Monday, October 3, 2016

U.S. Drug-Related Deaths Soar, And It’s a Problem for Industry Too

David Taylor: "People need a reason to get up in the morning"
Random shootings and police shootings are again in the news. However, out of the spotlight, there are other death statistics that are equally shocking—and larger in scale. In 2014, Americans who died from drugs hit 49,714. That’s up 62% since 2004. Drug-induced deaths have surpassed deaths from firearms and deaths from car accidents. as you can see in Figure 1. (Deaths at the hands of the police totaled far less, 990 last year.) Drug-related deaths are caused by a variety of drugs, notably amphetamines, opioids, and heroin. But it is heroin-related deaths that have seen the most dramatic increase, up 594% between 2001 and 2014, according to the Centers for Disease Control.

Rising drug use and drug-related deaths are a concern for many reasons. But a particular concern for economists is the impact of drugs on the employment situation, and particularly on manufacturing industry.  As of August, US manufacturing employment is up a tiny 0.3% on a year ago. It’s up a slightly more heartening 4.4% on five years ago. Yet, manufacturing job vacancies are up 3.6% in the past year, and up 18% in the past five years. As of July, there were 379,000 manufacturing job vacancies, equivalent to 3% of manufacturing jobs.  That’s the highest manufacturing job vacancy rate since at least 2000. With unemployment still high in many areas and millions of people voluntarily leaving the labor force, you’d expect people to be jumping at the chance to fill those jobs. Yet, manufacturers across the country report that it’s hard to fill those vacancies.

Drugs are a significant part of the reason. According to the Pennsylvania Manufacturers Association (PMA), about one third of manufacturing job applicants can’t pass a drug test. That Pennsylvania survey is borne out by evidence from other states. According to an article last May in the New York Times, manufacturers in the state of Georgia are suffering from the same problem, so much so that Governor Nathan Deal promised to develop a plan to help. He told the Times: “the number one reason they can’t hire enough workers is they can’t find enough people to pass a drug test.” The CEO of an Indiana-based manufacturer of products for recreational vehicles told the local newspaper that “a majority of applicants in the current environment cannot pass…the controlled substance requirements.”

Source: U.S. Centers For Disease Control

The drugs problem is due to a range of drugs, but experts attribute the rise of drug deaths to the strange story of the rise of OxyContin, a synthetic painkiller introduced in 1996 by Purdue Pharmaceuticals as an innovative cousin of morphine that promised pain relief for twelve hours from a single pill. According to an article in the National Review, by 2004, 2.4 million Americans were taking OxyContin. Prescriptions can cost $600 for a bottle of pills, but most of the cost is paid by insurance companies. The drug was most popular with white males in rustbelt and Appalachian areas, leading to the nickname “hillbilly heroin.” According to the L.A. Times, back in the 1990s Purdue launched the drug with a $200 million marketing budget while doubling its salesforce to 600. Even Purdue was surprised by their success: it became a billion-dollar drug within five years, and to date, the drug has generated $31 billion in revenue.  Purdue had legal skirmishes over misleading marketing of the drug; in 2007, it had its Wells Fargo moment, pleading guilty to a felony charge and paying a fine of $635 million (about 2% of Purdue’s cumulative revenue from the drug, making it a minor cost of doing business).  OxyContin’s highly addictive properties have led to a significant number of overdoses and deaths.

Source: Bureau of Labor Statistics

Following political and medical pressure, Purdue changed the formulation in 2010 to make it harder to crush the pills and snort them. Experts say that led to an unexpected development: OxyContin users turned to heroin, which became readily available through a growing network of Mexico-based heroin suppliers. Improved production methods have driven down the price of heroin. On top of that, a new synthetic drug, fentanyl, said to be hundreds of times more potent than heroin, is often mixed in with heroin by drug dealers. Fentanyl is apparently added in unpredictable quantities, making a heroin shot more of a game of Russian Roulette than it used to be. Fentanyl is the drug that killed pop singer Prince. It has led to a rash of deaths recently in Cincinnati, New Hampshire and elsewhere in the U.S.

It’s a very worrying trend, because we have highly focused companies like Purdue that are financially incentivized to increase the number of people using addictive drugs, combined with technological progress making drugs, legal and illegal, cheaper and easier to obtain. Meanwhile, the number of attractive, well-paid jobs for those who are not highly educated is shrinking, leading more people, particularly in the white non-college-educated demographic, to turn to drugs as an escape. I spoke to David Taylor, president of the Pennsylvania Manufacturers Association. He believes the growing drug problem, including both prescription and illegal drugs, reflects a decline in the work ethic and the attractiveness of work for millions of Americans. “People need a reason to get up each morning, they need a sense of oneself that can only come from applying one’s talents and working with other people,” he said. “And instead, we’re making it easier for people to give up and disengage from the realities of life.”  Two other signs of the same problem are the dramatic rise in Americans claiming federal disability benefits, and a recent study that found that 22% of young non-college educated men have not worked in the past year. The study found that these men spend some 75% of the time they would have been working playing video games instead.

There are no simple solutions. The decline of the work ethic, the loss of well-paying jobs for those not highly educated, the rise of drugs, are each enormously complex problems. Unfortunately, little of this has been discussed in the current presidential election campaign, which has been dominated by emotionally charged personality issues and simplistic platitudes. So not only do we end up knowing little about what either candidate thinks about these important issues, but the candidates themselves are missing a chance to raise awareness and educate the American people on issues that will affect them for many years to come.

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