Earlier this month, my colleagues Srikant Devaraj and Karthik Balaji and I published a study on the benefits and costs of eliminating over-the-counter cold medication (pseudoephedrine) in Indiana.
This is a policy issue because these medicines are used to cook meth, a scourge of communities across the country.
We are sympathetic to legislative efforts to keep these drugs off the street. Meth destroys many lives, and it has taken hold so quickly that there is a legitimate argument to experiment with any policy that will reduce its use.
It is not unlike the early lesson I learned as an infantry lieutenant. If you are caught in a close ambush by the enemy you might as well charge them directly as there’s no time to mull over other options.
Fortunately, two other states already have charged this enemy, so we have the makings of a natural experiment into the effects of making the ingredients for meth into being “prescription only” drugs.
In 2006 Oregon prohibited over-the-counter purchases of meth ingredients, and Mississippi followed suit in 2010. Studies of the experience of both states already have been published, and the results are remarkably strong but discouraging.
These laws had no effects on meth use in either state. In fact, the data on meth cases in both states is so clear that they could not have come to any other conclusions.
These results shouldn’t surprise anyone. Drug interventions have a dismal history of effectiveness, and the DEA reports that 90 percent of meth is imported from Mexico. If there were any real evidence that curbing over-the-counter sales of common drugs actually impacted meth use, their benefits would be large. Sadly, there is not, and that leaves only costs.
To better understand the costs associated with this law, we examined what would happen to sales tax collections, Medicaid expenditures and costs associated with extra visits to physicians’ offices by families needing a prescription.
The tax costs to Indiana are pretty small. We estimated a loss of sales tax of up to $1.3 million and higher Medicaid expenditures in the $1.8 million range. The real costs are to households and businesses.
Because obtaining these cold medicines would now require a visit to your doctor and pharmacy, the additional costs to households would range from $16 million to $61 million per year. These are conservative estimates that account for trips to the doctor and pharmacy, out-of-pocket expenses provider payments and higher drug prices for the prescription-only medicines.
Businesses also lose out; with employees missing more work for doctor’s appointments, their costs range from just under $10 million to over $27 million each year.
Fighting meth will be costly, but banning over-the-counter sales of pseudoephedrine hasn’t helped in the places it has been tried. We should expect the same effect here, but at an annual cost of more than $90 million.
It is not all bad news though. Indiana participates in a national registry of these drugs that seems to be interrupting some supply. No matter what we do now, our meth troubles are far from over.
Michael Hicks is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University.