As the COVID-19 pandemic surge peaks and we begin to think about reopening our economy, our policy makers should immediately address how to prepare for the next one, for it is inevitable that a next one will occur.
I share with you my exact words from an address I gave at the National Press Club on December 8, 2005. Not because they were prescient of what was to come 15 years later, but because we as nation failed to act. Let’s not make that mistake again.
My exact words as delivered:
Imagine a cigarette carelessly flung on the edge of a scorched and brittle forest. Un-extinguished, the cigarette smolders in the leaves until it catches flame. The winds blow in, sparks are carried afar, the thirsty limbs ignite. A forest fire is born.
When the elements are aligned, the path of a global pandemic is similar.
Normal life stops. The churches close, the schools shutter. Communications and transportation grind to a halt.
The public succumbs to hysteria and panic. Police protection fails. Order decays. Productivity dives.
Sounds like science fiction, doesn’t it? But what if I told you, it already happened? What if I told you it was the pandemic flu that swept across America and around the globe in 1918?
Or if I told you that that this glimpse into the past might just be a preview to our future?
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A viral pandemic is no longer a question of if, but a question of when.
We know— depending upon the virulence of the strain that strikes and our capacity to respond—that the ensuing death toll could be devastating.
In recent weeks, the growing death toll of the avian flu and the mounting drumbeat of discussion have placed the virus under the microscope of the public eye. Yet—like all stories — it too will shift from center stage. The public will have had their fill. The danger will seem removed.
But while the story may recede from the cover of Newsweek or the centerfold of Time, I know that a threat that strikes at our very mortality — as this does — must not recede to the backdrop of public concern.
As a physician, a heart surgeon, my life has centered on mortality – the preservation of life.
And similarly, as public officials, the mortality of mankind should be our first, and if necessary, only concern. Measured against everything we consider from day to day—budgeting, taxes, judges, pensions— your mortality, the care and protection of human life, is the most fundamental responsibility entrusted to us..
Which is why we will not look away from what may come.
So today I ask you to walk forward with me to a future where an avian pandemic strikes. (It’s almost Christmas…think of the Ghost of Christmas Future.) As we look to that future, let’s zero in on a critically important aspect that has received almost no focus to date— the pandemic’s impact on our economy.
“When a pandemic strikes, exactly how devastating will the economic fallout be?”
That is the question I’ll answer today.
But before we fast-forward to the future, let’s quickly rewind.
“Exactly what is this avian influenza?”
The year is 1997. The place, Hong Kong.
The culprit: the H5N1 strain of the avian flu, a highly contagious virus primarily affecting wild waterfowl. The birds are a natural breeding ground for the virus — they can carry the virus without symptoms, spreading it far and wide.
In 1997 the dynamics shift. The virus that has affected only animals so far spreads to 18 people in Hong Kong. A third of them die.
By slaughtering the region’s entire poultry stock — 1.5 million birds — Hong Kong authorities quickly stem the spread of disease.
But to scientists and public health officials, it is the first shot heard round the world. The Hong Kong outbreak signaled that the H5N1 strain had satisfied 2 of 3 prerequisites for a pandemic:
1st: the H5N1 strain was a novel type of virus, to which no human being has any pre-existing immunity.
2nd: The virus could reproduce in humans and cause serious illness.
The only remaining requirement—not yet fulfilled—is human-to-human transmission.
For the final element to fall into place, it will require little more than the shuffling of a few genes between the animal and human forms of a virus (—a phenomenon known as an antigenic shift.)
The resulting mix will be totally unfamiliar to the human immune system which normally fights infections —meaning that human beings will have no natural immunity to it. More alarming, the right mix of genes could allow for sustained human-to-human transmission: an avian pandemic would launch to life.
Since the 1997 outbreak, the avian flu has progressively and relentlessly spread across 16 countries. From Hong Kong, the virus has stretched its tentacles into Thailand, South Korea, Viet Nam, Japan, Cambodia, Laos, Indonesia, China, Malaysia, Russia, Kazakhstan, Mongolia, Turkey, Romania, and Croatia—infecting 135 humans, and killing 69 (in 5 countries – Cambodia, China, Indonesia, Thailand, Viet Nam).
With each outbreak, the signs are increasingly clear that a pandemic is looming.
1st: it’s found a permanent ecologic niche among domestic ducks in rural Asia.
2nd: it’s increased the range of species it can infect–moving to cats and tigers.
3rd: it’s grown more robust, rendering itself resistant to 1 of 2 types of anti-flu drugs.
4th: it’s shown the ability to mutate rapidly, with the propensity to acquire new genes.
