are a number of reviews and one meta-analysis on this relationship that come to roughly the same conclusion [9,10]. There has been less research undertaken on this topic because of the cost and complexity of doing so. However, the historical studies and the more scientifically controlled ones arrive at a similar profile of the effects of iodine deficiency both on the foetus and directly on the infant in compromising cognitive function [11].

Once these health and behavioural impacts are understood, it is necessary to ascertain their economic impact. A summary of the broad set of relationships is presented in table 2. There is a vast literature on methods of evaluating each of these benefits; Levin [5] and an earlier case study in the Philippines present the only attempts to quantify the economic benefits of reducing micronutrient deficiencies [12-14].

Economic costs

In ascertaining the economic costs, it is important to realize that the major rationale for a fortification effort is its long-term sustainability, which can be self-financing. As such, all planning and related efforts are usually focused on ways to front-load the costs that government incurs. These might include foreign exchange for the fortificant or some reduction of taxes and foreign-exchange controls for purchase of the fortificant, preliminary research and planning undertaken by the government, preliminary technical and other research on consumer acceptability financed by the public sector, and social marketing and all quality assurance costs at the retail and consumer level funded by the government. It is typically assumed that costs to the consumer and industry are negligible, and thus they are ignored. Moreover, within-company quality assurance costs are rarely covered by the government.

TABLE 2. Valuation of economic benefits of fortification programmes

In a typical situation concerning centrally processed foods, particularly foods handled in ways that are amenable to fortification, such as is found in the baking and milling sectors and the preparation of most condiments, this assumption of minimal costs to industry is typically true. Recent studies on the costs of fortification provide some guide [15]. The most complete review is the exceptional review volume by Lotfi et al. [16]. What these studies and the other cases noted above show is that generally the costs of fortification are very small in terms of annual costs for centrally processed foods. The estimated annual costs per person in 1994 were typically about US$0.02 to US$0.20 for iodine, US$0.06 to US$0.30 for retinol palmitate, and US$0.07 to US$1.07 for iron. These costs vary with the vehicle, the fortificant, the conditions the product will face, and the process used (e.g., premixes). This is a cost per total population reached and gives some sense of the small total cost and the very small likelihood that fortification with a centrally processed nutrient will affect the price of a processed food.

Comparable costs

Alternative measures for eliminating micronutrient deficiencies are typically found to be less cost-effective, particularly in terms of the costs the government faces. Provision of vitamin A and E capsules, iron tablets, or iodized oil injections is typically fully covered by public funds. These costs are typically greater per person than fortification costs. For instance, the studies noted earlier all found that the annual per person costs were US$1 to US$3 for injections of iodized oil, US$0.25 to US$1.50 for provision of mass dosage capsules of vitamin A plus E, and US$1.89 to US$5.30 for provision of iron tablets [1, 4, 12, 15]. Typically, these costs ignore the enormous expenditures in terms of health worker time, transportation, and so forth. They are the marginal costs of the programme.

There are two major ways that these cost relationships can be adversely affected. One relates to the fortification of a food, such as salt, that is processed in a wide-ranging variety of ways, many of which are primitive. This is particularly the problem for salt, as it is processed in many Asian and Latin American countries with large iodine-deficiency disorder problems. When this is the case, provision of fortified salt to be added to crudely processed salt or insistence that salt be centrally processed interferes significantly with the typical salt food chain and leads to unusual costs for the producer and often the consumer. Black marketing and other attempts to bypass the fortification requirements of government regulations are typically the result. Another result essentially places all small primitive processors at risk of losing their means of production.

A second issue is the cost of reaching people at high risk. When this cost is considered, there are many circumstances under which a general approach, such as fortification, turns out to be inefficient. When pregnant women, infants, or pre-schoolers are the target, there are circumstances in which supplementation is more cost-effective when total societal costs are considered. However, when one focuses on costs to the government and ignores the costs industry will bear, there are almost no situations in which fortification is less cost-effective. Moreover, there is absolutely no evidence that supplementation programmes are sustain-able over a long period, whereas there is clear evidence of the sustainability of fortification programmes.

There are important gaps in all the cost research to date. None of these efforts have included the costs of quality assurance and social marketing. Quality assurance is particularly important. The steps that specifically require quality assurance are:

» Purchase quality equipment and supplies;
» Routinely inspect processing equipment;
» Validate the mixing process to ensure consistent mixing;
» Monitor food ready for distribution;
» Monitor food in the marketplace to ensure that adequate levels of the fortificant are available;
» Monitor food at the household level to assure that adequate levels of the fortificant are reaching the target population,

The amount of experience and the number of models of quality assurance are insufficient to develop these costs yet.

In addition, it is clear that costs are often underestimated to improve the appearance of programmes. The results are adverse; they can lead to reduced allocation of resources and inefficient programme management. Materials are being developed that provide guidelines for the collection of the costs of fortification programmes [15].