THE supply and demand of illegal drugs are not the sole factors in determining the price of illegal drugs, according to the Philippine Drug Enforcement Agency (PDEA).
“As a general rule, the price structure of illegal drugs in the streets rests on their availability and demand. As the market price of illegal drugs increase, it can be expected that there is scarcity in supply, and vice-versa,” said PDEA Director General Undersecretary Wilkins M Villanueva.
“However, the illegal drug trade seemingly bends that law due to several factors influencing the end price of illegal drugs. It is a common assumption that when authorities seize a large volume of illegal drugs, the street price will likewise increase due to the constricted supply. This is not necessarily the case.” Villanueva added.
The following factors may dictate the actual street price of illegal drugs: highly regulated commodity; distribution costs; competition among local players; hoarding of supplies by some players to control the price; alteration of quality, to maximize profit; and higher barrier of entry for new players.
Dangerous drugs are classified as prohibited commodities and as such, carry expensive price tags. The reasons for their high mark-up prices are because they are high in demand and are difficult to obtain.
According to the investigation, distribution costs of various chain of expenses on the part of supplier and distributor of illegal drugs for their product to reach the consumers, include bribes, packaging, transportation costs, manpower costs, among others. These costs have a direct impact on the street price of drugs causing it to be higher.
Local drug syndicates compete in the same niche to earn and keep customers, generate revenues and gain more market share. While their rivalry promotes competitive pricing affecting the illicit drug trade adversely, they limit the competition among themselves todiscourage the entry of new players. They also resort to hoarding a sizable supply of drugs with the intent to inflate the market price.
The intensified anti-drug campaign has dwindled the supply of methamphetamine hydrochloride, or shabu, in the market, forcing local drug syndicates to dispense either low-quality, adulterated or fake shabu to their suppliers, distributors and pushers – searching for ways to reduce costs while increasing profitability.
The price structure of shabu varies depending on the area or place of transaction, payments, and on the quality/purity of the substance. Its current street price in the local market ranges from P6,000 to ?8,000 per gram.
On the other hand, the prices of marijuana and ecstasy vary from P150 to ?500 per gram, and ?1,800 to ?5,000,
respectively.
Illegal drugs are considered as inelastic goods. The reason is that, not all consume illegal drugs, therefore will not translate to more users, but increase in the quality of drugs they can afford.
In economic perspective, if there is an abundance in supply, it will not immediately translate to increased demand or lesser price. However, in the long run, the increase in supply will increase the number of users because of its prolonged availability in the streets, but not drastically.
In order to solve the country’s drug problem, it must be done holistically through enforcement (suppress the supply and arrest traffickers), rehabilitate users and reform offenders.
“It is evident that the drug price should not be the exclusive basis in assessing the status of the local drug trade but it remains an integral aspect of the drug situation,” the PDEA chief said. (VICTOR BALDEMOR)
