The Downward Spiral

Every year between 2015 and 2018 an average of 40,641 individuals between ages 18 and 64 died of opioid overdoses. A large majority of them, 37,596, did not have a college degree. The rest, 3,045 of them, were college graduates. The benchmark economy matches these statistics exactly. The downward spiral from opioid use is portrayed in Figure 8. It shows how the college- and non-college-educated' expected utilities steadily decline as they move through the stages of opioid addiction. The descent appears fairly gradual until one hits the addiction stage and, of course, the loss in utility associated with death is large. While utility is always higher for college graduates, the relative utility values of death to nonuse are roughly the same for both types of individuals. Backin 2000, the number of opioid-related deaths was only 8,179 (7,549 deaths among non-college and 629 among college graduates). Between 2000 and 2018, more than 400,000 individuals between the ages of 18 and 64 died from opioid overdoses. What can account for the dramatic rise in opioid use and overdose deaths during the last two decades? The model is now used as a quantitative laboratory to answer this question. Three candidates are entertained; namely, the fall in opioid prices, more powerful prescriptions, and longer length prescriptions…The calibrated model is then used to highlight the forces underlying the recent opioid epidemic. Through the eyes of the model, there were two key forces. The first force isthe decline in prices for both prescription and black market opioids. Thishad a big effect. The second force isthe increase in the dosages per prescription meted out by doctors. Thisalso had a significant impact. The fact that doctors kept pain suffers on prescription opioids for a longer period of time had little effect. Last, an analysis is conducted onmedical interventions that reduce either the probability of becoming addicted or the odds of an addict dying from an overdose. While such interventions are valued by consumers, theyincrease the number of opioid users.Reducing the odds of addiction can result in even more deaths due to the rise in users…The developed framework is taken to the US data for both the college- and non-college educated populations. The quantitative analysis has three key steps. The first step is the estimation of Markov chains characterizing the movements in and out of misuse and addiction. Death is an absorbing state. The model is calibrated in the second step to match the estimated transitions from the Markov chains for both the college- and non-college educated. The framework fits the US data well. A check is performed on the calibration, by examining whether the model's prediction on the relationship between prescription opioid access and opioid deaths is consistent with the cross-state evidence about this. The calibrated framework is then used to decompose the rise in opioid usage. The analysis suggests that drops in the price of both Rx and illicit opioids combined with increases in Rx dosages were the primary drivers of the opioid epidemic.

The evidence, “…In 2019 the age-adjusted death rate from an opioid overdose was 21.6 per 100,000 people. This compares with 12.9 for kidney disease, 14.2 from suicides, 14.7 for influenzas, 21.6 from diabetes, and 161.5 from heart disease (the leading cause of death in the United States). Opioid overdose deaths place in the top 10 leading causes of death in the United States. As can been from Figure 1, prior to 2015 most of these opioid deaths arose from prescription (Rx) overdoses, but after that they came from synthetic opioids; in particular, fentanyl. (The sources for all the data displayed in the figures are presented in Appendix B.) The overdose death rate was much higher for those without a college degree compared with those who had one. The rise in the death rate from synthetic opioids is particularly marked for the non-college educated population….”

Jeremy Greenwood, Nezih Guner and Karen Kopecky, "The Downward Spiral," National Bureau Of Economic Research, https://www.nber.org/papers/w29764

“…Figure 4 shows that the out-of-pocket expense for prescription opioids has fallen by a factor of 3 since 2001. This has been attributed to two factors. First, the advent of generic prescription opioids. Second, the expansion of social programs such as Medicare and Medicaid that subsidized the purchase of opioids, as can be seen from Figure 5. For the college educated Medicaid is less important than private payers while for the non-college educated the reverse is true. The share of opioids prescriptions funded by the government grew from 17 percent in 2001 to 60 percent in 2010. The vast majority of opioids went to people who needed relief from pain caused by either disability or illness. Over the same period the street price of opioids dropped by a factor of 3. This has been chalked up to both the illegal imports of inexpensive powerful synthetic opioids, for example fentanyl, from China and elsewhere. Additionally, the diversion of opioids from legal sources onto the black market via fraudulent prescription, family and friends giving away and/or selling their prescriptions, and theft. The rise of illegal imports is ascribed to the tightening of prescriptions and the introduction of a tamper-proof form of OxyContin. The upshot is that opioids are much less expensive now than they were in 2001. Likewise, the introduction of low-cost heroin at the beginning of the 20th century was due to the banning of smoking opioids and the increased restrictions on the use of cocaine…”

“.. Starting around the year 2000 there was a dramatic increase in number of opioid prescriptions per person for both the college- and non-college-educated populations, as shown in Figure 3. The non-college educated were much more likely to have an opioid prescription than the college educated. The former often work in occupations involving physical labor. Additionally, the amount of Rx opioids consumed, conditional on a prescription, also rose. Again, this was particularly true for those without a college degree. The price of prescription opioids has fallen dramatically since 2000…”