The Effects of Cocaine and Heroin Prices on Drug-Related Emergency Department Visits
This paper estimates the empirical relationship between the prices of cocaine and heroin and objective indicators of use. The set of outcomes is drug related hospital emergency department admissions where cocaine and heroin are cited, for 21 large U.S. metropolitan areas. These outcomes are superior to subjective self-reports, and are policy-relevant since they directly measure a large component of the health-care costs associated with heavy or chronic drug usage. Panel data methodology is used
... methodology is used to identify the empirical link between drug prices and these indicators. Results indicate that health consequences associated with heavy or chronic drug use are negatively related to drug prices, an instrument of drug control policy. The elasticity of the probability of a cocaine mention with respect to own-price is estimated at -0.27, and the corresponding elasticity for the probability of a heroin mention is -0.15. The probability of any drug related episode, which captures polydrug usage, is also significantly negatively related to both cocaine and heroin prices. Cross-price effects are consistent with a complementary relationship between cocaine and heroin. Models indicate the presence of negative lagged price effects, confirming the strong addictive aspects of both drugs and the cumulative adverse effects of drug use on health. 3 be measured inaccurately. In contrast, the indicators used in the present study are objective outcomes related to consumption. In the DAWN data, emergency department personnel identify whether cocaine or heroin was associated with a particular drug episode. Moreover, much of the literature, by relying on self-reported national surveys, does not consider consumption by certain subgroups, who may behave very differently from the population at large. The persons sampled in DAWN are not representative of the general population. In particular, the focus is on persons whose substance use resulted in a visit to a hospital emergency room. These individuals are much more likely to be hardcore or chronic users of drugs than an individual selected at random. Thus, they also impose the heaviest costs on society and are the target of much illegal drug policy. There were 19,698 deaths from drug-induced causes in 2000, up over 16 % since 1998. Health care costs associated with drug abuse were estimated at around $15 billion for 2000, an increase of almost 40 % since 1992 (ONDCP, 2003). In this respect, an estimate of the effect of drug prices on drug related emergency department (ED) episodes is valuable in that it directly relates drug prices, an instrument of enforcement efforts, to the health consequences of heavy drug use. Many studies based on survey data also rely on the respondent's state of residence as the geographic unit. Consequently, when estimating price responsiveness, these researchers have had to employ a state-average price despite the fact that there is considerable inter-city variation in drug prices even within a given state. This measurement error may lead to biased estimates. The present study overcomes this limitation by computing and merging drug prices at the city level. This analysis further exploits the time-series of city cross sections and estimates various fixed-effects specifications to control for unmeasured factors that may be correlated with price and consumption. Another deficiency in the existing literature concerns cross price elasticities of demand. There are very few studies that analyze the effects of changes in the price of one drug on the consumption relatively costly methods to enforce their contracts rather than use the court system, and 4) because of fines and imprisonment.