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Are Drug Prices Immune to Inflation?
Want an inflation hedge? Try drugs. Even historically high rates of inflation won’t necessarily lead to steeper prices for illegal substances like cannabis, MDMA, cocaine, and heroin. Not only do prices remain stable over the years, but quality has stayed the same and even improved in some cases. Why are illegal drug markets seemingly immune to inflation?
Inflation
Inflation is quite the buzzword these days. Inflation measures how much more expensive a set of goods and services has become over a certain period, usually a year, by using the consumer price index. It’s probably one of the most familiar words in economics, as inflation has historically been responsible for initiating long periods of instability in numerous countries across the globe. And we’re seeing a great deal of it in the United States lately.
While inflation hasn’t been as dramatic these last couple years as it was immediately after the COVID-19 pandemic and shutdowns, the cost of goods is still rising. U.S. inflation rate for 2022 was 8.00%, a 3.3% increase from 2021. U.S. inflation rate for 2021 was 4.70%, a 3.46% increase from 2020. This year so far, the annual inflation rate for was 3.7% for the 12 months ended September, according to U.S. Labor Department data published on Oct. 12, 2023, but we will know the real stats after the end of the calendar year.
Even though inflation is slowing down, the problem is that salaries never caught up. When we compare the average cost of a home in 2022, which was $349,000 and has gone up since then, with the average price from 2000 at $119,000; then factor in the minimum wage from those same years, $5.15 and $7.25 respectively, we can see some major discrepancies.
Wages went up 40.8 percent over a 22-year period, meanwhile, the cost of housing has increased by 193.3 percent. And it’s not just the cost of housing, but everything is going up – groceries, gas, utilities, clothing, even little stuff like streaming and other memberships have doubled, even tripled, over the last couple of decades. The only product left that seems to have completely dodged inflation-related price spikes (beside Arizona Iced Tea), are illicit drugs.
Street drug prices
What’s interesting about street drugs, is that pricing is pretty standardized. They fall into a range, but overall, they have remained relatively stable over time. For example, when I was growing up, and eighth of flower was always $40-50. Sure we have more options now, even less than $10 in some markets, but overall, the price of a top-shelf eighth is still around $25-40.
According to Teodora Groshkova, principal scientific analyst at the European Monitoring Centre for Drugs and Drug Addiction, it was believed to be due to a method known as “skimpflation”, where suppliers reduce the quality of whatever they are selling to offset rising production costs, but this does not seem to be the case here.
“Any change in the [wider] market would typically be reflected in the drugs’ purity,” Groshkova says. “So far, however, the potency of cannabis products and the purity of other illicit drugs are increasing or at minimum staying the same.”
How criminal organizations and other illegal drug producers have managed to skirt the pressures of inflation remains a mystery. While some might be going the “skimpflation” route to save some money, and others are horizontally integrating their businesses by controlling both import and distribution, that’s likely not the case for everyone. Groshkova suggests another possibility, which is quite simple, that drug dealers make so much money they’re able to better mitigate inflationary issues. “They’d rather not, but they can”, she adds.
Pharmaceutical drug prices
Perhaps even more interesting than the stability of street drug prices, is the fact that while illegal substances have actually gone down in price overall, legal pharmaceutical drugs have been increasing. And even though this has been happening since the 1990s, it seems the problem has compounded in recent years. Per a Medicare study published in February 2022, prices increased faster than rates of inflation for more than half of all the drugs they cover between 2020 and 2022.
A total of 3,911 drugs saw prices increases that were greater than inflation rates during that time period. Additionally, out of their 25 top selling medications, 23 percent were subject to price hikes. So nearly every single one of their most popular drugs, that they already make a lot of money on, were subject to price hikes.
It’s so bad, that President Biden signed The Inflation Reduction Act of 2022 into law on August 16th of that year. Among other things, the bill includes several provisions to lower prescription medication costs for people with Medicare and reduce overall drug spending by the federal government. The legislation has strong bi partisan support, as well as support from the general public who are struggling to deal with rising and already high drug prices.
Artificial inflation and price gouging
Let’s break it all down real quick. The prices of legal products are going up while quality is dropping. Meanwhile, manufacturers of illegal products are raising the quality and keeping consumer prices the same, even less, for many drugs. To me, this indicates that much of the rapid inflation we’re seeing in other industries is artificial, driven by shady politicians, or, the companies themselves.