Lastly, it’s demonstrated that it can infect humans directly.
With each person that the virus infects, the more likely it is that genetic re-assortment will occur, and a pandemic will arise.
Possible Pandemic Scenarios
A second fundamental question: “How severe will that pandemic be?”
To forecast the economic impact, it’s a question we must answer.
The most frequently cited, deadliest pandemic in recent history was the 1918-1919 Spanish influenza.
The flu infected between a quarter and a third of all Americans, and killed half a million (2-3% of those infected). Worldwide, 40 to 50 million people died.
Unlike the seasonal flu, the 1918 influenza preyed on and killed a younger, healthier demographic, the most productive segment of our population—as opposed to the elderly, the weak, and the very young. In the United States, the pandemic was so acute that the average lifespan was shaved-off by 10 years.
“So, will an avian pandemic today be more severe or less severe than the 1918 avian flu?”
We don’t know.
Scientists who believe that the coming pandemic will be LESS severe cite the dramatic 20th century advances in science and medicine. We have far more sophisticated tools for surveillance, the ability to design vaccines, and better treatment options like antibiotics for secondary bacterial infections.
Those who believe that we’re MORE vulnerable today argue (perhaps even more persuasively) that the world is much more densely populated which facilitates rapid spread. They cite that the population is comprised of a higher proportion of elderly; that our dependence on just-in-time delivery systems would wreak greater disruption; and lastly that a million people living today with preexisting compromised immune systems (by cancer therapy) means a more susceptible host.
This line of reasoning—that a pandemic would be worse — is compounded by the fact that the world today is so tightly interconnected through travel, trade, and on-line communication — a factor that could greatly amplify the spread of fear, panic, and even the virus itself.
Whatever the outcome, this latter argument speaks to an undeniable truth. When facing the prospect of a modern pandemic, no longer are we battling the rapidly spreading virus alone, but the repercussions of disease in a world where everything is interdependent.
“But,” you say, “1918 is a long time ago.”
“Is there a modern example of a viral outbreak that we can learn from?”
And the answer is yes—the 2003 outbreak of the SARS virus.
SARS is our Best Benchmark
SARS, though not a pandemic, demonstrated — for the first time ever — the profound sensitivity of the modern global economy to a contagious, spreading, infectious disease.
The SARS virus infected only 8,000, and killed just 774 (remember the annual seasonal flu kills 30,000 in America every year). BUT what we learned was that the global reaction to this newly emerged virus was disproportionately greater than the actual virulence of the disease. 
From an economic standpoint, SARS taught us that when a modern pandemic emerges, it will generate 2 waves of reaction.
The first economic wave leads to the INDIRECT costs to the economy. It will be propelled by fear, confusion and misunderstanding, and a lack of confidence in the authorities’ ability to respond.
- In the early stages of the SARS outbreak, fear and uncertainty led to a dramatic 30-80% decline in tourism in East Asia in the spring of 2003. GDP fell by an astounding 2% in the second quarter.
- In Hong Kong, airline passenger arrivals dropped by two-thirds in April 2003. (as compared to the month before). Retail sales fell 8.5% for the quarter.
- Foreign direct investment in Asia plummeted.
- And in Canada—where fewer than 500 people were infected—the country suffered more than $1 billion in economic losses.
The second economic wave is caused by the DIRECT impact of the disease. It represents the hit the economy takes from hospitalizations, deaths, lost productivity, and a consequent slowdown in the flow of goods and services. In SARS, these DIRECT economic losses—from the medical treatment costs and lost productivity—accounted for only 1-2% of the $30-50 billion in total damages.
SARS taught us that the indirect impacts—from fear, misunderstanding, and a lack of confidence in a community’s (or a nation’s) ability to respond—must be addressed when forecasting the economic impact of a pandemic.
So … “What current economic studies have looked at the impact of a modern avian pandemic on the US economy?”
The data are very limited.
The most cited – and until today – the most recent study is the 1999 report by the CDC (Centers for Disease Control and Prevention). The study, however, — conducted 4 years before the SARS outbreak — was incomplete. It measured only the DIRECT medical and health costs to the economy: hospitalizations, outpatient visits, and deaths.
Assuming an attack rate of 15-35%, the CDC predicted that:
- 38-89 million people would become clinically ill;
- 18-42 million would require outpatient care;
- 314,000-734,000 people would be hospitalized; and
- 89,000-207,000 people would die.
- Their conclusion: The estimated cost to the U.S economy would be a 1 to 2% drop in GDP ($71-$166 billion loss in 1995 dollars).
