Early data from Overdose Free PA confirms that 2020 will be at least the second most deadly year for overdose deaths in Allegheny County ever.

There are already 687 confirmed deaths, at least an 18% increase from the year before, and the second year of increased overdose deaths in a row. It takes months to confirm overdose deaths so these numbers are likely to increase.

Jonathan Caulkins, a professor of operations research and public policy at Carnegie Mellon University, has become one of the country’s leading experts on the economics of the opioid epidemic. In a paper published in February, Caulkins argues that the price of opioids is likely to keep dropping because of how fentanyl is produced. He believes this could lead to a transformational change in the role those drugs play in our society, akin to how cheap digital photography revolutionized the way we use cameras. 

This change is already hinted at in Pennsylvania State Police drug seizure data, which shows that in the first quarter of 2021, the police seized nearly three times as much fentanyl as heroin. Though fentanyl is much more potent, it was valued at less than half the cost of the heroin, per pound.

PublicSource has been reporting on how the opioid epidemic has continued to batter Southwestern Pennsylvania during the COVID pandemic. We spoke to Caulkins about how the opioid epidemic might change after lower prices.

Jonathan Caulkins says that the price of opioids will likely keep falling, even as the number of opioid deaths is rising. (Courtesy photo)
Jonathan Caulkins says that the price of opioids will likely keep falling, even as the number of opioid deaths is rising. (Courtesy photo)

Q: One of the basic ideas in your paper is that opioids and marijuana have both seen a dramatic drop in the cost of production. For marijuana, the cause is obvious: legalization in many states. But in your paper you wrote: “Heroin is at least 100 times more expensive per morphine equivalent dose, so fentanyl can cut wholesale opioid dealers’ raw materials costs by over 99%.” Why is fentanyl so cheap?

The simplest answer is that it’s synthetic. But a deeper answer is the miracle is that heroin is expensive, not that fentanyl is cheap. Heroin is expensive because we exert a lot of law enforcement pressure. So suppliers have costs that make it worth many times its weight in gold. So the surprise is not that fentanyl is cheap but that drugs like heroin and cocaine are expensive. 

We’re unable to apply that same degree of enforcement pressure to fentanyl. One reason is it’s synthetic. With a crop-based product, you can see the crops, which creates geographic specificity. Without that, it’s harder for law enforcement. 

The second thing is most of the production is China, a nuclear armed power that doesn’t like us. When it’s concentrated in a place like Mexico, which is next door and basically our friend even if there is tension, we trade a lot and get along. So it’s way easier for U.S. law enforcement to cooperate with Mexico. There was a big fentanyl lab in Mexico in 2005 and 2006, which led to a lot of production. We worked with Mexican law enforcement to shut it down. That spared us fentanyl for another decade. We can’t do that with China. 

The third reason why fentanyl is so darn cheap is it’s ridiculously potent. When you are talking about opioids, you can’t talk gram for gram, so we use a conversion to compare codeine vs. heroin vs. fentanyl, called the “morphine equivalent unit” to compare the effects on a human being. Part of the story of fentanyl is it’s ridiculously potent. So the total mass of material you need to move around is small. Heroin is already fairly potent, compared to something like cannabis, which is bigger and smellier. So heroin was already relatively easy to traffic but fentanyl is 25 to 40 times more potent. So to smuggle a commercially relevant quantity of fentanyl, you can do that fairly easily. 

You can actually ask why didn’t fentanyl come along sooner? It had been invented a while ago but it seems like the issue is that the first five or so times that fentanyl threatened to break out, law enforcement was able to shut down the lab before the market got established. Once China could make it, we can’t shut down labs in China easily. And a better synthesis method was invented, which was simpler and the labs didn’t need to control temperature during the production process. And the recipe was spread widely on the internet. So even if the Chinese government shut down one supplier, many more could replace them. All those factors come together and we have much more supply and lower costs.

Q: But we’re not seeing a price reduction yet for people buying it on the street at the retail level. Why is that?

So there are at least two things that could be going on, and it’s hard to sort out. 

One is illegal markets take longer than legal markets to reach a new equilibrium because information flow is poor. In an ideal fish market, everybody sees what’s going on and if anybody charges one penny less, there is very rapid adaptation to price signals. But illegal markets are not at all like that. Information flow is expensive. It’s risky for anybody to stand up and say, ‘I’m selling fentanyl for 10% less than somebody down the road.’ So it can take a while for the prices to work their way through. Cocaine prices were high in the 1970s when there was an explosion in demand and supply couldn’t keep up. It took the better part of a decade for supply to catch up and for prices to adjust. So one story is the price collapse of opioids is coming any time and takes a while. And there were some disruptions. Trump did pressure China to shut down some suppliers. Then COVID came along and created a hiccup. 

