The Economics Behind the Epidemic: Afghan Opium Price and Prescription Opioids in the US

Abstract

We investigate the effect of variations in the price of opium in Afghanistan on per capita dispensation of prescription opioids in the US. Quarterly county-level data for 2003-2016 indicate that reductions in opium prices significantly increase the quantity of opioids prescribed, and that the magnitude of the effect increases with the county's ex-ante demand for opioids. Most of the increase involves natural and semi-synthetic but not fully synthetic opioids. We further find that both opioid-related deaths and drug-related crimes increase following a decline in the opium price. Finally, firm-level analysis reveals that the stock prices and profits of opioid producers react significantly to opium price shocks. Overall, the findings suggest that supply-side economic incentives have played an important role in the opioid epidemic.

The Opioid Epidemic Was Not Caused by Economic Distress but by Factors That Could Be More Rapidly Addressed

“…Alpert et al (2019) show that deaths rose faster in states where OxyContin was marketed more aggressively. 4 Deiana, Giua, and Nistico (2020) show that companies marketed opioids more aggressively in years when raw material prices were lower (so that profit margins were higher) and that prescriptions rose more in places with more health care suppliers per capita.…”