“War on Drugs Moves to Pharmacy from Jungle” Essay
This news piece posted by Reuters on June 16, 2012 provides an interesting case for game theory analysis. The story depicts the ever-increasing legitimate demand for pain-killers versus the supply of painkillers for illegitimate/ illegal usage. Statistics collected between 1999 and 2009 indicate that deaths resulting from the usage of narcotic painkillers have quadrupled; a fact that has triggered the Drug Enforcement Agency (D.E.A) to enact measures that combat the usage of these pills.
The fact that most users start using pills casually as a harmless pain deterrent (as evidenced by Pamela Storozuk who started using these painkillers in order to be in a position to attend to her husband then developed an addiction) presents a fertile ground for the analysis of this case scenario using a theoretical game analysis technique. There are two fundamental aspects that this analysis will fiddle with: The fact that users and well-meaning physicians are not aware of the danger posed by continuous usage of these drugs or prescription habits respectively and the urgency with which the D.E.A needed to crack down and minimize resultant usage of prescription drugs. The D.E.A has been under immense pressure from the congress in an effort seen as ensuring that the D.E.A is in a position to ‘contain the problem.’ Thus, some of the measures adopted may result in rapid results that may restrict the access to the much-needed prescription drugs for a legitimate user.
In this game theory analysis, there are two key players: The Drug Enforcement Agency and the pharmaceutical supply chains such as painkillers dispensing clinics, internet pharmacies and over-the-counter points of sales. Specific stores and pharmaceutical companies named in this analysis are the Cardinal Health Inc., CVS Pharmacies and Walgreen Co drugstores. The D.E.A has two options when dealing with presumably rogue pharmaceutical companies and supply chains:
Option A: The usage of ‘wire taps, undercover operations and informants.’
Option B: Require pharmaceutical companies ‘to maintain certain record-keeping and security protocols to prevent drug diversion.’
Option A has been regarded as relatively successful in dismantling the supply of prescription pills to the black market. ‘Rogue pill mills’ have been discovered and dismantled as well as internet pharmacies that were previously unmonitored. However, these methods are costly and time consuming; factors that have not gone down well with the increasingly ‘impatient’ Congress who demand rapid results. As stated in the article, ‘A report last year from the nonpartisan Government Accountability Office said the DEA had not shown its strategy was working and called for clearer performance measures.’ In addition, the D.E.A has come under sharp criticism for the usage of these techniques in investigating pharmaceutical companies and prescription drugs wholesalers.
Option B has been used regularly in assessing prescription drug wholesalers. Breaches of the stipulated rules has resulted in these companies being levied millions of shillings, a factor that has instilled fear and caution when selling or shipping controlled substances.
In this analysis, there are two scenarios that emerge:
Scenario 1: The dispensing physicians had the best of intentions when dispensing the drugs and were not aware of ‘the consequences of their prescribing habits.’ This claim has been supported by Robert Stutman, a former D.E.A agent.
Scenario 2: The dispensing physicians were well-averse with the intentions and purposes for which the prescription drugs are to be used. As Leonhart states, the dispensing physician ‘understands the problem.’
Therefore, the prescription company/ supplier has two options when under investigation: deny (‘D’) or confess (‘C’) to having prescribed the drugs knowingly. Thus, this leads us to a consequential case analysis whereby the pharmaceutical company/wholesaler ‘actually’ supplied these drugs knowingly and thus contravened the law and thus liable to prosecution and asset seizures or the company supplied these drugs to people who were in ‘real’ need and thus not liable to any further investigation/ pursuance by the D.E.A.
Analyzing Scenario 1:
I shall assume that the D.E.A’s main intention is to prosecute all firms under investigation and that the dispensing physicians issued the drugs with the best of intentions. Additionally, I shall assume that the D.E.A values a speedy confession over and above any other measures and that option B leads to a speedy confession. Nonetheless, I shall assume that the D.E.A prefers option A to option B due to the fact that option A presents the D.E.A with credible information that can be used to successfully prosecute a pharmaceutical company in a court of law. On the other hand, if the D.E.A chooses to pursue a company using option A, there is a potential risk that there won’t be sufficient evidence to coerce a confession from the pharmaceutical company/wholesaler under investigation.
Thus:
The utility function U(.) of a confession given option A is greater than the utility function of a confession given option B. This can be represented as:
U( A, C)> U(B)> U( A, D)
For a pharmaceutical company, I shall assume that the company prefers a denial rather that a confession given that it’s company image is at stake and that the company prefers option B rather than option A whereby the company is aware of the extent of information/damage that has been revealed/ caused respectively. Thus:
U(D, B)> U(C, B) >U(A)
To obtain the discount value ɸ:
For a finite series:
U(B)> U(C)
1>3ɸ and thus ɸ<1/3 (see fig.2)
For a real life case scenario, as is the case with a recursive investigation i.e. if the D.E.A was to prefer investigating a firm severally after it had been found not guilty, the discount value would be calculated as follows:
1>3/ 1- ɸ; where β = 3
Hence: ɸ<2/3
U(B)> β (1/1-ɸ)
Thus
U(B)> β (1/1-ɸ)
Thus
U(B)> 3/1-ɸ
Analyzing Scenario 2: In this scenario, the prescribed drugs are distributed knowingly. In this instance, I shall assume that the D.E.A prefers option A rather than B and that ɸ <1/3 holds:
Thus
U(B)> 3/1-ɸ, where ɸ= 2/3
Hence,
U(B)> 3/(1-2/3)
Implying U(B)> 9
 
Therefore, there is a probability p= 2/3 that the pharmaceutical companies will confess to having knowingly sold the prescription drugs if investigated using option A.

Works Cited

Clarke, Toni. “War on Drugs Moves to Pharmacy from Jungle.” 16 June 2012. New York Times. 19 November 2012 <http://www.reuters.com/article/2012/06/16/us-dea-prescription-drugs-idUSBRE85F09220120616>.
 

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