Monitoring and Pricing of Illicit Drugs
Published in October 2022
In tackling illicit drug trafficking and related activities, one of the main challenges experienced by authorities and policymakers in different countries lies in generating strategies and actions that impact illicit drug markets in their territories — which are increasingly globalized, heterogeneous and diverse. The illicit drug markets in the world are constantly changing, as dynamic actors, both international and local (criminal organizations, drug traffickers, illegal armed groups, among others), generate alternative strategies in order to guarantee sustainability and the clandestineness of their operations in the territories where they are established.
In a territory affected by the production, trafficking, commercialization and consumption of illicit drugs, monitoring the behavior of prices in this market, the actors involved and their contexts is relevant as it contributes to a better understanding of the drug phenomenon in a given region, and can provide data for early warning systems about changes in criminal dynamics.
In the medium term, the availability of a price database facilitates assessment of trends, cycles and behavior by area. Furthermore, it provides clues about the dimensions of the drug market at different stages of its production and distribution chain, such as the increase in the production of raw materials and narcotics and the analysis of profitability at different stages of the market structure.
However, the complexity of the global illicit drug market makes estimating its size considerably difficult, not because the drug market does not behave like most others in terms of supply and demand, but because the most basic data required for such an estimate (such as data on production, prices, exported, imported and consumed quantities) are not available in a systematic way and are often estimates based on scarce or underrepresentative data (UNITED NATIONS OFFICE ON DRUGS AND CRIME, 2005).
Illegal markets are, above all, markets, that is, they operate with characteristics similar to other legal goods. Like any product, drugs have a group of consumers, and it is important to promote studies on their effects on the market in general, their variables and the public policies implemented to deal with them.
In this context, price data is configured into an indicator that allows understanding how price affects illicit markets, and how disruptions in supply affect the price and purity of drugs, as well as helping to integrate other drug-related measures in the search for a more comprehensive or systemic understanding of the problem (CAULKINS, 2007).
In the United States, the main official sources of data on illicit drug pricing are collected by the Drug Enforcement Administration (DEA)¹, including: the Drug Evidence Data Retrieval System (STRIDE), the Wholesale and Retail Illicit Drug Prices Report, and the Illicit Drug Pricing and Purity Reports (IDPPR).
STRIDE is a drug seizure database, sourced from federal, state and local public safety institutions, established to ensure that such data are readily available to researchers and policymakers to inform decisions and problem solving. on the availability of illicit drugs (GOVERNMENT OF CANADA, 2017).
In turn, the Wholesale and Retail Prices of Illicit Drugs Report and the IDPPR obtain data on prices and purity from records of undercover purchases and subsequent laboratory analysis. In this regard, several researchers have found a strong correlation in drug prices obtained from official data, between the IDPPR and STRIDE datasets. The level of detail incorporated into these datasets has been critical to analyzing price variation in illicit drug markets.
In Canada, the Royal Canadian Mounted Police (RCMP)² has made efforts to collect national data on drug prices through initiatives such as the “Illicit Drug Price List”. However, publicly available data is much broader in scope, resulting in the publication of summary macro-level statistics rather than the micro-level data needed to measure regional price variations (GOVERNMENT OF CANADA, 2017).
Other initiatives to study illicit drug prices around the world include Australia's Illicit Drug Information System (IDRS) and New Zealand's National Drug Survey. IDRS, administered by Australia's National Drug and Alcohol Research Center, aims to monitor patterns of drug price, purity and availability to identify trends in Australia's illicit drug markets. The initiative triangulates data collected from: 1) annual surveys of intravenous drug users — including questions about the purchase price of drugs over the past six months; 2) interviews with professionals who have regular contact with people in the illicit drug market; and 3) official and self-report data, including data on drug seizures and national household drug use surveys (GOVERNMENT OF CANADA, 2017).
Other more focused efforts to obtain data on drug transactions include convenience sampling via online surveys such as the Global Drug Survey (GDS). GDS is an independent research firm based in London, England that produces reports for various organizations. The GDS is an anonymous online survey promoted through media sources and developed annually. In 2014 and 2015, the GDS reported having received more than 100.000 responses (GOVERNMENT OF CANADA, 2017).