Inflation can be an elusive foe: quietly making off with our savings and chunks of our paychecks and stealing away everything from vacations to favorite foods. Everyone agrees inflation is happening. What they don’t agree on is whodunit. The main suspects differ across party lines. Many economists and politicians on the right say inflation has been caused by government spending and various aid programs (stimulus checks, student debt forgiveness, Biden in the White House with the public purse).
Many economists and politicians on the left point to the war in Ukraine (for pushing up oil prices, which bleeds into most everything else), and also greedy companies, many of which, despite tales of supply chain snarls and rising costs, have been bringing in record profits. (Corporations, in aisle 4, with the price gun.)
It’s worth noting that corporate profits reached an all-time high this year with many companies seeing record profits. This, naturally, raises some eyebrows. If companies are struggling with costs and supply chains so much, where are all of these billions in profits coming from? It begins to seem like all of this corporate crying about rising costs might be a case of crocodile tears, as companies jack up prices for all of us.
Rakeen Mabud is chief economist for the progressive think tank Groundwork Collaborative. “Companies are taking a spoonful of sugar off the … backs of families who are all really struggling to get by,” she said. Mabud has sat in on dozens of corporate earnings calls and says she often hears CEOs bragging about how much they were able to raise prices.
Final thoughts
For the time being at least, consumers are unlikely to notice any dramatic changes to the cost of getting high. drug prices inflation
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The legal landscape of cannabis is changing in the EU; but how does this affect its illicit presence, or the overall illicit drug market? New EMCDDA report gets into it.
What is EMCDDA?
If you keep up on international politics concerning drugs, you’ve probably heard of this agency. The EMCDDA is the European Monitoring Centre for Drugs and Drug Addiction. This agency was established under the EU in 1993, but was modified via a 2022 bill, which includes a renaming of the agency to the European Union Drugs Agency.
The agency acts as a knowledge base for the EU drug world; including all member states. It’s goal is to provide reliable and objective coverage of drug topics; like usage rates, addiction potential, and health complications. The organization serves Europe and the EU; but the group works with lawmakers and scientists around the globe.
The EMCDDA operates under a stated mission, which involves three basic points: 1) To provide for the EU and beyond, ‘factual, objective, reliable and comparable information at European level concerning drugs and drug addiction and their consequences.’ 2) To obtain and assess information on emerging trends in the drug world, with a focus on multi-drug use, and the combination of legal and illegal drugs. And 3) To offer best practices information to the member states of the EU, and to help the states institute these practices.
How accurate is the EMCDDA? It’s hard to say. Like any government agency, it can only officially account for what’s official. Perhaps it has good feelers in the illicit world, and really knows the ins and outs of whats not reported. And alternatively, maybe its used as a way to form beliefs in the general public. If nothing else, a recent report gives us some new talking points regarding the EU, and its illicit cannabis drug market.
Report – EU Drug Market: Cannabis
The EMCDDA’s EU Drug Market: Cannabis report was published in November, 2023. It “describes the European cannabis market from production and trafficking, to distribution and use. It details the processes, materials and players involved at different stages and levels of the market. The module takes a threat assessment approach, identifying key issues and defining recommendations for action at EU and Member State level.”
The report notes that cannabis is both the most commonly used illicit drug worldwide, as well as the basis for the largest black market in Europe. It estimates that 84 million between 15-64 years of age, have used cannabis at least once in life; and that 22.6 million used it in just the past year. The report indicates that a larger choice for products is available on the black market; including oil and hash oil, vapes, edibles, and other concentrates. This is in contrast to how it was not many years ago; when the main products were flower and hash.
In its ‘key points’ section, the report states the belief that most of the cannabis ‘detected,’ is thought to be grown in the EU. It states that seized drug amounts peaked in 2021, for cannabis and resin; the highest in 10 years. And that while Spain is a key player for illicit cannabis in the EU, Morocco is still the biggest hash provider to Europe.
It comments on the expanding market, with new product offerings; as well as the increase in potency of cannabis products, and the entrance of synthetic (or semi-synthetic) cannabinoids products, like HHC. According to the report, “Violence, corruption and the misuse of legal business structures are key enablers used by the diverse, adaptable and flexible criminal networks involved in the illicit cannabis market in the EU.” And that “The environmental impact of illicit cannabis production in the EU is considerable.”