Projected Economic Effects
But that’s just the DIRECT costs.
“What would the TOTAL economic impact be?
To shed light on that answer, I asked my economic advisers, the Congressional Budget Office, to provide a comprehensive analysis of the economic impact of a pandemic on the U.S. economy.
Our CBO study looked at 2 scenarios—a severe pandemic (much like the 1918 pandemic) and a mild pandemic. For a severe scenario, the CBO assumed a 2.5% case fatality rate, and for a mild scenario they assumed a 0.1% case fatality rate.
I will focus my remarks on the severe scenario:
- 30% of the population is infected (90 million Americans)
- 2 million people die.
CBO assumed that:
- The pandemic would last for 3 months.
- And 30% of the workforce would become ill and miss 3 weeks of work
The supply-side economic impacts would include:
- A shrinking of the labor force due to illness and the death of 1 million labor force participants;
- A disruption of the supply chain due to shutdowns in transportation; and
- A shortage of health care personnel and quality medical care for flu- and non flu-related illnesses.
The supply-side impacts can be roughly correlated to direct losses—from lost productivity, illness, and death.
CBO concluded that these supply-side impacts would cause the nation’s GDP to decline by a full 3% in the year the pandemic occurs.
And then there is the demand side of the equation.
The impacts to demand would also be astounding:
- Voluntary quarantining would reduce turnout at restaurants, shopping malls, sporting events, churches and schools.
- Demand would fall by 80% in entertainment, arts, recreation, restaurants, and lodging (for 3 months).
- Retail trade would fall by 25%.
- The demand for medical and hospital services would surge.
- And, a fear of travel, coupled with government-imposed restrictions, would lead to a dramatic decline in domestic and international travel.
These demand-side impacts can be roughly characterized as indirect economic losses, (and they reflect the public’s fear, misunderstanding, and lack of confidence in authority). CBO concluded that these indirect losses would cause the nation’s economy to fall by an additional 2%!
Thus, together, the supply and demand impacts would result in a 5% reduction in GDP.
This is a $675 billion hit (in 2006 dollars) to the U.S. economy.
These are huge numbers. This scenario suggests that a severe influenza pandemic would have an impact on the U.S. economy that is slightly larger than the typical recession experienced since World War II. On average those recessions lowered real GDP 4.7%.
(The CBO study also reports results for a milder pandemic of the 1957 and 1968 variety. The analysis found that the impact on the economy would be a 1.5% drop in GDP — 1% on the supply-side and 0.5% on the demand side.)
Similar to what the SARS experience brought to light, the CBO scenarios suggest that fear, misunderstanding, and a lack of confidence and trust in authority may have almost as much impact on the economy as the direct toll of sickness and death.
Public Health Prescription
A $675 billion hit to the economy is — without question — a grim prognosis. But our hands are not tied. In fact, the policy implications become crystal clear. By immediately outlining and implementing a specific policy prescription, we can minimize not only the direct economic effects of a pandemic, but perhaps more significant, greatly reduce the costly indirect effects of panic, fear and paralysis.
There are 6 steps we must take.
Number #1 is communicating with the public.
To allay irrational fear, communication must be the bedrock of every public policy response. Communication—of accurate, reliable, consistent information—isn’t an option—it is the antidote—the vaccine for irrational fear. (Think Katrina.)
Failing to effectively communicate with the public—both before and during the pandemic—would be analogous to having a fire escape plan for your home, but neglecting to share the plan with your family. You don’t want your family jumping out the window when there’s a ladder under the bed. To minimize losses, you not only create an emergency plan, you tell people about it – again and again and again..
Prior to the pandemic—today—we must organize a communications structure with representatives from public health, law enforcement, military, and government to serve as the liaison to the public. It must be grounded in trust and reliability. During an outbreak, the communications structure should update the public every 6-8 hours on what they need to know—educating them on symptoms, cases, deaths, outbreak locations, and when and where to find care.
Second is surveillance. Remember the forest fire? We must stomp on the sparks before they ignite. The sooner we detect, identify and contain avian flu—in animals and in humans—the better the economic prognosis will be. That’s why we need a real-time international threat detection system. And that’s why I’ve proposed $1 billion to build it. By developing rapid testing technology, by training more epidemiologists, by enhancing our global partnerships, and by helping developing nations compensate farmers for livestock culled we can contain the flames before they spread.
