The global economics behind America's fentanyl problem

Fentanyl is cheaper and easier to transport than heroin. So why isn't it everywhere?
The global economics behind America's fentanyl problem
Photo: Don Emmert (Getty Images)
We may earn a commission from links on this page.

Illegal fentanyl seems to be everywhere in the US. Synthetic opioids (largely fentanyl) were linked to more than 70,000 drug overdose deaths in the US in 2021, up from fewer than 58,000 the year before, and now account for nearly two-thirds of the country’s overdose deaths.

Not only is the potent narcotic a growing percentage of opioids sold on the illegal market, it’s increasingly found contaminating all sorts of other drugs. Fentanyl-laced cocaine and methamphetamine, for instance, account for at least 50% of the rising number of stimulants overdoses. And counterfeit medications sold illegally—from anxiety drugs such as Xanax, to opioids such as oxycodone, to stimulants like Adderall—are at times laced, if not outright replaced, with fentanyl disguised as prescription pills.

And though the laws of economics suggest prices should rise as both demand and hurdles to supply increase, fentanyl is cheaper than it’s ever been.

In much of the world, fentanyl is hardly an issue, and yet in the the US its ubiquity is growing despite the known dangers. An analysis of DEA data on nearly 67,000 illegal opioid seizures or undercover buys found that in 2013, 99% of the illegal opioid market was for pure heroin, and 1% was fentanyl. In 2021, only 23% was heroin, while 52% was fentanyl and 16% a mix.

Fentanyl is 30 to 50 times more powerful than heroin, and up to 100 times more than morphine. This means a very small amount of fentanyl can be more quickly addictive, and deadlier, than the same amount of heroin.

According to the US Drug Enforcement Administration (DEA), 42% of drugs seized from the illicit market that were tested for fentanyl contained at least 2 mg of it, or a quantity sufficient to cause an overdose.

This doesn’t seem to be a great business strategy for dealers: Fentanyl overdoses routinely kill their customers. So how did fentanyl become ubiquitous in the US, and why?

In short, a phasing out of prescription opioids and Colombia’s shift away from the heroin trade left a hole in the US market that other heroin sources could not fill. This paved the way for fentanyl—straight from China at first, and then from Mexico.

The economics of the fentanyl supply chain

Fentanyl is a synthetic drug, which means that unlike heroin or cocaine, it can be made in a lab without the need of raw ingredients derived from plants such as poppy or coca. Instead it’s made with a compound called NPP (N-phenethyl-4-piperidone) and a combination of other chemicals, and is sold as a powder or in pills.

It’s cheap to make—with returns in the order of 1,000 times the investment—although that is arguably not its most treasured feature. What makes it so appealing are its potency and compactness and ease of manufacturing, all of which make it easier for suppliers to bypass law enforcement crackdowns on illegal substances.

“The current fentanyl situation is really a product of misguided drug policy and its enforcement,” says Leo Beletsky, a professor of law and health sciences at Northeastern University in Boston.

“The market has shifted towards fentanyl very rapidly as a result of numerous factors, but one of the top [ones] is pressure exerted by law enforcement all along the production chain—so the planting, harvesting, processing, and transport of heroin,” he says. This pushed drug traffickers to shift to a more compact and less detectable supply option.

How fentanyl gets produced

Fentanyl production can be distributed, and typically occurs in three steps. First comes the manufacturing of the active pharmaceutical ingredients, which are overwhelmingly made in China.

Then there is the synthesis. That, too, used to happen in China, though recent crackdowns on fentanyl production, as well as covid-related supply chain disruptions, have shifted it to other countries, notably Mexico.

Finally, the drug is cut for consumption. This tends to happen as close as possible to the point of final sale.

The entire process proved more resilient to pandemic disruptions than the heroin supply chain was—and fentanyl was able to fulfill the increased demand for opioids generated by the isolation and stresses brought on by covid.

In many other countries where heroin is a problem, fentanyl isn’t an issue

So fentanyl is cheaper, easier to make, and harder to bust than heroin. This would seem sufficient to explain its overtaking of the illegal opioid market, if it weren’t for one question: Why is it that other parts of the world—such as Australia, or European countries—don’t see nearly as big a presence of fentanyl, and continue having a supply of heroin?

“The truth is, nobody really knows why fentanyl hit where it hit, and nobody really knows why it is replacing heroin,” says Daniel Ciccarone, a professor of family and community medicine at the University of California, San Francisco. “The best guess is that it’s not subject to the same negative interdiction aspects of supply that poppy would be. [The US has] been on a multi-decade, multi-generational fight to stop opium, and it has been partly successful,” he says.

Yet this alone wouldn’t explain the sudden, dramatic uptake of fentanyl. Nor would price. While data on drug prices is shared only sparingly by the DEA, the information available suggests that a major strategy of the war on drugs—to make drugs more expensive by destroying the supply—didn’t work. “For the last 25 years, most of the major categories of drugs have gotten nothing but cheaper and better,” says Ciccarone.

