Economic impact of addiction

DEFINITION: The economic impact of addiction is the cost associated with substance abuse and addiction as expressed in US dollars, both in dollars spent (also called direct or resource costs) and in dollars not earned (also called indirect or productivity costs).

Estimates

The first step in estimating the economic impact of addiction is to determine what costs and what addictions will be included in that analysis. The broadest estimate would include all the costs associated with the following:

• medical care (treatment for addiction and treatment for the health consequences of substance abuse, such as cirrhosis of the liver)

• criminal justice (such as enforcement of laws, consequences of property crimes, and costs of incarceration)

• social services (for example, foster care for children of individuals addicted to methamphetamine)

• employee absenteeism and lost productivity (both for substance abusers and their families)

• excess substance abuse-related deaths (such as lost earnings for individuals with addictions who die prematurely)

• substances or behaviors themselves

The key to this process is to separate out the excess, addiction-related costs from the general, population-level, “background” costs. For example, bankruptcy costs for pathological gamblers should take into account the risk of bankruptcy associated with gambling in excess of the general population-level risk of bankruptcy.

To estimate the economic burden of all addictions, costs are calculated for each type of addictive substance or behavior, including tobacco, alcohol, drug, and compulsive gambling. Although many people think only of individuals who use illicit drugs when they discuss the economic costs of addiction, the costs associated with alcohol problems, tobacco use, and other addictive behaviors are also relevant. This article will explicitly state the specific population of individuals or users for each cost estimate wherever possible. Because research on the economic costs associated with food addiction and sex addiction is lacking, potential costs associated with disordered eating and addictive sexual behaviors will not be discussed.

It can be difficult to determine whether costs incurred by a substance user are related to addiction per se. For example, not everyone who has an alcohol-related car accident is necessarily addicted to or dependent on alcohol in a physical sense. However, one definition of substance addiction is the continued use of a substance despite negative consequences. In that respect, some would argue that any cost incurred by a substance user is, therefore, an addiction-related cost.

There are two additional difficulties associated with calculating the costs of addiction. First, many people have multiple addictions. For example, many individuals who compulsively gamble are also likely to abuse alcohol, illicit drugs, or tobacco. Therefore, it may be somewhat misleading to simply sum up the costs associated with each addiction and consider that sum to be the total economic impact of addiction; in reality, the total is likely to be less than the sum of its parts. Second, it is difficult to determine causal relationships between addiction and some of the costs associated with addiction. Do criminals gamble or do individuals who gamble become criminals, or is there a separate causal factor that results in both gambling and crime? In short, it is important to remember that attributing costs to specific pathologies is a complex exercise.

Finally, a true estimate of the economic impact of addiction at the societal level would take into account both the costs of addiction and the economic benefits. From a strictly economic point of view, the money legally spent by individuals addicted to alcohol, tobacco, food, and gambling provides jobs, economic development, tax revenue, and funding for social goods. The central issue is whether the increase in one party’s income is worth the costs to another party. Because such an analysis of addiction in general does not appear to have been conducted, this question is beyond the scope of this article.

An analysis of the economic burden of addiction can be done using a bottom-up or top-down approach. For a bottom-up approach, estimates for all the possible risks for each of the potential consequences and the costs associated with each consequence are calculated at an individual level to arrive at a cost per individual with addiction. Once that cost has been estimated, it is multiplied by the prevalence (percentage of the population with the addiction at a particular time). For the top-down approach, the total amount spent in each category is multiplied by the percentage attributable to people with addictions. For example, if the annual cost of traffic accidents is $164.2 billion, and if an estimated 7 percent of all traffic accidents involve alcohol, then the alcohol-related cost of traffic accidents would be $11.49 billion per year.

Economic Impact on Society

The economic impact of addiction rose sharply in the first decades of the twenty-first century. In the early 2020s, over 100,000 overdose deaths occurred each year in the US, compared to less than 20,000 in the 1990s. Most of these deaths involved illicitly manufactured fentanyl, a deadly synthetic opioid. Synthetic opioid deaths consistently totaled less than 10,000 deaths until 2015, when deaths spiked above 80,000 in five years. Consistent with this trend, drug, alcohol, and illicit substance use increased through the 2010s and 2020s. Studies that provide an estimate of actual monetary cost are sparcely conducted, but research provides data that give perspective to the enormous cost of substance abuse disorder and compulsive addictions.

In 2017, the National Institute on Drug Abuse estimated the total annual cost to the nation of substance abuse to be more than $740 billion. Specific costs include alcohol for $249 billion (2010), illicit drugs for $193 billion (2007), and prescription opioids for $78.5 billion (2013). However, the economic cost of opioid use rapidly inflated with the onset of the opioid epidemic. In 2017, opioid use disorder and fatal overdoses were estimated at $1.02 trillion, and in 2020, at $1.5 trillion. Tobacco use accounted for a $600 billion economic cost in 2018, but research in 2020 estimated the total economic burden at $891.8 billion in 2020, or 4.3 percent of the year's gross domestic product. Secondhand smoke exposure was estimated to cost Americans around $7 billion in lost productivity. These estimates include the costs of crime, lost work productivity, healthcare, and property damage, among other smaller expense categories.

