The costs of public policies to fight illegal drugs
Summary report
prepared for the Special Committee on Illegal Drugs
Meeting May 14, 2001
Ottawa, Canada
Agenda: To reassess Canada’s anti-drug legislation and policies
Witness: Jürgen Rehm, Ph.D.
CEO, Addiction Research Institute Zurich, Switzerland
Professor, Public Health Sciences, University of Toronto, Canada
Senior Scientist, Centre for Addictions and Mental Health, Toronto, Canada
Acknowledgements: Financial support for research for this article was in part provided by the Swiss Federal Office of Public Health, Reference #00.000972, and the Connaught Fund, University of Toronto, Grant #417623.
Correspondence to:
Prof. Dr Jürgen Rehm
Addiction Research Institute
Konradstrasse 32
P.O. Box
CH 8031 Zurich, Switzerland
e-mail: jtrehm@isf.unizh.ch or jtrehm@aol.com
1. Scope, aim and organization of this report
Public drug policy tries to reduce drug use and abuse and associated harm. It is the aim of this report to look at the costs of such policies in Canada and compare them to the cost of policies in other established market economies. Costs of public drug policies can be defined in several ways:
- In a narrow sense costs of public drug policy are confined to the resources spent in this area, e.g. all public expenses as research, prevention, educational campaign as well as the costs for law enforcement. The narrow definition will be used at the end of this report in Point 4 below.
- In a more analytical sense, the costs of public drug policy may include not only the public expenses cited above, but also causally related consequences of these expenses. As it has been pointed out before (e.g. overview table in Fischer et al., 1997), harm and harm-related costs from drug use can result from the consequences of the use itself as well as from the situation (the conditions), in which this drug use has been happening. And this situation is largely defined by the public drug policies in a country. To give an example: heroin use can produce harm and costs associated with the substance itself. Unrelated to this use are costs for consequences of heroin use as policing, or for other aspects of law enforcement. These costs depend on the decision of society to make heroin use a criminal act. Such questions are well known and currently discussed widely in the European context. For instance, in the current discussion of the revision of the Swiss Law on Narcotics, one of the drafts asked for depenalization of use of any substance, combined with strict laws against sale of these substances (for drafts and their discussion see www.admin.bag.ch , the homepage of the Swiss Federal Office of Public Health). The wider definition of costs of public policies is discussed in Point 3 below. We believe that the wider definition is more important for an evaluation of drug policies in established market economies, as it will eventually establish criteria to redirect and improve such policies.
Before different definitions of costs for public drug policies are discussed, we would like to give some definitions for costs in social cost studies, which will help understand the arguments in the latter parts (Point 2 below). Finally, there is a short conclusion (Point 5 below).
2. Definition of costs in cost studies
Costs will be defined following the International guidelines for estimating the costs of substance abuse (Single et al., 1996a; see www.ccsa.ca/intguid.htm; see also Rehm, 1999, for an overview on economic questions with regard to substance use and abuse). In this perspective costs are defined according to the concept of alternative uses for scarce resources, e.g. as opportunity costs. With certain exceptions, the major direct costs are the tangible, external costs of substance abuse; that is, those costs borne by persons other than the abuser or his family. Transfer payments, such as welfare benefits to people disabled by substance abuse are usually not included in cost studies and thus will not be part of this presentation (although administrative costs to run such programs are included; see below).
The focus of most cost studies is on gross rather than net costs: Most studies on costs of substance abuse do not consider benefits and thus refer to gross rather than net costs of substance abuse.
Intangible costs of illegal drugs are viewed as very significant even if they cannot be estimated in dollar terms. The major intangible costs of substance use are caused by death, pain, suffering and bereavement. Intangible costs will not be part of this presentation.
In dealing with the welfare costs attributable to drug abuse, care is taken to distinguish between the real resource costs of abuse (administrative costs for substance abuse-related welfare cases) and costs, which are simply transfer payments. The welfare costs involved relate to the payments borne by the state (such as disability pensions and sickness benefits). It is particularly important to ensure that there is no double counting of costs or benefits. If a person previously in the workforce receives welfare benefits as a result of abuse- related sickness, it would be double counting to also include in the estimate of external costs the productivity loss. Thus, the only welfare costs included in cost studies are administrative costs.