So while fentanyl can be as cheap as a sixth of the price of heroin, heroin is less expensive than it’s ever been, and likely would have more users if it were easier to find on the market.

Ciccarone suggests looking at two other factors that propelled the success of fentanyl in the US. The first is a shift in the heroin supply.

From Afghanistan to Colombia to Mexico

Up until the early 2010s, the majority of heroin sold in the US came from Colombia, which since the 1990s had been an ideal base for the trade: It could grow opium, it had an established illegal drug system developed for cocaine, and it had large portions of land outside any government or legal control.

The growth of Colombia’s heroin production was, too, somewhat triggered by international law enforcement’s intense focus on the decapitation of Pablo Escobar’s Medellin cartel, which in turn put intense pressure on the cocaine trade. This made heroin a relatively safer business, and the quality of the product allowed it to easily replace Afghan heroin, which previously dominated the trade.

As Colombia moved toward economic growth and democratic stabilization, it pulled away from the heroin market, essentially handing it over to Mexico’s cartels, the second largest supplier until then. This handover happened in the late 2000s and early 2010s, based on evidence collected by the DEA, which began seizing Mexican-made heroin that mimicked the recipe of Colombian heroin.

But Mexican producers—which by 2014 supplied an estimated 80% of the heroin in the US—didn’t have the capacity to keep up with demand, which was growing exponentially. Around the same time, the US began putting into focus the issue of opioid overprescription, and pushing for a reduction in the use of opioid pain medications. Doctors reined in their prescribing of opioids, but many patients in need of addiction treatment didn’t or couldn’t access the right resources, and ended up finding their way to illegal market instead.

This led to a dramatic increase of heroin and illegal opioid users. According to RAND, a think tank leader in drug-use policy analysis, the number of chronic heroin users in the US went up 40% between 2006 and 2016, to roughly 2.3 million people.

Fentanyl only began taking hold as heroin—which many users would have preferred—became harder to find. “You can find 40 songs written about heroin,” Ciccarone says. “How many songs are there about fentanyl at this point? None that I’m aware of. It hasn’t captured the public imagination or the artist’s imagination, because it’s not a fun drug.”

But with the supply of Mexican heroin too small to satisfy demand, for most users in the US, it’s fentanyl or nothing. That’s not the case elsewhere in the world, however, where supplies of heroin continue to come from Afghanistan and southwest Asia.

Why are other drugs getting contaminated with fentanyl?

The market is so flush with fentanyl, it seems, that the drug is getting even where it shouldn’t be. It’s unclear whether fentanyl contamination of other drugs is a misguided strategy of suppliers or merely accidental, but many experts suspect it’s the latter, given the propensity of people to overdose or die from even small amounts of fentanyl, particularly if they haven’t developed a tolerance for it.

“The current thinking among policy folks like myself is that it’s mostly cross-contamination because of sloppy practices,” says Northeastern’s Beletsky. “Some dealers may be trying to spike their supply with fentanyl to give it more kick. But it’s quite unlikely because, you know, their consumer base is not prepared for it.”

Because fentanyl gets cut very close to where it’s sold, it might end mixed with other drugs by accident. There are a lot of small dealers who might not be careful enough in cleaning the tools they use, or the area where they work, for example.

“My guess is that there’s always been a lot of cross contamination in the body. It’s just that we haven’t noticed it because microscopic amounts of heroin and cocaine [are] not going to make people have an overdose,” Beletsky says.

The likelihood of sloppy practices, says Ciccarone, is also higher now because dealers in the past tended to carry only one type of drug, whereas now they typically handle different types at the same time.

Moreover, the tight control that some large cartels used to exercise on the distribution routes—down to the local dealer—has all but disappeared with the dismantling of larger cartels. There are more small producers and traffickers now, each behaving differently, without accountability to a larger organization invested in maintaining a good reputation with customers, if not law enforcement.

How often are other drugs laced with fentanyl?

It’s hard to tell how big a problem fentanyl-laced drugs—beyond heroin, which is often contaminated—actually are. The DEA doesn’t share whatever data it has on the issue, so all we know about it is more or less left to anecdotal reporting.

“Most of the stories have been aggrandized along the way,” says Ciccarone, who has been analyzing data on cross-contamination.

“The percentage of cocaine that’s contaminated with fentanyl is growing over time. It should be of some concern,” he says. “[But] if you then look at methamphetamine, it’s very low, and with cannabis it’s zero. So my guess is, to the degree that it’s happening, it’s not happening on purpose, it’s happening accidentally,” he says.

That may be of little comfort to users or their loved ones, though it would at least explain why the distribution of fentanyl has expanded beyond the explicit demand for it.

Whether accidental or intentional, fentanyl use is now an epidemic in the US, an unintended consequence of the law-enforcement approach to opioids.