An Economic Assessment of Food Safety Regulations

Benefits of the HACCP Rule

In order to evaluate the economic benefits of HACCP, we

need to estimate how implementing the new inspection

system will affect the level of foodborne illness.  In

addition, we must choose a methodology for expressing

the value of improved food safety in economic terms.

Figure 2 summarizes the analytic process.

Four key assumptions, which affect our analysis of the

benefits of HACCP, flow from the following questions.

·

How effective will HACCP be in reducing microbial

pathogens in meat and poultry?

·

What is the relationship between pathogen reduc-

tion and the level of foodborne illness associated

with meat and poultry?

·

Since HACCP will be implemented over time, what

is the appropriate discount rate to use in expressing

long-term benefits in present-value terms? When do

benefits begin to accrue?

·

What is the methodology used to quantify the

benefits of reductions in foodborne illnesses;

particularly regarding those who die prematurely or

are never able to return to work because of a

foodborne illness?

1

Here, we use the term “HACCP” or "HACCP rule" to refer to the

entire suite of rules enacted in 1996, which include not only require-

ments for implementing HACCP plans, but also requirements for

standard operating procedures for meat and poultry plants and testing

for 

E. coli and Salmonella.

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9

Economic Research Service/USDA

An Economic Assessment of Food Safety Regulations

Effectiveness of HACCP Rule in Reducing Pathogens

In its initial assessment of HACCP, the FSIS made the

assumption that, when fully in place, the new meat and

poultry inspection system would reduce microbial patho-

gens 90 percent across the board (Federal Register,

Feb.  3, 1995).  In comments on the proposed rule,

some asserted that this assumption about HACCP

effectiveness was not scientifically justified.  In the final

rule, the FSIS concluded “... there is insufficient knowl-

edge to predict with certainty the effectiveness of the

rule, where effectiveness refers to the percentage of

pathogens eliminated at the manufacturing stage” (FSIS,

1995, pg. 297).   For the final rule, the FSIS projected a

range of effectiveness estimates, from 10- to 100-percent

reduction in pathogen levels.

The Relationship Between Pathogen Reduction and the

Level of Foodborne Illness

The relationship between human exposure to microbial

pathogens and any resultant illness is very complex.  A

number of factors influence whether a person, once

exposed, becomes ill, and the severity of the illness.

Factors include the level of pathogens in the food, the

way the consumer handles the product before cooking,

the final cooking temperature, and the susceptibility of

the individual to infection.  In addition, the relationship

between pathogen levels and disease varies across

pathogens.  Some, such as 

E. coli O157:H7, are infective

at very low doses, while others require ingestion of higher

doses to cause illness.

Conducting a comprehensive risk assessment to estab-

lish the relationships between pathogen levels, illnesses,

and deaths is beyond the scope of this report.  Therefore,

we make the assumption that HACCP will reduce

illnesses and deaths in proportion to the reduction in

pathogen levels.  In other words, a 50-percent effective-

ness rate would result in a 50-percent reduction in

foodborne illness, across all pathogens.  This enables us

to apply effectiveness rates to the reported incidence of

foodborne illness reported in table 1 to estimate the

reduction in foodborne illness associated with HACCP.

The Discount Rate Used to Estimate the Present Value

of Benefits and the Timing of Benefits

In our analysis, we follow the FSIS assumption that the

pathogen reductions associated with HACCP will begin

to accrue starting in year 5 of the program.  We also

follow their analysis by estimating the benefits over a 20-

year time horizon; that is, benefits begin in year 5 and

extend over the next 20 years.

The initial benefits estimates (in 1993 dollars) published

in 1995 were calculated using a 7-percent discount rate,

as recommended by the Office of Management and

Budget.  However, others (

e.g. Lind, 1990) have argued

that a lower discount rate should be used.  An alternative

assumption would be to use a 3-percent discount rate to

calculate the present value of HACCP benefits over time.

Haddix et al.  (1996) recommend the 3-percent rate,

combined with sensitivity analyses of 0-, 5-, and 7-

percent rates.

Methodology Used to Measure Benefits of Reduced

Foodborne Illness

Previous ERS studies have used the cost-of-illness

(COI) method to estimate the annual resource expendi-

tures for foodborne illnesses targeted by the HACCP

HACCP Rules

Applied

Pathogen Levels

Reduced

Fewer Cases of

Foodborne

Disease

Economic

Benefits: Lower

Medical Costs

and

Productivity

Losses

How effective is

 HACCP in reducing 

pathogen levels?

How much do lover

pathogen levels

reduce foodborne 

illness?

Economic assumptions:

-  What is the discount rate?

-  What method is used to

   value premature deaths?

Key

Assumptions:

Source: Economic Research Service