What’s at stake: The US Department of Health and Human Services (HHS) declares that the country is “in the midst of an unprecedented opioid epidemic”. Since 1999, the rate of overdose deaths involving opioids - including prescription pain relievers and heroin - nearly quadrupled. We review contributions looking at the economic drivers and implications of this phenomenon.









The opioid epidemics

According to the Centers for Disease Control and Prevention, 91 Americans die every day from an opioid overdose. From 2000 to 2015, more than half a million people died from drug overdoses. Overdoses from prescription opioids are a driving force: since 1999, the amount of prescription opioids sold in the U.S. nearly quadrupled, and deaths from prescription opioids – drugs like oxycodone, hydrocodone, and methadone – have more than quadrupled. Some of the largest concentrations of overdose deaths were in Appalachia and the Southwest (Figure 1), with West Virginia, New Mexico, New Hampshire, Kentucky and Ohio being top-5 States. CNN has a historical overview of how opioids turned from “wonder drug” to abuse epidemics.

This trend may be connected to another disquieting statistics. In 2015 Princeton’s Anne Case and Angus Deaton documented a 21st century rise in the proportion of white non-Hispanic Americans dying in middle age. While midlife increases in suicides and drug poisonings had been previously noted – they argue – the fact that these upward trends were persistent and large enough to drive up all-cause midlife mortality was overlooked. Case and Deaton argue that concurrent declines in self-reported health, mental health, and ability to work, increased reports of pain, and deteriorating measures of liver function all pointed to increasing midlife distress.

In 2017, Case and Deaton are following up on the same topic, in a Brookings Paper on Economic Activity. Dividing the country into 1,000-plus regions, they find that the rate of “deaths of despair” (deaths by drugs, alcohol, and suicide) in midlife for white non-Hispanics rose in nearly every part of the country and at every level of urbanisation – from deep rural areas to large central cities – hitting men and women similarly. In 2000, the epidemic was centered in the southwest, today it’s country-wide (Figure 2). The increases in “deaths of despair” are accompanied by a measurable deterioration in economic and social well being, which has become more pronounced for each successive birth cohort.

The opioid epidemic is also central to recent political events. Shannon Monnat at Penn State University examines the relationship between county-level rates of mortality from drugs, alcohol and suicide (2006-2014) and voting patterns in the 2016 Presidential election. She finds that Trump over-performed the most in counties with the highest drug, alcohol and suicide mortality rates, and that much of this relationship is accounted for by economic distress and the proportion of working-class residents. Many of the counties with high mortality rates where Trump did the best have also experienced significant employment losses in manufacturing over the past several decades.

Possible economic drivers of the opioid epidemics

Hollingsworth, Ruhm and Simon have a NBER paper on macroeconomic conditions and opioid abuse. They examine how deaths and emergency department (ED) visits related to use of opioids and other drugs vary with macroeconomic conditions. They find that as the county unemployment rate increases by one percentage point, the opioid death rate per 100,000 rises by 0.19 (3.6%) and the opioid overdose ED visit rate per 100,000 increases by 0.95 (7.0%). Macroeconomic shocks also increase the overall drug death rate, but this increase is driven by rising opioid deaths. The findings are primarily driven by adverse events among whites.

A previous study by Carpenter, McClellan and Rees found strong evidence that economic downturns lead to increases in substance use disorders involving hallucinogens and prescription pain relievers. These effects are robust to a variety of specification choices and are concentrated among prime-age white males with low educational attainment. Based on these findings, they conclude that the returns to spending on the treatment of substance use disorders are particularly high during economic downturns.

Charles and DeCicca examine the relationship between local labour market conditions and several measures of health and health behaviors for a sample of working-aged men living in the 58 largest metropolitan areas in the US. They find evidence of procyclical relationships for weight-related health and mental health for men with low ex ante employment probabilities. Separate estimates suggest worsening labour market conditions lead to weight gains and reduced mental health among African-American men and lower mental health among less-educated males. The findings related to mental health are most pronounced, which is significant given the connection of mental health to other phenomena including drug abuse.

Pierce and Schott investigate the impact of a large economic shock on mortality. They find that counties more exposed to a plausibly exogenous trade liberalisation exhibit higher rates of suicide and related causes of death, concentrated among whites, especially white males. These trends are consistent with the finding that more-exposed counties experience relative declines in manufacturing employment, a sector in which whites and males are disproportionately employed.

The economic and social costs

This 2013 NYT article has a brief overview of the soaring costs of the opioids epidemic, including for screening tests, hospitalisation, legal expenses and workplace costs.

Birnbaum et al. (2011) attempted to estimate the societal costs of prescription opioid abuse, dependence, and misuse in the United States. Costs were grouped into three categories (health care, workplace, and criminal justice) and estimated by quantity method and apportionment method. They estimate the total US societal costs of prescription opioid abuse at $55.7 billion in 2007, of which workplace costs (including both lost earnings from premature death and reduced compensation/lost employment) accounted for 46%, health care costs accounted for 45%, and criminal justice costs accounted for 9%.

Noah Smith argues that “one of the worst US social problems [the opioid epidemic] might also be one of its chief economic woes”. Registered unemployment is low in the US, but labour-force participation is also low. Many reasons have been suggested for this, but Smith argues that one simple factor often overlooked is health: a less healthy population works less. Besides obesity, the biggest health problem afflicting the US in recent years has indeed been opioid and opiate abuse. Drug abuse is bound to have a deleterious impact on Americans’ ability to work.

Smith refers to a recent paper by economist Alan Krueger, who looks at the decline in the labour force participation rate, and finds that about half of prime-age men who are not in the labour force (NLF) take pain medication on a daily basis, and in nearly two-thirds of cases they take prescription pain medication. For some, Smith argues, it’s probably because injuries or illnesses make them unable to work. But there’s no obvious reason why so many more prime-age men should have become injured and sick in recent years. It seems likely that abuse of painkillers – and, later, addiction to heroin – makes many people not want to work.