Opium Price Shocks and Prescription Opioids in the USA*

We investigate the effect of international opium price shocks on the per capita dispensation of prescription opioids in the USA. Using quarterly county‐level data for 2002q4–2016q4, three main results emerge. First, reductions in opium prices significantly increase the quantity of opioids prescribed, and more so in counties with a larger pre‐existing market for pain relief, as captured by the incidence of mining sites. Second, the increase involves only natural and semi‐synthetic, but not fully‐synthetic, opioids, suggesting that the effect is moderated by the amount of raw material contained in the products. The impact is larger prior to 2010, when overdose deaths were more related to the use of legally prescribed opioids. Third, advertising expenses, stock prices and the profits of opioid producers increase following negative opium price shocks, suggesting an important role of supply‐side economic incentives.