The opioid crisis takes a bite out of economic growth
Investors are often drawn to the health care sector as it generates good returns, while also contributing to people’s well-being. Yet, the sector struggles with some alarming controversies as well, such as the significant use and abuse of opioids.
Opium has been used for centuries, but a breakthrough in palliative medicine in the 1990s led to a global health care crisis, which had an unprecedented societal and economic impact. This was mainly due to the introduction of new opioid medication, which led to widespread abuse, accounting for over 200,000 overdose deaths over an eight-year period in the US alone.
The graph shows that the opioid crisis is estimated to have cost the US more than USD 1 trillion from 2001 to 2017. Altarum, a US nonprofit research and consulting organization in the health care sector, expects these costs to rise by another USD 500 billion in the period up to the end of 2020.
If we factor in the growing health care and criminal justice costs associated with the opioid crisis, we arrive at numbers that are truly astounding. According to an analysis by the Council of Economic Advisers, the total cost of the opioid crisis at the end of 2020 will equal approximately 3.4% of the US gross national product.
Opioids are primarily prescribed to alleviate pain after a major injury or surgery. They are also used to help people who have severe and chronic pain, such as cancer patients. The most commonly prescribed opioids include morphine, oxycodone (often referred to as OxyContin) and hydrocodone.
Short-term use of opioid pain relievers is generally considered safe, but patients using them for longer periods of time may experience severe side effects. This includes the very high risk of addiction. Regular users may develop tolerance to these drugs, meaning a higher dose is required. Alternatively, they may switch to more potent opioids such as fentanyl or heroin.
Opioid use has been on the rise since the 1990s, when pharmaceutical companies began marketing these drugs for patients with non-cancer related pain. The sector is now being accused of wrongful marketing practices, as well as illicitly encouraging doctors to prescribe these drugs, while systematically turning a blind eye to the very high risk of addiction.
In 2017, there were 53.4 million opioid users around the world, 80% of whom were based in the US. In the period spanning 1999 to 2017, 218,000 people died of an overdose.
I believe it is essential that investors take action – the sooner, the better. It seems likely that the opioid crisis will ensure manufacturers have to pay significant sums to settle legal proceedings initiated by thousands of claimants. At the time of writing, several pharmaceutical companies and distributors have agreed to pay billions in settlements, and numerous litigation cases are still pending.
What is the best course of action in these kinds of circumstances? Active investors can turn to any one of the solutions in their sustainability toolkit. The most efficient method by far is that of corporate engagement. Investors ask the relevant companies to be transparent about their research findings and to be open about their lobbying efforts in a report.
A report of this kind should present an accurate reflection of the results, and ensure a drug’s success is not just measured by its profit, but also by its social and environmental impact. Ultimately, we need to create a health care system that is truly committed to acting in the best interest of patients and society.