Likewise, the European Monitoring Center for Drugs and Drug Addiction (EMCDDA)³ regularly produces estimates on the size of the European Union (EU) retail drug market for cannabis, heroin, cocaine, amphetamines and ecstasy, using a demand-driven approach that, despite existing limitations, has proven to be a valuable process in helping consumers policymakers to prioritize interventions and understand changes in the illicit drug market over time (EUROPEAN MONITORING CENTER FOR DRUGS AND DRUG ADDICTION, 2018).
Over the past few decades, several efforts have been made to measure the value of illicit drug markets, including the Financial Task Force International (FATF) and the United Nations (UN). The FATF estimated that in the late 1980s, sales of cocaine, heroin and cannabis amounted to about $124 billion a year in the United States and Europe—of which about $85 billion, or 70% of the total. , would be available for money laundering and investment. Taking inflation into account, the FATF estimate of the size of the illicit drug industry in the late 1980s would be equivalent, in mid-2005, to about $200 million (UNITED NATIONS OFFICE ON DRUGS AND CRIME, 2005).
Other attempts to estimate the total value of money hidden through money laundering annually (from criminal activities) were initiated by the FATF in the late 1990s, as part of a broader work. It was decided to start this exercise by examining the illicit drug market and several meetings were held with experts from various international, national and regional organizations to discuss the topic.
Due to limitations in the data, as well as deficiencies and contradictions in some of the information studied, experts were unable to agree on the most appropriate methodological approach for measuring the illicit drug market. The basic question was whether a top-down approach (starting from global production estimates) or a bottom-up approach (starting from national estimates based on prevalence rates and estimates of expenditure per drug user, later aggregated) offered a better chance of arriving at an estimate realistic view of the total value of the drug market. Finally, it was recommended that countries be encouraged to improve their drug data collection systems and to estimate the drug market at the national level (UNITED NATIONS OFFICE ON DRUGS AND CRIME, 2005).
So far, only a limited number of national estimates of the value of the illicit drug market are available, which would be insufficient to generate global estimates. However, some countries have been improving their criminal statistics and public security systems, including the price index as an indicator, as is the case of Colombia, where UNODC has worked with national institutions, with the objective of obtaining a reliable parameter. the magnitude of the market value and stimulate further research on the subject.
Following this line, due to the need to obtain information related to the prices of illicit drugs, in Colombia, for example, since the mid-1990s, this type of information has been collected. Pricing strategies for illicit drugs at specific points in the national territory under the leadership of SIMCI/UNODC, the Anti-narcotics Directorate (DIRAN), the Ministry of Justice and Law and in partnership with entities such as the National Narcotic Drugs Directorate, the Investigation Directorate Criminal, the INTERPOL of the National Police; and institutions and plans that at the time contributed to the exercise, such as the National Plan for Alternative Development, the Special Administrative Unit for Territorial Consolidation, the Presidency of the Republic, the DEA, among other institutions.
In this way, data on prices of illicit drugs have been collected in areas of cultivation, as well as in places of influence of production and commercialization, after the collaborative work developed by officials of these institutions. Within the scope of this strategic and cooperation alliance, information was collected for the pricing of illicit drugs until 2018. Currently, the design and implementation of the illicit drug pricing methodology is in the process of being improved, taking into account the lessons learned so far. moment, the needs in the generation of information related to the contexts of the markets and the challenges in the development of these studies.
Illicit Drug Pricing Stages
United Nations Office on Drugs and Crime – Colombia
The first step in the illicit drug pricing process is data collection. From the identification of the products that are commercialized in the market, based on the delimitation of the areas in which the raw material markets, wholesale and consumer, are active, price collections are carried out.
In the second stage, called consolidation, the different records of illicit drug prices in each of the regions under study are obtained from different sources and grouped by type of product and measurement unit. The result in this phase is the integration and standardization of the various records in a single database.
In the third stage, called data review, validation and criticism, statistical analyzes of the consolidated database are performed, according to criteria such as: a) corroboration that each record is unique; b) each record must be completed in its agreed minimum conditions, such as month, measurement unit and specific area; c) standardization of information for each product (measurement unit, variable names); d) identification of atypical data (comparison with historical records from the same area).
