Economics of Drug Policy and the Drug War

1. FY2018 Federal Drug Control Budget Request

"The President’s FY 2018 Budget Request supports $27.8 billion for drug control efforts spanning prevention, treatment, interdiction, international operations, and law enforcement across 14 Executive Branch departments, the Federal Judiciary, and the District of Columbia. This represents an increase of $279.7 million (1.0 percent) over the annualized Continuing Resolution (CR) level in FY 2017 of $27.5 billion. Within this total, the Budget supports $1.3 billion in investments authorized by the Comprehensive Addiction and Recovery Act (CARA) the 21st Century Cures Act, and other opioid-specific programs to help address the opioid epidemic."

"National Drug Control Budget: FY 2018 Funding Highlights" (Washington, DC: Executive Office of the President, Office of National Drug Control Policy), May 2017, p. 2.
https://www.whitehouse.gov/sit...

2. Federal Drug Control Spending by Function FY2013 through FY2018 (Un-Adjusted)

The combined federal drug control budget request for Fiscal Year 2018 is $27.57 billion, up from $23.8 billion in 2013.

Click here for complete datatable for Federal Drug Control Spending by Function FY2013 through FY2018 as estimated by the Office of National Drug Control Policy.

ONDCP changed its method of accounting for treatment spending in its FY2018 report. According to footnote two for table two, p. 18, in the FY2018 budget report: "The estimates for the CMS [Centers or Medicare and Medicaid Services] reflect Medicaid and Medicare benefit outlays (excluding spending under Medicare Part D) for substance use disorder treatment; they do not reflect budget authority. The methodology for Medicaid estimates has been refined from prior years to more accurately reflect spending. The estimates were developed by the CMS Office of the Actuary." Questions have arisen regarding this decision, so in order to provide a better understanding of these figures, click here for a complete datatable of Federal Drug Control Spending by Function FY2008 through FY2016 and the request for FY2017 as estimated by ONDCP in December 2016.

The FY2017 budget report from ONDCP, which was issued in early January 2017, showed the following final figures for FY2015:
Treatment: $12.54 billion (43.4% of total)
Prevention: $1.34 billion (4.6% of total)
Domestic Law Enforcement: $9.4 billion (32.5% of total)
Interdiction: $3.96 billion (13.7% of total)
International: $1.64 billion (5.7% of total)
Total: $28.88 billion

The FY2018 budget report from ONDCP, which was issued in May 2017, shows the following final figures for FY2015:
Treatment: $9.55 billion (36.9% of total)
Prevention: $1.34 billion (5.2% of total)
Domestic Law Enforcement: $9.4 billion (36.3% of total)
Interdiction: $3.96 billion (15.3% of total)
International: $1.64 billion (6.3% of total)
Total: $25.89 billion

FY2016 figures were also adjusted:
According to the FY2017 Budget Report
2016 Enacted:
Treatment: $13.25 billion (43.4%)
Prevention: $1.5 billion (4.9%)
Domestic Law Enforcement: $9.7 billion (31.7%)
Interdiction: $4.48 billion (14.7%)
International: $1.64 billion (5.4%)
Total: $30.56 billion

However according to the FY2018 report:
FY2016 Final:
Treatment: $9.85 billion (36.6% of total)
Prevention: $1.49 billion (5.5% of total)
Domestic Law Enforcement: $9.28 billion (34.5% of total)
Interdiction: $4.73 billion (17.6% of total)
International: $1.52 billion (5.7% of total)
Total: $26.87 billion


"National Drug Control Budget: FY 2018 Funding Highlights" (Washington, DC: Executive Office of the President, Office of National Drug Control Policy), May 2017, Table 1, p. 16; Table 2, p. 18; and Table 3, p. 19.
https://www.whitehouse.gov/sit...
"FY 2017 Budget and Performance Summary" (Washington, DC: Executive Office of the President, Office of National Drug Control Policy), December 2016, Table 1, p. 21, and Table 3, p. 24.
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"National Drug Control Budget: FY 2017 Funding Highlights" (Washington, DC: Executive Office of the President, Office of National Drug Control Policy), February 2016, Table 1, p. 16; and Table 3, p. 19.
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3. Estimated Economic Impact of Illegal Opioid Use and Opioid-Related Overdose Deaths

The White House Council of Economic Advisers [CEA] released its analysis of the economic costs of illegal opioid use, related overdoses, and overdose mortality in November 2017. It reported a dramatically higher estimate than previous analyses, largely due to a change in methodology. Previous analyses had used a person's estimated lifetime earnings to place a dollar value on that person's life. According to the CEA, "We diverge from the previous literature by quantifying the costs of opioid-related overdose deaths based on economic valuations of fatality risk reduction, the “value of a statistical life” (VSL)."

The CEA noted that "According to a recent white paper prepared by the U.S. Environmental Protection Agency’s (EPA) Office of Policy for review by the EPA’s Science Advisory Board (U.S. EPA 2016), the EPA’s current guidance calls for using a VSL estimate of $10.1 million (in 2015 dollars), updated from earlier estimates based on inflation, income growth, and assumed income elasticities. Guidance from the U.S. Department of Health and Human Services (HHS) suggests using the range of estimates from Robinson and Hammitt (2016) referenced earlier, ranging from a low of $4.4 million to a high of $14.3 million with a central value of $9.4 million (in 2015 dollars). The central estimates used by these three agencies, DOT, EPA, and HHS, range from a low of $9.4 million (HHS) to a high of $10.1 million (EPA) (in 2015 dollars)."