Some costs clearly attributable to use of illicit substances result from public decisions to reduce abuse rather than from the direct effects of substance use itself (see discussion above). Costs in this category include research expenditures, public education and prevention campaigns, and law enforcement programs. These costs are discretionary in the sense that governments could choose not to incur them. Presumably such reduced expenditures would lead to higher direct costs of substance use, but these expenditures are not themselves direct costs. In many cost studies, these costs are included as direct costs, but categorized as "policy costs" or "costs of public policy". In this way, such costs are identified as being incurred in relation to substance use, but are not classified as unavoidable costs of use.
3. Defining and estimating the costs of public policy
The overall costs of illegal drugs in Canada 1992 are summarized in Table 1.
Table 1: The costs of alcohol, tobacco and illicit drugs in Canada, 1992 (from Single et al., 1998) in millions of $ Canadian
| Alcohol | Tobacco | Illicit drugs | Total ATD | |
| 1. Direct health care costs: total | $1,300.6 | $2,675.5 | $88.0 | $4,064.1 |
| ---1.1 morbidity-general hospitals | 666.0 | 1,752.9 | 34.0 | 2,452.9 |
| -------morbidity-psychiatric hospitals | 29.0 | -- | 4.3 | 33.3 |
| ---1.2 co-morbidity | 72.0 | -- | 4.7 | 76.7 |
| ---1.3 ambulance services | 21.8 | 57.2 | 1.1 | 80.1 |
| ---1.4 residential care | 180.9 | -- | 20.9 | 201.8 |
| ---1.5 non-residential treatment | 82.1 | -- | 7.9 | 90.0 |
| ---1.6 ambulatory care: physician fees | 127.4 | 339.6 | 8.0 | 475.0 |
| ---1.7 prescription drugs | 95.5 | 457.3 | 5.8 | 558.5 |
| ---1.8 other health care costs | 26.0 | 68.4 | 1.3 | 95.8 |
| 2. Direct losses associated with the workplace | 14.2 | 0.4 | 5.5 | 20.1 |
| ---2.1 EAP and health promotion programs | 14.2 | 0.4 | 3.5 | 18.1 |
| ---2.2 drug testing in the workplace | N/A | -- | 2.0 | 2.0 |
| 3. Direct administrative costs for transfer payments | 52.3 | -- | 1.5 | 53.8 |
| ---3.1 social welfare and other programs | 3.6 | -- | N/A | 3.6 |
| ---3.2 workers' compensation | 48.7 | -- | 1.5 | 50.2 |
| ---3.3 other administrative costs | N/A | N/A | N/A | N/A |
| 4. Direct costs for prevention and research | 141.4 | 48.0 | 41.9 | 231.1 |
| ---4.1 research | 21.6 | 34.6 | 5.0 | 61.1 |
| ---4.2 prevention programs | 118.9 | 13.4 | 36.7 | 168.9 |
| ---4.3 training costs for physicians and nurses | 0.9 | N/A | 0.2 | 1.1 |
| ---4.4 averting behaviour costs | N/A | N/A | N/A | N/A |
| 5. Direct law enforcement costs | 1,359.1 | -- | 400.3 | 1,759.4 |
| ---5.1 police | 665.4 | N/A | 208.3 | 873.7 |
| ---5.2 courts | 304.4 | N/A | 59.2 | 363.6 |
| ---5.3 corrections (including probation) | 389.3 | N/A | 123.8 | 513.1 |
| ---5.4 customs and excise | N/A | N/A | 9.0 | 9.0 |
| 6. Other direct costs | 518.0 | 17.1 | 10.7 | 545.8 |
| ---6.1 fire damage | 35.2 | 17.1 | N/A | 52.3 |
| ---6.2 traffic accident damage | 482.8 | -- | 10.7 | 493.5 |
| 7. Indirect costs: productivity losses | 4,136.5 | 6,818.8 | 823.1 | 11,778.4 |
| ---7.1 productivity losses due to morbidity | 1,397.7 | 84.5 | 275.7 | 1,757.9 |
| ---7.2 productivity losses due to mortality | 2,738.8 | 6,734.3 | 547.4 | 10,020.5 |
| ---7.3 productivity losses due to crime | -- | -- | N/A | N/A |
Total |
7,522.1 |
9,559.8 |
1,371.0 |
18,452.9 |
| Total as % of GDP | 1.09% | 1.39% | 0.20% | 2.67% |
| Total per capita | $265 | $336 | $48 | $649 |
| Total as % of all substance-related costs | 40.8% | 51.8% | 7.4% | 100.0% |
Direct costs for public policy consisted of costs for prevention and research and costs for law enforcement. Costs occurred on different levels of government (local, provincial, national) and policies may differ to a certain degree between levels of jurisdiction and within one country. Direct costs are usually smaller than indirect costs, and for illegal drugs, within direct costs, the costs for law enforcement clearly constitute the largest portion (see Single et al., 1996 or Rehm, 1999, for further discussions).
