Opium Price Shocks and Prescription Opioids in the US

We investigate the effect of opium price shocks on the per capita dispensation of prescription opioids in the US. Using quarterly county-level data for 2003-2016, three main results emerge. First, reductions in opium prices significantly increase the quantity of opioids prescribed, and the more so in counties with higher ex-ante demand for analgesics, as captured by the incidence of mining sites. Second, the increase involves natural and semi-synthetic but not fully-synthetic opioids, suggesting that the effect is moderated by the amount of opium contained in the products. Third, the impact is larger prior to 2010, when overdose deaths were more related to the misuse of natural and semi-synthetic prescription opioids. Our additional firm-level estimates reveal that supply-side economic incentives have played a relevant role in the opioid epidemic. Advertising expenses of opioid producers increase following negative opium price shock and so do their stock prices and profits