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Opioid Crisis & Demand Inflation – When ‘Permission’ Policies Undermine Public Health

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In both 2015 and 2016, U.S. life expectancy fell from the previous year. A single-year drop had not happened in 22 years, and two consecutive drops had not occurred in more than 50 years. This sharp reversal in the national trend toward longer lives is widely understood to be connected to the opioid epidemic that began in the 1990s. The best kept secret about the epidemic, however, is how much of it — arguably most of it — resulted from Federal policy changes initiated by both Democrats and Republicans.

Opioids include prescription drugs like oxycodone as well as illicitly manufactured drugs like heroin and fentanyl. Since 2000, the Federal government has increased subsidies on both types of opioids and cut taxes on illicit opioids.

Regardless of whether the government increases subsidies or cuts taxes, the result is lower prices paid by the opioid consumer, making opioid addiction more affordable. The CEA’s recently released 2020 Economic Report of the President estimates that, adjusted for inflation, out-of-pocket prices for prescription opioids fell by a factor of five between 2001 and 2010. (CEA’s price data is graphed below.) More recently, the quality-adjusted price of illicit opioids fell by at least a factor of two.

subsidizing-opioid-crisis

Studies have shown that opioids and other addictive substances obey the law of demand: lower prices mean more demand. If nothing else, the reduced prices for opioids have sharply increased the number of people who can afford an opioid addiction. CEA estimates that lower prescription opioid prices explain 31 to 83 percent of the increase in the death rate from 2001 to 2010 involving prescription opioids. This estimate does not include the additional effects of subsidies for benzos or hospitals, or the effects of reduced heroin prices since 2010.

Without the new subsidies supporting opioid addiction, the number of fatalities from opioid overdoses would be significantly lower, and maybe it wouldn’t even be called an “epidemic.”

Casey B. Mulligan, former chief economist at the Council of Economic Advisers (2018-2019) and a professor of economics at the University of Chicago, is the author of The Redistribution Recession: How Labor Market Distortions Contracted the Economy.

For complete article go to How the Government Subsidized Our Opioid Addiction | Economics21