One story is that the price decline is already happening but not yet observed. Our ability to track retail processes is so bad. Usually price changes in pure quantity by what’s in the bag, not changes in nominal price. The cost of heroin at the retail unit was a dime bag because it sold for $10 per bag and has been that way since 1980. That didn’t mean prices didn’t change from 1980 to 2010, but number of grams in a bag or the purity of it changed. [Like the cost of a bag of Doritos may stay the same but the company just puts fewer chips in the bag.] So it’s even quite possible that cities penetrated by fentanyl, the number of morphine equivalent doses per unit price may have gone up but our data monitoring is not good at tracking that. 

The other way we can kind of think about the price is how much are users spending per day. But as fentanyl penetrates market, they may be using more times per day, so their spending per day may not have gone down even if they’re spending less per unit — because they’re consuming more morphine doses per day. [A fentanyl high typically doesn’t last as long as a high from heroin.] We’ve seen this in the past. A user may spend $10,000 to $14,000 per year, which is a pretty typical number. If the price is cut in half, they use twice as much. If the price is doubled, they use half as much. They’re still spending $10,000 to $14,000 per year.

Q: In your paper you mention that fentanyl is unusually only prevalent in Western Canada and the Northeastern United States. Why is the fentanyl market so regional? 

I wish I knew. As a scientist, this is something that is really puzzling. Nobody has a very good story for this. And the pattern is peculiar. It was super common in British Columbia and spilled into Alberta and then it becomes super common in the Eastern United States, New Hampshire and Ohio. Like with Vancouver, it has a really big Asian population, which has traditionally been supplied by Chinese triads, so it makes sense why it would show up there first. But Ohio? I don’t know. 

The best story anyone has offered, I don’t find it totally satisfying. The idea is that fentanyl is super potent, and it’s difficult to manipulate because it’s so potent that it’s dangerous. So it may be physically harder to work the fentanyl into the black tar kind of heroin that predominates in places like out West. But fentanyl is so cheap, why the Mexican drug trafficking organizations don’t change and take advantage of this new raw material is a puzzle. It could still happen but we’re not sure why it hasn’t happened sooner. 

Peter Reuter, [a professor of public policy and criminology at the University of Maryland] argues that drug markets are conservative. What on earth? What he means is that innovation comes slowly in illegal markets. They require coordination with people who you don’t really trust and can’t write a written contract with. The tendency is if it worked last month, let’s keep doing things the same way until something prevents us from doing that. They’re not very innovative unless they need to. So they’re innovative in a tactical level, at smuggling stuff from point A to point B. But that’s different than adopting new forms of the drug. You see it with cannabis. For decades and decades, most people were pretty much just smoking flowers. Yeah a little around the corners people were making brownies but after legalization there was a true explosion of CBD, vapes, dabs, etc. So Reuter’s recognition that illegal markets don’t tend to adapt unless something forces them to. So for much of Europe, there has not been much disruption and they don’t have much fentanyl. But in one place, Estonia, they got fentanyl after its heroin market was disrupted. 

Fentanyl is spreading. It’s not static but it’s not spreading as fast as it might be, which is good because a lot more people would be dying if it was.

Q: When people think of the prices of drugs falling, they often think that will mean that more people will use drugs and that people struggling with addiction will use more frequently. You suggest it could also mean they would have to spend less of their income on drugs. Could lower prices provide a health benefit to drug users?

The arrival of fentanyl is very bad news for users, death rates go up quite dramatically. The benefit of a decline in prices is that it reduces some of the impoverishment. If you look at a traditional heroin user, their life prospects are bad for four or five categories of reasons, the most obvious is they can die of an overdose. 

The second reason is that when you are injecting with a needle, that is bad even if you were just injecting saline solution, when the needle’s not sterile. 

Third, you are impoverished. Spending $10,000 to $15,000 per year is a lot of money for people with less education and skill. 

And fourth, when someone is dependent on a street drug, it often interferes with their life function, their ability to show up on the job consistently. So you have this big expenditure and you will end up having lower income in part because you’re not as reliable a worker, so the combination creates poverty. So part of the bad outcomes and bad life circumstances is poverty. 

And the last harm is the addiction itself can rupture relations with friends and family. If you talk to friends and family of chronic users of hard drugs, they say they lie to me, they steal from me, they’re not trustworthy, in general. So the fifth category is burning bridges. 

Of all those harms, one is poverty, straight up, and the fact that the drugs are expensive and poverty is a source of health harm. [For small price changes] users typically buy more or less. But if you have a very large drop in price … their spending may not keep up.

Q: Because at some point, there is a limit to how much more they can buy and stay alive?


Oliver Morrison is PublicSource’s environment and health reporter. He can be reached at oliver@publicsource.org or on Twitter @ORMorrison.

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Oliver Morrison is a general assignment reporter at WESA. He previously covered education, environment and health for PublicSource in Pittsburgh and, before that, breaking news and weekend features for...