- Antiviral Agents
Third are antiviral agents. Antiviral agents (and believe it or not there are only 2) are the only front-line therapeutic tool we currently have to treat the avian flu, and slow its spread. But the bad news is, our current supply is inadequate. Today we have 4.3 million courses of Tamiflu stockpiled. That’s enough to treat less than 2% of the U.S. population. We must increase that number to provide Tamiflu for at least 25% of the population. A five day course of Tamiflu for 75 million Americans would cost approximately $1.35 billion—a tiny fraction of the economic impact of a full-blown pandemic.
Vaccines are our best line of defense—for prevention. Yet, unfortunately, until we identify the strain—which we can do only when sustained human-to-human transmission occurs—we can not begin to produce a targeted, fully effective vaccine. With our current grossly inadequate vaccine manufacturing capacity, it could take as long as a whole year to achieve “bug to drug”—that’s the window of time between first identifying the specific strain and manufacturing a vaccine available for distribution. In a time of pandemic, that’s an unacceptable wait.
We have a dangerously inadequate vaccine manufacturing base in this country. Why? Bottom-line: there’s so little profit and so much uncertainly in vaccine manufacturing today.
30 years ago there were 24 vaccine manufacturers. Today there are only 5… and only 1 on U.S. soil (Sanofi Pasteur).
In the United States we have 18,000 (not millions) doses of a test vaccine stockpiled, and 22 million more on order—enough to treat 11 million people—clearly far less than we need.
How do we grow our manufacturing base?
- We can immediately begin by increasing the annual market for the seasonal flu vaccine. The most we’ve ever sold in a year is 83 million doses, but by recommending that a larger percentage of the population receive the annual vaccine, we can increase the demand for vaccines and incentivize manufacturers to enter the market.
- We should target tax credits to increase manufacturing capacity, streamline regulations, and offer balanced, sensible liability protection for manufacturers to make these life-saving emergency medicines.
- Together these will lay the groundwork for a quicker “bug-to-drug” timeframe.
- Research and Development
5th is research and development.
Vaccines and antivirals our best tools for the present. But research is our best hope for the future. We must harness the best minds in academia, and in the public and private sectors. We need to bring them together to form a “Manhattan Project for the 21st Century” which can help us better defend against naturally occurring, accidental, and intentional threats — including infectious diseases.
One example is targeted research for a cell-based flu vaccine. By investing in cell-based manufacturing technology, rather than relying on antiquated egg-based technology, the window for bug to drug can be cut from a year to less than six months. With tens of thousands of people dying every week, every moment counts. (When tens of thousands of people are dying every week, every moment will count…?)
- Stockpiling & Surge Capacity
6th, we need to stockpile and prepare for surge capacity.
If identification and vaccine manufacture represents the “bug-to-drug” portion of the equation, stockpiling of medicine and surge capacity represents the “drug-to-person” side— that is, to respond with medical treatment.
Our current health infrastructure simply and unequivocally lacks the capacity to respond effectively to a severe pandemic. We don’t have the number of hospital beds, ventilators, health care personnel, morticians, vaccines, antivirals, or communication networks we need. All would be overwhelmed.
Being prepared means training first responders, and ensuring a civilian volunteer corps to step in and help handle the surge. It means allocating adequate surge facilities—vaccination sites, treatment centers, laboratories, and morgues. Has your community done so?
Our goal should be building a stockpile of antiviral agents for 75 million people, and putting in place a specific plan to deliver them. As soon as an effective vaccine is available, we must begin stockpiling, with the objective of having 300 million vaccinations—enough for every American.
We know that a pandemic influenza is no longer a question of if, when.
While there is no way to predict when an avian pandemic will occur, what we CAN predict, what we DO know, is the cost of being under-prepared.
The study I report on today sends a strong message.
A $675 billion potential hit to our economy — almost half of which is brought on by factors which CAN be eliminated by planning—gives us every reason to act now with a prescription, and immediately implement the course of action. Now is the time to act.
The 6- point prescription is simple—communication, surveillance, antivirals, vaccines, research, stockpile/surge capacity. We have the intellect, the ingenuity, the tools, the knowledge to minimize the blow. .
Science and technology afford us the power to allay the direct effects. Sound public policy—grounded in communication and information — renders us the ability to ease the indirect effects.
My duty as an elected official, and as a doctor, is to ensure that we begin filling that prescription today. Our economy, our country, our lives depend on it.
 From 2003 to present. Deaths have occurred in Cambodia, China, Vietnam, Thailand, and Indonesia
 Economic Risks Associated with an Influenza Epidemic, Bio-Era
 Economic Risks Associated with an Influenza Epidemic, Bio-Era
 Economic Risks Associated with an Influenza Epidemic, Bio-Era