On Feb-1, 2019 Project Syndicate published an article titled “How to Help Deflate America’s Opioid Bubble” (link). In it the authors look at what policymakers can do to deal with the opioid epidemic in the United States. And they make what seems at first to be a non-intuitive suggestion:

To figure out how to resolve it, policymakers should look for lessons in what may seem to be an unrelated episode: the 2008 global financial crisis.

They identify as one of the main causes of the opioid crisis the use of “aggressive commercial and marketing tactics by pharmaceutical companies”. In their opinion, the current FDA’s programs don’t “do enough to control the incentives provided by drug manufacturers to prescribers and patients”. Here is the main comparison narrative:

Just as the promotion of opioid painkillers like OxyContin (sold by Purdue Pharma) has been a key driver of the opioid crisis, unethical “hook strategies,” facilitated by lax mortgage-lending practices, were a major cause of the 2008 financial crisis. In both cases, many individuals were lured into making risky decisions – whether taking out a mortgage they couldn’t afford or treating their pain with a highly addictive drug – by attractive “introductory offers.”

The article goes on to discuss the role the Consumer Financial Protection Bureau (CFPB) in overseeing financial products and services offered to consumers. One of the key aspects was to limit the use of introductory pricing in mortgage loans – one of the key ingredients in the housing bubble and subsequent financial crisis. In comparison to the opioid crisis,

… pharmaceutical companies offered free samples and savings coupons to doctors, who then prescribed to patients who often were not made fully aware of the addictive nature of the substances they were consuming. Many of these patients then became addicted to opiates, with a large number of them eventually dying from drug overdose.

Just like in the case of the financial sector, the large companies and lobby groups resist such protective measures. For instance,

…the Pharmaceutical Research and Manufacturers of America, the largest drug-lobby group in the US, vigorously defends the practice of providing free samples of prescription drugs to physicians.

In a somewhat related news clip from Health Law 360 (pay wall) this morning (Feb-4), here is an attorney general’s view on this dynamic:

Purdue Pharma LP’s controlling Sackler family paid itself $4.2 billion in opioid money over 10 years as the company aggressively pushed sales and then tried to use its knowledge of addiction to expand into the treatment market, according to newly public allegations in a suit brought by the Massachusetts attorney general.

When incentives grow this large and lead to distorted outcomes (good for a few, bad for many), the market economy may need a healthy dose of regulation. When millions are addicted and tens of thousands of Americans die each year, it’s hard to see this as a case of the “free market knows best” and the “consumer is always right”. Just like financial asset bubbles repeat, unfortunately the lessons learned from the global financial crisis in 2008 have not been properly applied in the subsequent decade.

One positive trend can be seen in the chart below from Statista showing the declining total number of opioid drug prescriptions in the United States from 2014 through 2017:

Number of annual opioid prescriptions in the U.S. from 2014 to 2017



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