The question as to what proportion of these costs was related to public policy on top of the obvious costs defined above (e.g. research expenditures, public education campaigns, and law enforcement programs) varies on two points (see also Figure 1 below for a graphical presentation):
- How is the prevalence and incidence of substance use and abuse related to public policy?
- To what degree are the effects of substance use and abuse related to public policy?
Figure 1: Potential impact of public policy on prevalence/incidence of drug use or abuse and subsequent effects
Public policy |
|
Prevalence/incidence |
Effects of illicit drug use or abuse |
Dependent on the answers to these questions, the costs may vary tremendously, as the main cost for illegal drugs as well as for legal drugs result from indirect costs, e.g. productivity losses due to morbidity or mortality (e.g. Single et al., 1996b, 1998; Xie et al., 1996, 1998, 1999).
These questions are not new, and different conceptual frameworks exist to assess the influence of public policy on prevalence and harm (e.g. Longshore et al., 1998; MacCoun et al., 1996).
Let us try to define these questions and the underlying problems more clearly: Suppose there is clear scientific evidence that certain policies influence the prevalence and/or incidence of use and abuse. Take tobacco as an example and presume, that public policies in Canada since 1990 have caused about 50% of the decrease in prevalence of smoking (see Bondy et al., 2000, for trends in prevalence of smoking in Canada; see Ferrence et al., 2000, for a discussion of policy issues in smoking). Then, the subsequent reduction in direct and indirect costs of tobacco (see Table 1) can be attributed to public policy and thus public policy can be said to have produced the related financial benefit.
Similarly, if there is evidence that public policies caused an increase in illicit drug use or abuse, the related direct and indirect costs can be seen as attributable to public policies and thus can be considered as indirect costs of public policy. Thus it would be extremely important to have sound scientific evidence, in what way incidence and prevalence of drug use or abuse are related to public policy.
Unfortunately, the scientific evidence on the effects of public policy on prevalence/incidence of illegal drugs is quite scarce. One of the notable exceptions is the evaluation of MacCoun & Reuter (2001) of different cannabis policies. These authors examined alternative legal regimes for controlling cannabis availability and use in different cultures. Their main results showed that depenalisation of the possession of small quantities of cannabis does not increase cannabis prevalence. However, commercial promotion and sales of cannabis may significantly increase prevalence. Based on these figures, one may attribute a portion of the direct and indirect costs related to cannabis to the policy of legalizing commercial promotion and sales (e.g. the Dutch model).
Thus overall, even though there are substantial differences in prevalence and incidence of illegal drugs in established market economies (and of course even more so between market economies and the developing world; see Warner-Smith et al., forthcoming, for a recent overview), the relation of these differences to the different public policies on drugs in these countries remains unclear (see also Table 2 for some illustrations of prevalence estimates).
