Pricing Strategies for Alcohol Products

What is the most common pricing strategy for preventing excessive alcohol consumption and related harms?

There is strong scientific evidence that increasing the unit price of alcohol by raising alcohol taxes is an effective strategy for reducing excessive alcohol consumption and related harms.^[1] Increasing alcohol taxes is the most commonly used strategy for increasing the price of alcoholic beverages, and studies have shown that alcohol taxes are efficiently reflected in the retail price of these products. There are different types of alcohol taxes, including excise taxes and sales taxes, which can be implemented alone or in combination. Excise taxes are based on the volume of alcohol sold; are often applied at the wholesale level; are beverage-specific (i.e., are usually different for beer, wine, and distilled spirits); and tend to decline over time due to inflation, unless they are increased periodically.^[2] Sales taxes are assessed as a percentage of the retail price of alcohol; are applied at the point of sale; may or may not be beverage-specific; and the taxes paid by consumers increase with the retail price of alcoholic beverages^[2], thus providing at least some adjustment for inflation^[3]. Alcohol taxes are implemented primarily at the federal and state levels, but in some states, these taxes may be levied at the county or city levels as well.^[4] State alcohol excise tax rates also vary across jurisdictions. To illustrate this variation, in 2015, Tennessee’s excise tax rate on beer was $1.29 per gallon, while Wyoming’s was $0.02 per gallon.^{[5, 6]} However, as of January 1, 2014, 42 states had excise taxes on beer that were less than $0.50 per gallon, or approximately 5 cents per standard drink.^[6,7]

What is the public health issue?

Excessive alcohol use is responsible for approximately 88,000 deaths and 2.5 million years of potential life lost (YPLL) each year in the U.S. from 2006 to 2010, shortening the lives of those who died by an average of 30 years.^{[8, 9]} Further, excessive drinking was responsible for about 1 in 10 deaths among working-age adults aged 20 to 64 years.^[9] The economic costs of excessive alcohol consumption in 2010 were estimated at $249 billion, or $2.05 a drink.^[10]

Short-Term Health Risks
Excessive alcohol use has immediate effects that increase the risk of many harmful health conditions. These are most often the result of binge drinking and include the following:

• Injuries, such as motor vehicle crashes, falls, drownings, and burns.^{[11, 12]}
• Violence, including homicide, suicide, sexual assault, and intimate partner violence.^[11-15]
• Alcohol poisoning, a medical emergency that results from high blood alcohol levels.^[16]
• Risky sexual behaviors, including unprotected sex or sex with multiple partners. These behaviors can result in unintended pregnancy or sexually transmitted diseases, including HIV.^{[17, 18]}
• Miscarriage and stillbirth or fetal alcohol spectrum disorders (FASDs) among pregnant women.^{[11, 17, 19, 20]}

Long-Term Health Risks
Over time, excessive alcohol use can lead to the development of chronic diseases and other serious problems including:

• High blood pressure, heart disease, stroke, liver disease, and digestive problems. ^{[11, 21]}
• Cancer of the breast, mouth, throat, esophagus, liver, and colon. ^[22]
• Learning and memory problems, including dementia and poor school performance.^{[11, 23]}
• Mental health problems, including depression and anxiety.^{[11, 24]}
• Social problems, including lost productivity, family problems, and unemployment.^{[11, 25, 26]}
• Alcohol dependence, or alcoholism.^{[11, 27]}

What is the evidence of health impact and cost effectiveness?

Multiple systematic reviews examining the effects of alcohol taxes and prices on excessive alcohol consumption and related harms have found that higher alcohol prices are associated with reduced consumption.^{[1, 28]} For example, one review found that a 10 percent increase in the price of beer would reduce consumption by 5 percent; a 10 percent increase in the price of wine would reduce consumption by 6.4 percent; and a 10 percent increase in the price of spirits would reduce consumption by 7.9 percent.^[1] Across all beverage types, a 10 percent increase in the price of alcoholic beverages would reduce consumption by 7.7 percent.^{[1, 4]}

Evidence also shows an association between higher prices and reductions in alcohol-related harms, including motor vehicle crashes and fatalities, alcohol-impaired driving, mortality from liver cirrhosis, sexually-transmitted diseases, and all-cause mortality. ^{[1, 4]} A systematic review and meta-analysis examining the effects of alcohol taxes or prices on morbidity and mortality estimated that increased prices were significantly related to reductions in alcohol-related morbidity and mortality, traffic crash deaths, sexually transmitted disease, and violence.^[29] A separate review found that higher alcohol prices were associated with lower rates of sexual violence at the state level.^[30] The impact of an alcohol tax increase on excessive drinking and related harms is expected to be proportional to the size of the tax increase.^[1]

Another study also assessed the economic costs and benefits of an alcohol tax intervention. The study estimated that current taxation rates implemented over 10 years in the World Health Organization (WHO) region including Canada, US, and Cuba, would cost $482,956 (in 2007 dollars) and prevent 1,224 disability-adjusted life years (DALYs), per one million people per year, yielding an average cost-effectiveness ratio of approximately $395 per DALY averted—a good value for money based on the per capita income of the included countries.^[31]