Background: The spread of illegally manufactured fentanyl (IMF) has been a public health disaster in Canada and the United States, driving overdose deaths to unprecedented levels. It has also changed the production function for drug traffickers, most notably by radically reducing raw materials costs for those producing illegal opioids.
Objectives
Examine the consequences of the reduction in opioid production costs and the elimination of seasonal variability in supply on all the categories of market participants, from Chinese firms who supply Mexican Transnational Criminal Organizations (TCOs) with the precursors of fentanyl, the TCOs responsible for manufacturing fentanyl and shipping it across the U.S. border, the multiple layers of the domestic drug distribution network, to the users themselves.
Methods
Application of economic reasoning and the risks and prices model to the scattered information available on technology, enforcement, prices, trafficking organizations and user behavior.
Results
Inter alia: (1) Though production costs per dose are dramatically cheaper for fentanyl than heroin, the street price may not decline much because the retail price is determined largely by the costs of compensating distributors for incurring risks from enforcement and violence. (2) The consequences for the resilience of the supply chains are ambiguous, depending on how many Chinese firms are willing to sell precursors to Mexican customers.
Implications
High level opioid seizures are even less likely now to cause short-term disruptions than in the past. The chain of opioid distribution may also be shortened.