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September 2001, Vol 91, No. 9 | American Journal of Public Health 1446-1448
© 2001 American Public Health Association

RESEARCH

Drug Prices and Emergency Department Mentions for Cocaine and Heroin

Jonathan P. Caulkins, PhD

The author is with Carnegie Mellon University, H. John Heinz III School of Public Policy and Management, Pittsburgh, Pa, and RAND, Pittsburgh, Pa.

Correspondence: Requests for reprints should be sent to Diane Schoeff, RAND Drug Policy Research Center, PO Box 2138, Santa Monica, CA 90407-2138 (e-mail: caulkins{at}rand.orgordschoeff{at}rand.org).


   ABSTRACT
TOP
 ABSTRACT
INTRODUCTION
 METHODS
 RESULTS
 DISCUSSION
 References
 

Objectives. In this report, the author illustrates the historic relation between retail drug prices and emergency department mentions for cocaine and heroin.

Methods. Price series based on the Drug Enforcement Administration's System to Retrieve Information From Drug Evidence database were correlated with data on emergency department mentions from the Drug Abuse Warning Network for cocaine (1978–1996) and heroin (1981–1996).

Results. A simple model in which emergency department mentions are driven by only prices explains more than 95% of the variation in emergency department mentions.

Conclusions. Fluctuations in prices are an important determinant of adverse health outcomes associated with drugs.


   INTRODUCTION
TOP
 ABSTRACT
 INTRODUCTION
METHODS
 RESULTS
 DISCUSSION
 References
 
Most US drug control spending seeks to restrain supply,1 which—unless it makes drugs physically scarce—affects use primarily through prices.2 Hence, a key question concerns the extent to which drug prices affect use, particularly heavy or problematic use.3 If use is not related to price, this focus on supply factors, and much of the literature on controlling drug markets, may be misguided.4

Economists take it as an article of faith that use responds to price changes; they even have a term for quantifying the concept. The price elasticity of demand is the percentage change in consumption associated with a 1% increase in price. Other economists are more skeptical, believing that there may be an elasticity of demand for conventional goods, and perhaps even marijuana, but not for cocaine and heroin.

I am not an economist, but I have some sympathy for economists' view in this case. The purpose of this report is to show some figures that might help a noneconomist understand intuitively that price variations may be related to drug use and associated health consequences, at least at the aggregate level.

For cocaine and heroin, the figures presented here correlate retail prices, numbers of emergency department (ED) mentions, and numbers of mentions one might expect if prices were the only thing that affected ED mentions. Such correlations are not a significant contribution to the economics literature. Besides offering the usual admonition that "correlation does not imply causality," an econometrician would note that prices and measures related to consumption are simultaneously determined, so price is an endogenous variable. To quantify the effect of price on consumption, one must "identify" the system with some "instrumental variable." This is routine work for econometricians, and a growing literature empirically estimates elasticities of demand for addictive substances.5 This literature generally finds that consumption of drugs such as cigarettes, alcohol, marijuana, and cocaine is surprisingly responsive to price changes.

Econometric studies can, however, be bewildering to the uninitiated. In my experience, citing these studies to an audience skeptical that prices influence drug use is of little value. Nevertheless, simple descriptive plots, even if they offer no quantitative estimate of the elasticity of demand, can persuade skeptics of the basic point that price matters.


   METHODS
TOP
 ABSTRACT
 INTRODUCTION
 METHODS
RESULTS
 DISCUSSION
 References
 
The unit of observation was annual data for the United States. Price data were derived from undercover purchases recorded by the Drug Enforcement Administration's System to Retrieve Information From Drug Evidence (STRIDE) database.6 Data for 1981 through 1996 were obtained from the Office of National Drug Control Policy.7,8 I extended the cocaine series back to 1978 with data from prior work.9 Prices were converted to constant dollars with the consumer price index.

Counts of ED mentions were taken from Drug Abuse Warning Network data.10,11 The Drug Abuse Warning Network monitors drug-related ED episodes by retrospectively examining ED records in a sample of nonfederal, general care, short-stay hospitals that operate a 24-hour ED. Its data have been criticized,12–15 but they remain the standard source of information on drug-related morbidity.

The third pair of data series was the number of mentions one would expect if ED mentions were determined only by prices through a constant price elasticity. By definition, a constant elasticity relation is log linear. Choosing the scaling constant and exponent to minimize the sum of the squared difference between the actual and the expected number of mentions yields the following relations:

  1. cocaine ED mentions = 5.85 x 107 x P–1.30
  2. heroin or morphine ED mentions = 2.73 x 107 x P–0.84,
where P = price.

The apparently strong relation between use and price suggested by the exponents is consistent with cocaine elasticity estimates derived from youth surveys,16 cocaine and heroin estimates based on arrestee urinalysis results,17 and the observation that heroin prices are inversely related to the size of the methadone dose needed to stabilize persons addicted to heroin.18


   RESULTS
TOP
 ABSTRACT
 INTRODUCTION
 METHODS
 RESULTS
DISCUSSION
 References
 
Figure 1Go plots retail price and the annual number of ED mentions for cocaine) and heroin (1981–1996). A clear negative correlation is seen between prices and ED mentions, but it is difficult to judge its strength because it is an inverse loglinear correlation. To present the correlation visually, Figure 2Go plots the actual and expected number of ED mentions. If price were all that determined the number of ED mentions (and did so through a constant elasticity), the 2 pairs of lines would coincide, which they nearly do. The correlation between actual and expected mentions is 0.987 for cocaine and 0.975 for heroin. Thus, price changes can explain 97.5% of the variation in ED mentions for cocaine and 95% of the variation for heroin. This is striking, considering the imperfections in price and ED data and the fact that the model omits factors such as changes in the number and age of users, the availability of health insurance, the purity and availability of the drugs, and enforcement risks for users. Furthermore, the biggest discrepancies have a ready explanation. When prices spike, the actual number of ED mentions responds less than would be predicted by the constant elasticity relation. That makes sense if, as one would expect, ED mentions are less responsive to short-term price spikes than to longer-term price trends.