A few more points from the report
The EMCDDA report estimates the minimum value of the EU cannabis black market to be EUR 11.4 billion. While it states that indicators point to it being a stable market; it also states that between 2015-2021, prices went down for cannabis flower and hash products. The discrepancy likely indicates that stability is in general market size and number of users; while pricing for individual products, does vary through time. The falling prices in these categories mirrors falling prices in the US and Canada as well.
In terms of increasing potency, the report states that flower went up 60% in THC potency, while hash went up 200%, in the years from 2011-2021. Seizures indicate that whereas hash used to be consumed more than flower in Europe, that now flower is the more common product, with more seizures finding flower, than hash. The biggest seizures came from countries like Spain, France and Italy; which are on trafficking routes. The report indicates that the Western Balkan region is a big part of the illicit cannabis trade; and both cultivates and imports products to Europe.
The report states cannabis as the most commonly used drug worldwide. It gives the statistic of 2,014 tonnes of resin seized in 2021, and 5,226 tonnes of cannabis flower. The former is an 8% drop from the previous year’s seizures, and the latter is an 11% increase. Spain was cited as being where 75% of plants were seized in 2021, as well as 650 tonnes of resin.
Things to remember
First and foremost, this is the report of a government agency on the black markets that operate within its borders. No direct production, sales, or transport information was given to any government, or used for this report. Like with all reporting on drug trafficking and black markets, the numbers grabbing headlines, are estimates made from what is obtained through arrests, seizures, and covert operations.
All three of these are dependent on how much money a government puts behind the efforts; which is something that often changes with new laws or new measures. What I mean by this, is that if a government isn’t looking for something one year, and then starts looking for it the next; it’ll appear in the news like it doesn’t exist at all the first year, but then pops up in the second.
Or, perhaps, efforts to stop a particular drug amp up, meaning more arrests, seizures, and covert operations. Let’s remember, the same report spoke of this as a stable market; which implies any increase seen in it, is really just an increase in law enforcement efforts against it.
In the ‘cannabis production’ section of the report, it says, “Little is known about the scale of illicit cultivation in Europe due to challenges in monitoring and reporting.” Of course, logically, if authorities don’t know much about production, they also don’t realistically know much about the rest either. A statement like this should act as a reminder that we’re only going off of guesses, that relate to how good the government is at intercepting these businesses, at a given time.
When we look at black market numbers from government reporting, what we’re generally looking at is how much funding an initiative gets, and whatever protocol is currently in place. So did the industry increase in 2021 in Europe? Or did Europe put more time and money into rooting out operations? Weed has been a staple black market drug for nearly a century, and was used throughout history before then. Aspects might change, like which country produces more; but the overarching idea of the market in general, remains the same.
Another thing to remember is that this kind of information can be used to inform policy, and personal opinions. As personal opinions relate to buying preferences, and therefore shape industries; and since companies are known to contribute so much to politicians; its not out of bounds to assume political agendas are pushed by way of molding popular opinions through reporting.
The report makes a reference to the ‘dangerous’ semi-synthetic cannabinoids and increased THC levels, of concentrate products and edibles. While it does seem increased THC has led to more ER visits; this has not been linked with increased deaths, nor did the EMCDDA offer a statistic for cannabis deaths or injuries. As a reminder, the EU is totally cool with allowing synthetic opioids, which according to an EMCDDA report from August 2023, were responsible (along with heroine) for 3/4 of drug deaths in Europe. Perhaps we should question how the EMCDDA defines ‘dangerous.’
Conclusion
I expect these reports come out for the sake of appearances – like that of maintaining control; as well as for whatever opinion-molding they can do. But the reality is, we don’t know much about what goes on in the EU illicit drug market beyond a point, just like we don’t know it about any other black market. What we do know, is that weed is big, it always has been, and attempts to thwart markets, or divert them to costlier legal markets; doesn’t tend to work.
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business
After Massachusetts cannabis worker died from asthma attack, state pushes marijuana industry to take extra safety steps
After a Bay State cannabis worker suffered an asthma attack and died, the state Department of Public Health is pushing the local marijuana industry to take extra safety steps to prevent work-related asthma.
A Trulieve Cannabis Corp. employee who was packaging ground cannabis into pre-rolls at the company’s Holyoke processing facility suffered an asthma attack and later died in the hospital last year. The Occupational Safety and Health Administration investigated, and the company later settled with OSHA.
DPH and OSHA confirmed that the death of the 27-year-old production technician was the first known occupational asthma fatality in the U.S. cannabis workforce.
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