The National Institutes of Health ranks alcohol second, tobacco sixth, and drug use disorders seventh among estimated costs of illness for thirty-three diseases and conditions. Even though fewer people die from alcohol-related causes than from tobacco-related causes, alcohol-related costs are higher because alcohol-related deaths tend to occur at younger ages than smoking-related deaths. The combined total of approximately $511 billion per year for alcohol, tobacco, and other drugs overshadows the annual cost of the most costly illness, cardiovascular disease.

Abuse of alcohol and other drugs is associated with an increased risk for numerous adverse outcomes, including premature deaths, hospitalizations, and incarceration. In 2000, it was estimated that tobacco was the number one actual cause of death (435,000 persons, or 18.5 percent of all deaths), alcohol consumption was third (85,000 deaths, or 3.5 percent), and illicit drug use was ninth (17,000 deaths, or 0.7 percent). According to another source, 38,396 persons died from substance abuse (excluding accidents, homicides, and infant mortality) in 2006, marking a death rate of 12.8 per 100,000. By the 2020s, tobacco remained the primary cause of preventable death in the US, with over 480,000 deaths annually. Over 40,000 of these deaths were among adults who did not smoke but were negatively impacted by secondhand smoke. Also included in this number are around 400 infants who die from smoke inhalation each year.

In 2002, there were 670,307 emergency room visits for causes directly related to illicit drugs, with an additional 1.2 million emergency room visits in which an illegal drug was implicated in the reason for the visit. In 2008, there were 971,914 emergency department visits involving nonmedical use of pharmaceutical drugs. By the 2020s, over 630,000 emergency room visits each year were alcohol-related, accounting for nearly 40 percent of all drug and alcohol-related emergency room visits. Opioids accounted for around 14 percent of drug-related emergency room visits, while others included methamphetamine 11 percent, marijuana 10 percent, and cocaine 5 percent.

Among incarcerated individuals in the 2020s, nearly 50 percent admit to using drugs, and over 20 percent admit they were using a drug at the time of their offense. Over 25 percent of all arrests in the US are for drug-related violations, and many incarcerated individuals have a drug offense as their most serious offense.

Economic analyses for substance abuse treatment and prevention programs have been produced by many local, state, and federal entities, often because of requirements that budgets be justified in terms of return on investment and cost-benefit ratio. Many substance abuse prevention programs exist, but not all have been proven effective. A longitudinal study from 2011 to 2019 found that American youth increasingly attended fewer school and community-based substance use prevention programs, particularly those who belong to traditionally marginalized minority groups.

The economic cost of gambling addiction has been estimated to be between $32 to $54 billion per year. These costs are attributable to job losses, unemployment insurance, welfare benefits, bankruptcy, divorce, physical and mental health, arrests, and incarceration. This figure does not include the actual monies spent on gambling activities. The total also does not include lost productivity costs, although surveys suggest that more than two-thirds of gamblers have missed work to gamble. Criminal activities committed by individuals with an addiction to gambling are also not included, and these activities may be substantial. For example, one survey of four hundred Gamblers Anonymous members found that 57 percent admitted to stealing to finance their gambling, with an average theft of $135,000 and a total theft of $30 million among the respondents.

Trends

From 1992 to 2002, according to the Office of National Drug Control Policy (ONDCP), the costs associated with illicit drug abuse increased from $107.5 to $180.8 billion—an average of 5.3 percent per year. During the same period, the size of the adult population and consumer prices (inflation) increased by 3.5 percent, so the costs associated with drug abuse increased more than would be expected. Components of the costs associated with illicit drug abuse that are readily available from year to year include the amount spent on treatment and the federal drug-control budget. Both of these components continue to increase every year. From 1986 to 2005, spending on substance abuse treatment grew by about 4.8 percent annually, compared with 6.9 percent annual growth in mental health spending and 7.9 percent annual growth in overall health spending. However, beginning in the early 2010s, federal spending on drug control increased drastically and the budget continued to increase throughout the twenty-first century14.8 billion in 2010, $25.9 billion in 2015, $39.7 billion in 2020, and $46.1 billion in 2024. These increases coincide with the American opioid crisis.

Individual users spent an estimated $64 billion to purchase illicit drugs in 2000. This amount is a substantial reduction from $154 billion, the amount spent in 1988. The majority of the decline is related to declines in the amount spent on cocaine, which dropped from $107 billion in 1988 to $35 billion in 2001. In 1988, users in the United States consumed 660 metric tons of cocaine, compared with 259 metric tons in 2000 and 145 metric tons in 2010. However, by the 2020s, Americans were spending over $150 billion annually on illicit substances. This trend continued, and the cost of illegal drugs continued to increase with the cost of prescription drugs. Though prices depend on the person and their location, illicitly purchased prescription medications like Oxycodone (15mg) averaged around $20 per pill and Fentanyl patches (25mcg/hr) around $40 per patch in the 2020s. Individuals with an addiction to opioids, heroin,cocaine, marijuana, or many other drugs may spend hundreds of dollars each day to support the physical dependence their substance use disorder created.

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