Whereas the use of opium and its derivatives has existed for centuries, a breakthrough in palliative medicine in the 1990s led to a global health care crisis, with an unprecedented social and economic impact. Since then, the introduction of new opioid medication has led to widespread abuse, accounting for over 200,000 overdose deaths over an eight-year period in the US alone.
This has given the general public another reason to mistrust the pharmaceutical industry. In order to restore confidence in medicine, we need to look further than just the industry and consider the role of public health organizations to avoid similar painful predicaments.
Although the purpose of the medical industry is to make patients better – in practice, sometimes the opposite occurs. The misuse of opioids – medication that was intended to improve the lives of very ill people – has led to widespread deaths and economic costs as a result.
In 2017, there were 53.4 million opioid users around the world, 80% of whom were based in the US. It is estimated that of these users, over two million suffer from opioid abuse disorders, including the use of prescription medicines and non-medical opioids such as heroin and fentanyl. Between 1999 and 2017, 218,000 people died of an overdose. This is high when compared with the number of deaths from motor vehicle accidents or firearm incidents, but relatively low when considering deaths caused directly or indirectly by smoking.1
The opioid crisis in the US alone is estimated to have cost USD 696 billion in 2018 – or 3.4% of GDP – and more than USD 2.5 trillion for the period from 2015 to 2018.2 These figures include the value of lost lives and increases in health care and substance abuse treatments costs, as well as criminal justice costs and reductions in productivity.
Overall, the opioid epidemic has become a serious impediment to achieving Sustainable Development Goal 3 (good health care and well-being), and specifically its sub-target 3.5 on the prevention and treatment of substance and narcotic drug abuse. As a result of wrongful marketing practices, as well as issues concerning business ethics and competition, a significant number of pharmaceuticals are in breach of both the UN Global Compact and OECD Guidelines for Multinational Enterprises.
For investors, the opioid crisis has caused significant volatility. It reflects increasing uncertainty and a higher likelihood that these companies might need to pay significant sums to settle legal proceedings initiated by thousands of claimants. These include states, counties, municipalities, health care providers, insurance companies and government agencies.
The ancient civilizations of Persia, Egypt and Mesopotamia all cultivated and harvested the opium poppy, long known for its calming and pain-relieving effects. In the last two centuries, opium and opium derivatives have gained popularity in the western world and are used in increasingly concentrated quantities, both legally and illegally.
Today, opioids are primarily prescribed for short term use to reduce pain after a major injury or surgery. However, opioids may also be used for people with severe and chronic pain, such as cancer patients. The most common examples of prescription opioids include morphine, oxycodone (commonly known as OxyContin) and hydrocodone.
These opioids are known as Schedule III drugs, meaning the potential for physical and psychological dependence is low to moderate. Short-term use of opioid pain relievers is generally considered safe, but patients using opioids for longer periods of time may suffer from their adverse side effects. When regular users develop a tolerance to the drug, the dosage is increased, or patients switch to more potent opioids like fentanyl or heroin (Schedule II and I drugs, respectively).
Opioid use has been on the rise since the 1990s, when prescribers and pharmaceutical companies provided reassurances about their products, and began advertising them to patients with non-cancer related pain. During this time, consumption of pharmaceutical opioids for medical purposes doubled. The last wave started in 2013, beginning with the proliferation of fentanyl. Between 2013 and 2016, opioid deaths involving fentanyl increased by about 113% per year in the US.3
Big pharma is often in the harsh glare of the public eye, given their efforts to develop and distribute opioid painkillers. Controversy stems from companies’ involvement in wrongful marketing practices, as well as issues concerning business ethics – such as illicitly incentivizing doctors to prescribe their product instead of those offered by the competition.
At the time of writing, some drug companies and distributors have agreed to pay billions in settlements, and numerous litigation cases continue. Overall, settlements appear to represent only a fraction of the damage done. Investors have been relatively slow in holding companies accountable for their involvement in wrongful drug marketing and distribution practices. The Investors for Opioid Accountability was only founded in 2017, after which controversies slowly attracted the attention of data providers, and became available for investors to analyze.