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  		FIGURE 1—— Trends in prices and emergency department (ED) mentions for cocaine and heroin: 1981–1996.

 


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  		FIGURE 2—— Actual emergency department (ED) mentions for cocaine (1978–1996) and heroin (1981–1996) compared with numbers predicted by prices.

 

   DISCUSSION
TOP
 ABSTRACT
 INTRODUCTION
 METHODS
 RESULTS
 DISCUSSION
References
 
The preceding analysis shows that drug prices can explain a large proportion of the variation in national time series for the number of ED mentions for cocaine and heroin. The purpose in showing this is not to argue that other factors are unimportant or to quantify precisely the strength of the relation, but rather to give a visual, intuitive basis for understanding more obscure analyses of the relation between prices and drug use. Inasmuch as one believes that prices affect drug use and drug-related morbidity, it makes sense for policymakers to track price trends, to use price as a performance measure, and to think explicitly about how valuable it is to keep prices high and how best that can be accomplished.19


   Acknowledgments
 
This material is based on work supported in part by the National Science Foundation (grant SBR-9357936).

Any opinions, findings, and conclusions or recommendations expressed in this material are those of the author and do not necessarily reflect those of the National Science Foundation.


   Footnotes
 
Peer Reviewed

Accepted for publication September 26, 2000.


   References
TOP
 ABSTRACT
 INTRODUCTION
 METHODS
 RESULTS
 DISCUSSION
 References
 
1. Office of National Drug Control Policy (ONDCP). The National Drug Control Strategy: 2000 Annual Report. Washington, DC: The White House; 2000.

2. Reuter P, Kleiman MAR. Risks and prices: an economic analysis of drug enforcement. In: Tonry M, Morris N, eds. Crime and Justice: An Annual Review of Research. Vol 7. Chicago, Ill: University of Chicago Press; 1986:289–340.

3. Caulkins JP, Reuter P. The meaning and utility of drug prices. Addiction.1996;91:1261–1264.[Medline]

4. Caulkins JP. Measurement and analysis of drug problems and drug control efforts. In: Duffee D, McDowall D, Green Mazerolle L, Mastrofski SD, eds. Criminal Justice 2000, Volume 4: Measurement and Analysis of Crime and Justice. Washington, DC: National Institute of Justice; 2000:391–449.

5. Chaloupka FJ, Pacula RL. Economics and anti-health behavior: the economic analysis of substance use and abuse. In: Bickel W, Vuchinich R, eds. Reframing Health Behavior Change With Behavioral Economics. Hillsdale, NJ: Lawrence Erlbaum Associates; 2000:89–111.

6. Frank RS. Drugs of abuse: data collection systems of DEA and recent trends. J Anal Toxicol.1987;11:237–241.[Medline]

7. Office of National Drug Control Policy (ONDCP). The National Drug Control Strategy, 1997: Budget Summary. Washington, DC: The White House; 1997.

8. Rhodes W, Hyatt R, Scheiman P. The price of cocaine, heroin, and marijuana, 1981–1993. J Drug Issues.1994;24:383–402.

9. Caulkins JP. Developing Price Series for Cocaine. Santa Monica, Calif: Rand Corp; 1994.

10. Substance Abuse and Mental Health Services Administration. Historical Estimates From the Drug Abuse Warning Network: 1978–1994 Estimates of DrugRelated Emergency Department Episodes. Washington, DC: US Dept of Health and Human Services; 1996.

11. Substance Abuse and Mental Health Services Administration. Year-End 1997 Emergency Department Data From the Drug Abuse Warning Network. Washington, DC: US Dept of Health and Human Services; 1999.

12. Ungerleider J, Thomas GD, Lundberg IS, Walberg CB. The Drug Abuse Warning Network (DAWN) Program. Arch Gen Psychiatry.1980;37:106–109.[Abstract]

13. Brookoff D, Campbell EA, Shaw LM. The underreporting of cocaine-related trauma: Drug Abuse Warning Network reports vs hospital toxicology tests. Am J Public Health.1993;83:369–371.[Abstract/Free Full Text]

14. Caulkins JP, Ebener P, McCaffrey D. Describing DAWN's dominion. Contemp Drug Probl.1995;22:547–567.

15. Roberts DC. Data quality of the Drug Abuse Warning Network. Am J Drug Alcohol Abuse.1996;22:389–401.[Medline]

16. Chaloupka FJ, Grossman M, Tauras JA. The demand for cocaine and marijuana by youth. In: Chaloupka FJ, Grossman M, Bickel W, Saffer H, eds. The Economic Analysis of Substance Abuse: An Integration of Econometric and Behavior Economic Research. Chicago, Ill: University of Chicago Press; 1999:133–155.

17. Caulkins JP. Estimating Elasticities and Cross Elasticities of Demand for Cocaine and Heroin. Washington, DC: National Institute of Justice; 1995.

18. Bach PB, Lantos J. Methadone dosing, heroin affordability, and the severity of addiction. Am J Public Health.1999;89:662–665.[Abstract/Free Full Text]

19. Caulkins JP, Reuter P. What price data tell us about drug markets. J Drug Issues.1998;28:593–612.





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