Table 2: Prevalence of "abuse" per thousand adult population (15 years and above)
| UN Region (example country) |
Adult Population1 (‘000) |
Illicit opiates |
Cocaine |
Amphetamine |
IDU2 |
| Europe A European Union, Switzerland |
196578 |
3.8 |
4.9 |
8.3 |
|
| Europe B1 Poland, Turkey |
86732 |
1.8 |
0.4 |
5.0 |
|
| Europe B2 Uzbekistan, Armenia |
25707 |
6.9 |
0.1 |
||
| Europe C Russian Federation, Kazakhstan, Ukraine |
122149 |
6.9 |
0.3 |
0.6 |
|
| Americas A USA, Canada |
153738 |
4.7 |
27.6 |
7.0 |
|
| Americas B Mexico, Cuba, Barbados |
230889 |
1.2 |
8.8 |
7.0 |
|
| Americas C Peru, Bolivia, Ecuador |
35259 |
2.6 |
15.0 |
3.7 |
|
| Western Pacific A Australia, Japan, New Zealand |
69580 |
1.3 |
11.7 |
8.0 |
5.59 |
| Western Pacific B1 China, Mongolia, Korea |
756866 |
0.6 |
- |
0.5 |
0.6 |
| Western Pacific B2 Cambodia, Vietnam, Myanmar |
75432 |
6.4 |
|||
| Western Pacific B3 Vanuatu, Fiji, Papua New Guinea |
3389 |
- |
- |
- |
|
| Africa D Nigeria, Sierra Leone, Angola |
127051 |
1.1 |
3.003 |
11.1 |
|
| Africa E Kenya, South Africa, Zimbabwe |
151683 |
0.5 |
3.003 |
4.3 |
|
| South East Asian B Indonesia, Singapore, Thailand |
211575 |
1.4 |
0.1- |
8.2 |
0.31 |
| South East Asian D India, Nepal, Pakistan |
671972 |
6.4 |
- |
11.64 |
|
| Arab Emirates B Iran, Saudi Arabia, Kuwait |
69031 |
19.7 |
- |
0.7 |
|
| Arab Emirates D Morocco, Egypt, Iraq |
67952 |
2.0 |
- |
5.0 |
|
| Global | 35601074 |
2.23 |
3.03 |
6.03 |
Sources: Warner-Smith, et al., forthcoming based on UNDC, UNUNAIDS, Asian Harm Reduction Network, ONDCC, and Murray and Lopez(1996). NB. Prevalence estimates for some drugs for some regions are based on a small number of countries
There is some more evidence on the relationship between policy and harm attributable to illicit drugs. For instance, Fischer et al. (2000) found in a comparison of Canadian drug policies in selected cities with those from Western European jurisdictions, that Canadian policies seemed to be related to increases in harm indicators over the past decade, whereas the same indicators tended to decrease in some Western European jurisdictions over the same time span (see Tables 3 and 4).
Table 3: Prevalence of HIV infection among injection drug users in Canada and selected jurisdictions in Western Europe
Location |
Year; prevalence rate in % |
||
1988/89 |
1994/95 |
1998/99 |
|
| Canada | |||
| Montreal | 4 - 5 |
19 |
16 - 20 |
| Toronto | 4 - 5 |
8 |
10 |
| Vancouver | 1 - 3 |
6 |
23 - 30 |
| Western Europe | |||
| Amsterdam | 33 |
26 |
26 |
| Frankfurt | NA |
NA |
NA |
| Switzerland | 30 (1986) |
9 (1991) |
6 (1995) |
NA: not available; number in parentheses indicate different years as data source
Table 4: Number of deaths related to overdose of illicit drugs in Canada and selected jurisdictions in Western Europe
Location |
Year; prevalence rate in % |
||
1988/89 |
1994/95 |
1998/99 |
|
| Canada | |||
| Montreal | 73 (1991) |
62 |
72 |
| Toronto | 44 |
95 |
63 |
| Vancouver | 39 |
331 |
370 |
| Western Europe | |||
| Amsterdam | 61 |
52 |
25 |
| Frankfurt | 62 (1987) |
147 (1991) |
31 (1996) |
| Switzerland | 202 |
353 |
209 |
NA: not available; number in parentheses indicate different years as data source
Of course, comparisons like this are always subject to discussion about the comparability of indicators (see also Longshore et al., 1998). On the other hand, overdose deaths and HIV are relative "hard" indicators and even if they are differently measured across jurisdictions, the conclusions of Fischer et al. (2000) were mainly based on comparisons within the same jurisdiction over time. Finally, it should be stressed that these data are preliminary based on available local data and that the overall picture relating policy to harm may be different than the one found by Fischer et al. (2000) in the preliminary data set.