Without denying both the medical advantages that opioids offer for a subset of patients, as well as the unjustifiable scale of malpractice by the pharmaceutical companies, we argue for a more holistic approach when analyzing the epidemic amid a complex landscape of stakeholders.
First of all, governments play a key role in approving and regulating drug distribution. They are therefore prone to being influenced by lobbyists representing the industry and by patient pain organizations. The latter have played a key role in promoting opioids and are partially influenced by pharmaceutical companies.
Second, family doctors have played a crucial role in prescribing opioid medicine. Interestingly, research shows that physicians who completed their training at a top medical school have prescribed significantly fewer opioids annually than physicians from lower-ranked schools, stressing the important role of continuous education.4
Moreover, external parties such as consultants, drug distributors and researchers all have a role to play in this crisis and must assume responsibility for stemming it. Lastly, we need to take into account that each country’s health system operates differently: prices, regulation and cultural issues are all critical factors that have the potential to impact the severity of such an epidemic.
So far, we have not managed to end the opioid epidemic. Covid-19 is influencing access to treatment and making it difficult for patients to find a solution to their addiction. Nonetheless, prevention efforts are increasing, and non-medically assisted treatments such as cognitive therapy is receiving more attention. With that in mind, it should be said that additional research is needed for prevention, including developing a better understanding of what causes chronic and episodic pain, and aligning incentives in the business model to reduce the unnecessary prescriptions of opioids.
More broadly, one could wonder whether we know enough about the real costs of medicine. It is important that companies support accountability and transparency initiatives that ensure investors are able to make well-informed decisions. Business ethics is a material issue in the health care sector, as is the capacity to innovate and guarantee product quality.
Also, we now recognize the opioid crisis has created a situation with many distressed characteristics, requiring a holistic approach. Such an approach allows a thorough assessment to be made of the financial risks, fundamental impact and relative value of opioids to society.
In integrating ESG into our investment decision-making process, we asses health care companies based on their performance in business ethics, corporate governance and innovation. Companies that have strong ethics and governance, and those that invest in R&D and innovate efficiently, are rewarded with higher valuations.
Through engagement, we ask companies to:
Cross-domain interdisciplinary collaboration and innovation is necessary to combat the medical challenges of this era. Ultimately, we need to know that the health care ecosystem is truly committed to acting in the best interest of patients and society.
1 Centers for Disease Control and Prevention (CDC), 2019
2 White House Council of Economic Advisers (CEA), 2019
3 Centers for Disease Control and Prevention (CDC), 2019
4 Schnell and Currie (2018)
5 Business (pricing) models driven by the quality and effect of the drugs (linked to patients health outcomes).
The contents of this document have not been reviewed by the Securities and Futures Commission ("SFC") in Hong Kong. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This document has been distributed by Robeco Hong Kong Limited (‘Robeco’). Robeco is regulated by the SFC in Hong Kong.
This document has been prepared on a confidential basis solely for the recipient and is for information purposes only. Any reproduction or distribution of this documentation, in whole or in part, or the disclosure of its contents, without the prior written consent of Robeco, is prohibited. By accepting this documentation, the recipient agrees to the foregoing
This document is intended to provide the reader with information on Robeco’s specific capabilities, but does not constitute a recommendation to buy or sell certain securities or investment products. Investment decisions should only be based on the relevant prospectus and on thorough financial, fiscal and legal advice. Please refer to the relevant offering documents for details including the risk factors before making any investment decisions.
The contents of this document are based upon sources of information believed to be reliable. This document is not intended for distribution to or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation.
Investment Involves risks. Historical returns are provided for illustrative purposes only and do not necessarily reflect Robeco’s expectations for the future. The value of your investments may fluctuate. Past performance is no indication of current or future performance.
Please read this information carefully.