In addition, the CEA assumed that the number of opioid-related overdoses in the US in 2015 was significantly under-reported. According to its report, "However, recent research has found that opioids are underreported on death certificates. Ruhm (2017) estimates that in 2014, opioid-involved overdose deaths were 24 percent higher than officially reported.4 We apply this adjustment to the 2015 data, resulting in an estimated 41,033 overdose deaths involving opioids. We apply this adjustment uniformly over the age distribution of fatalities."

The combination of that assumption with the methodology change resulted in a dramatically higher cost estimate than previous research had shows. According to the CEA, "CEA’s preferred cost estimate of $504.0 billion far exceeds estimates published elsewhere. Table 3 shows the cost estimates from several past studies of the cost of the opioid crisis, along with the ratio of the CEA estimate to each study’s estimate in 2015 dollars. Compared to the recent Florence et al. (2016) study—which estimated the cost of prescription opioid abuse in 2013—CEA’s preferred estimate is more than six times higher, reported in the table’s last column as the ratio of $504.0 billion to $79.9 billion, which is Florence et al.’s estimate adjusted to 2015 dollars. Even CEA’s low total cost estimate of $293.9 billion is 3.7 times higher than Florence et al.’s estimate."

In contrast, the CEA noted that "Among the most recent (and largest) estimates was that produced by Florence et al. (2016), who estimated that prescription opioid overdose, abuse, and dependence in the United States in 2013 cost $78.5 billion. The authors found that 73 percent of this cost was attributed to nonfatal consequences, including healthcare spending, criminal justice costs and lost productivity due to addiction and incarceration. The remaining 27 percent was attributed to fatality costs consisting almost entirely of lost potential earnings." According to the CDC, there were 25,840 deaths in 2013 related to an opioid overdose.

According to the CEA, "We also present cost estimates under three alternative VSL assumptions without age-adjustment: low ($5.4 million), middle ($9.6 million), and high ($13.4 million), values suggested by the U.S. DOT and similar to those used by HHS. For example, our low fatality cost estimate of $221.6 billion is the product of the adjusted number of fatalities, 41,033, and the VSL assumption of $5.4 million. Our fatality cost estimates thus range from a low of $221.6 billion to a high of $549.8 billion."

"The Underestimated Cost of the Opioid Crisis," Council of Economic Advisers, Executive Office of the President of the United States, November 2017.
https://www.whitehouse.gov/sit...
Warner M, Trinidad JP, Bastian BA, et al. Drugs most frequently involved in drug overdose deaths: United States, 2010–2014. National vital statistics reports; vol 65 no 10. Hyattsville, MD: National Center for Health Statistics. 2016. Table B, p. 64.
https://www.cdc.gov/nchs/data/...
https://www.cdc.gov/nchs/produ...

4. Estimated Cost Savings for Treatment vs. Law Enforcement

"This study found that the savings of supply-control programs are smaller than the control costs (an estimated 15 cents on the dollar for source-country control, 32 cents on the dollar for interdiction, and 52 cents on the dollar for domestic enforcement). In contrast, the savings of treatment programs are larger than the control costs; we estimate that the costs of crime and lost productivity are reduced by $7.46 for every dollar spend on treatment."

Rydell, C.P. & Everingham, S.S., Controlling Cocaine, Prepared for the Office of National Drug Control Policy and the United States Army (Santa Monica, CA: Drug Policy Research Center, RAND Corporation, 1994), p. xvi.
http://www.rand.org/pubs/monog...

5. Estimated Federal Drug Control Spending By Function for Fiscal Years 2003-2017


Click here for complete datatable for Estimated Federal Drug Control Spending By Function for Fiscal Years 2003-2017 including revisions by ONDCP for FY2009-FY2016.

ONDCP changed its method of accounting for treatment spending in its FY2018 report. According to footnote two for table two, p. 18, in the FY2018 budget report: "The estimates for the CMS [Centers or Medicare and Medicaid Services] reflect Medicaid and Medicare benefit outlays (excluding spending under Medicare Part D) for substance use disorder treatment; they do not reflect budget authority. The methodology for Medicaid estimates has been refined from prior years to more accurately reflect spending. The estimates were developed by the CMS Office of the Actuary." Questions have arisen regarding this decision, so in order to provide a better understanding of these figures, click here for a complete datatable of Federal Drug Control Spending by Function FY2008 through FY2016 and the request for FY2017 as estimated by ONDCP in December 2016.

"National Drug Control Budget: FY 2018 Funding Highlights" (Washington, DC: Executive Office of the President, Office of National Drug Control Policy), May 2017, Table 1, p. 16; Table 2, p. 18; and Table 3, p. 19.
https://www.whitehouse.gov/sit...
"FY 2017 Budget and Performance Summary" (Washington, DC: Executive Office of the President, Office of National Drug Control Policy), December 2016, Table 1, p. 21, and Table 3, p. 24.
https://obamawhitehouse.archiv...
"National Drug Control Budget: FY 2016 Funding Highlights" (Washington, DC: Executive Office of the President, Office of National Drug Control Policy), February 2015, Table 3, p. 18.
http://obamawhitehouse.archive...
"FY2012 Budget and Performance Summary: Companion to the National Drug Control Strategy" (Washington, DC: Executive Office of the President, Office of National Drug Control Policy), April 2011, Table 3, p. 22.
https://obamawhitehouse.archiv...

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