However, if the conclusions of the analysis of Fischer et al. (2000) are correct, then part of the direct or indirect costs of illegal drugs are attributable to public policy. Under these circumstances, the increase in harm and the associated costs due to policy should be estimated and added to the policy costs in Table 1, if policy conclusions are drawn based on social cost studies.
There are ways, where public drug policies are directly influencing costs in other sectors. Involuntary (coerced) treatment in many established market economies is one good example for such an influence. The costs of such treatment are usually counted as medical costs in social cost studies.
Unfortunately, economic analyses on the relationship between public policy and drug use or drug related harm are rarely done. The reasons for this absence are not clear. Reuter (2001) speculates that policy makers despite the official mantra that policy should be based on science rather than ideology (see e.g., the annual report of the US Office of National Drug Control Policy) have not used the results of research so far, and may even not intend to use it. For sure, none of the declarations on evidence-based policy seemed to have led to a substantial increase in the quantity of research on the central policy questions. However, research on drug policy is not alone in this respect: research on alcohol policy has indicated that many of the most popular policy interventions such as educational campaigns are not supported by evidence, whereas interventions with shown effectiveness are rarely used (e.g. Edwards et al., 1994). Thus, money of the taxpayer is spent to a large degree without evidence of its effectiveness or of its cost-effectiveness compared to other policy measures.
4. Comparative analysis of direct spending for public policy
Independently of the considerations from above on the relationship between public policy and prevalence of drug use and subsequent harm, the direct costs of public policy can be measured and compared across the countries. As defined above the following categories can be considered as reflecting public drug policies:
- Research and prevention
- Law enforcement
Table 5: Direct costs for public policy in cost studies in established market economies in 1992
| Country, year and category of direct costs | Costs for prevention in millions of local currency | Population in thousand in the year of the study | Costs for prevention per capita in 1’000 of local currency |
| Australia 1992 (Collins & Lapsley, 1996) | millions $ Australian |
||
| Law enforcement | 450.6 |
17335.575 |
26.0 |
| Canada 1992 (Single et al., 1996, 1998) | millions $ Canadian |
||
| Research and prevention | 41.9 |
28546.921 |
1.5 |
| Law enforcement | 400.3 |
28546.921 |
14.0 |
| Total public drug policy | 442.2 |
28546.921 |
15.5 |
| Germany 1992 (Hartwig & Pies, 1995) | millions DM (German mark) |
||
| Research and prevention | 25.0 |
80365.470 |
0.3 |
| Law enforcement | 6,334.8 |
80365.470 |
78.8 |
| Total public drug policy | 6,359.8 |
80365.470 |
79.1 |
| US 1992 (Harwood et al., 1999) | Millions $ US |
||
| Law enforcement | 18,075.0 |
259288.792 |
69.7 |
Source: own calculations based on cost studies cited and UN figures on population for 1992
Table 5 gives an overview of these costs from different social cost studies in different established market economies. Clearly, direct costs for public policy vary quite drastically between established economies. This is true for both research and prevention as well as for law enforcement, where the latter is more important, as direct costs for law enforcement costs clearly outweigh the direct costs for research and prevention.
If all currencies are converted into the same currency (e.g. US $), the U.S. clearly shows the highest level of cost per capita for law enforcement. On the other hand, in no indicators available to the author of this report, the U.S. shows the lowest prevalence or the lowest harm per capita (for prevalence of different parts of the world see Table 2). Thus, even when comparing only direct costs of law enforcement as the main costs for public policy, the U.S. drug policy shows the highest costs without better indicators for prevalence/incidence of illicit drug use or better levels of harm indicators.
Conclusions
Costs for public policy may be defined in the narrow sense just as public expenditure (e.g. research and prevention, law enforcement). Usually, the costs of law enforcement by far outweigh the costs for research and prevention. For 1992, the year with the last available comparative data for several established market economies, the per capita costs differed quite drastically. The U.S. clearly had the highest costs for law enforcement. On the other hand, prevalence/incidence of drug abuse and harm indicators were not on a lower level for this country.
If costs of public policy are defined to include costs resulting from the impact of public policy on prevalence/incidence of illegal drug abuse and/or on associated harm, comparative data between countries are lacking almost entirely. However, such data and subsequent analysis would be required to develop evidence-based policies. The problems of creating comparative data and meaningful analysis are laid out, together with some first isolated results.
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