This website is prepared and issued by Robeco Hong Kong Limited ("Robeco"), which is a corporation licensed by the Securities and Futures Commission in Hong Kong to engage in Type 1 (dealing in securities); Type 4 (advising in securities) and Type 9 (asset management) regulated activities. The Company does not hold client assets and is subject to the licensing condition that it shall seek the SFC’s prior approval before extending services at retail level. This website has not been reviewed by the Securities and Futures Commission or any regulatory authority in Hong Kong.
2. Important risk disclosures
2. Important risk disclosures Robeco Capital Growth Funds (“the Funds”) are distinguished by their respective specific investment policies or any other specific features. Please read carefully for the risks of the Funds:
3. Local legal and sales restrictions
The information contained in the Website is being provided for information purposes.
Neither information nor any opinion expressed on the Website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. The information contained in the Website does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, most recent annual and semi-annual reports, which can be all be obtained free of charge at www.robeco.com/hk/en and at the Robeco Hong Kong office.
4. Use of the Website
The information is based on certain assumptions, information and conditions applicable at a certain time and may be subject to change at any time without notice. Robeco aims to provide accurate, complete and up-to-date information, obtained from sources of information believed to be reliable. Persons accessing the Website are responsible for their choice and use of the information.
5. Investment performance
No assurance can be given that the investment objective of any investment products will be achieved. No representation or promise as to the performance of any investment products or the return on an investment is made. The value of your investments may fluctuate. The value of the assets of Robeco investment products may also fluctuate as a result of the investment policy and/or the developments on the financial markets. Results obtained in the past are no guarantee for the future. Past performance, projection, or forecast included in this Website should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Fund performance figures are based on the month-end trading prices and are calculated on a total return basis with dividends reinvested. Return figures versus the benchmark show the investment management result before management and/or performance fees; the fund returns are with dividends reinvested and based on net asset values with prices and exchange rates of the valuation moment of the benchmark.
Investments involve risks. Past performance is not a guide to future performance. Potential investors should read the terms and conditions contained in the relevant offering documents and in particular the investment policies and the risk factors before any investment decision is made. Investors should ensure they fully understand the risks associated with the fund and should also consider their own investment objective and risk tolerance level. Investors are reminded that the value and income (if any) from shares of the fund may be volatile and could change substantially within a short period of time, and investors may not get back the amount they have invested in the fund. If in doubt, please seek independent financial and professional advice.
6. Third party websites
This website includes material from third parties or links to websites maintained by third parties some of which is supplied by companies that are not affiliated to Robeco. Following links to any other off-site pages or websites of third parties shall be at the own risk of the person following such link. Robeco has not reviewed any of the websites linked to or referred to by the Website and does not endorse or accept any responsibility for their content nor the products, services or other items offered through them. Robeco shall have no liability for any losses or damages arising from the use of or reliance on the information contained on websites of third parties, including, without limitation, any loss of profit or any other direct or indirect damage. Third party off-site pages or websites are provided for informational purposes only.
7. Limitation of liability
Robeco as well as (possible) other suppliers of information to the Website accept no responsibility for the contents of the Website or the information or recommendations contained herein, which moreover may be changed without notice.
Robeco assumes no responsibility for ensuring, and makes no warranty, that the functioning of the Website will be uninterrupted or error-free. Robeco assumes no responsibility for the consequences of e-mail messages regarding a Robeco (transaction) service, which either cannot be received or sent, are damaged, received or sent incorrectly, or not received or sent on time.
Neither will Robeco be liable for any loss or damage that may result from access to and use of the Website.
8. Intellectual property
All copyrights, patents, intellectual and other property, and licenses regarding the information on the Website are held and obtained by Robeco. These rights will not be passed to persons accessing this information.
10. Applicable law
The Website shall be governed by and construed in accordance with the laws of Hong Kong. All disputes arising out of or in connection with the Website shall be submitted to the exclusive jurisdiction of the courts of Hong Kong.