The Opioid Crisis and Secondary Markets : Evidence from a Laboratory Experiment

The opioid crisis is responsible for hundreds of thousands of deaths and trillions of dollars in costs. The secondary market for opioids contributes substantially to those numbers. Nevertheless, the welfare consequences of closing secondary market distribution remain ambiguous. Although shutting down the secondary market could help alleviate the health threat induced by the drug diversions, it could also trigger increased unnecessary prescriptions. Drawing on Schnell’s (2017) model, we design a laboratory experiment to investigate how secondary markets affect patient and physician behaviors. We find that when a secondary market is present, patients visit physicians more frequently and physicians provide more prescriptions than when there is no secondary market available. Consequently, we find that shutting down this distribution channel reduces total consumption of opioids, and positively impacts overall health outcomes. Our results provide clear evidence that policies aimed at restricting secondary markets can contribute significantly to mitigating the opioid crisis