The fourth stage is called analysis and disclosure, generated from the final consolidation of the database. In this step, the monthly price of the product is estimated by region. After the above, the analysis of the historical behavior and the crossing of context information is carried out, including the identification of trends. Finally, the results obtained are published in the UNODC Monitoring Report on the territories affected by Illicit Crops, in the Colombian Drug Observatory and in the technical documents generated by the International Center for Strategic Studies against Drug Trafficking (CIENA), of the Antinarcotics Directorate – National Police from Colombia.
Figure 10 - Illicit drug pricing stages
Source: UNITED NATIONS OFFICE ON DRUGS AND CRIME. Integrated Illicit Crop Monitoring System. Colombian experiences in monitoring the prices of illicit drugs. UNODC: 2021.
It was possible to observe the experience of some countries in the implementation of strategies for the pricing of illicit drugs and how this variable can help in the monitoring of illicit markets. However, there are still few countries that have managed to establish a consolidated system of data and statistics on the subject, and it is important to emphasize that, not only for drug pricing, the challenges of developing and systematizing criminal and public security statistics are diverse. globally.
Furthermore, it is pertinent to mention that, to date, there are different statistical techniques and econometric models that contribute to the construction of comprehensive analyzes and facilitate the understanding of changes in the dynamics of illicit drug prices. As illegal markets, drug prices vary widely and are difficult to validate. The biggest obstacle to determining the true value of substances, however, is that most prices in circulation are not easily “quality-adjusted”. This means that a gram of retail cocaine can vary if it is 90%, 60% or 30% pure or if the concentration of THC in a gram of marijuana is significant or very low (BERGMAN, 2018).
Additionally, prices generally show a great disparity between different geographic regions, so market prices should be considered indicative, as they are derived from surveys whose data may originate from different sources of information. As these are illegal products, it is more complicated to homogenize criteria and standards for data collection between the different regions and institutions involved. For example, in map 4, it can be seen that there is considerably greater variation in the price of 1 kg of cocaine between producing countries, the US and some countries in Europe, Africa and Asia. The further the producing countries are from the consumers, the more expensive the price will be; thus, drug prices and their variations help to understand this global chain, but also provide relevant regional and local subsidies for the analysis and formulation of strategies to face the illicit drug market.
Examples of variations in the price of 1 kg of cocaine
Prepared by: CdE – Center of Excellence for Reducing the Supply of Illicit Drugs.
Source: Data – UNODC (2021). Cocaine price estimates for 2018.
Finally, pricing of illicit drugs aims to consolidate objective, periodic and comparable information from different regions of the country related to illicit drug prices, which contributes as an input, integrating other variables related to the analysis of changes in the conditions of illicit markets.
On the supply side, the price depends on the intensity of the repression exercised by the security agencies, the purity of the drugs, the availability translated into production, supplies, traffickers' access to distribution and marketing networks, and the infrastructure/logistics, such as transport routes. This is how prices are configured in an indicator that allows determining, among other variables, the possible efficiency or level of impact of actions and strategies implemented by governments in the fight against illicit drugs and related activities.
The implementation of illicit drug pricing strategies can become a decisive tool for the systematic analysis of the different stages of the drug trafficking production chain. To strengthen this purpose, it is essential to activate information collection strategies at points associated with the main areas of trafficking and consumption of narcotic substances, which allow the generation of monitoring tools on changes in market conditions in different regions of the country, which will allow analysts a better understanding of the spatial dynamics of the drug phenomenon in a given region.
In addition, this information can feed national information systems, such as the National Public Security Information System (SINESP) in Brazil, since there are still no consolidated strategies in this aspect in the country, and contribute with the indicators of each state, for the planning of the state police, or in order to be used to guide actions and decisions of the Federal Government, as well as by the academy for its analysis.
Information on the prices of illicit drugs contributes to the elaboration of analyzes aimed at reducing the supply of drugs, which is one of the main axes of the National Policy on drugs established by Decree n. 9.761/2019, as well as the contributions of Brazil as a member state of the United Nations, by providing information of relevance to the UNODC World Report on Drugs, among other national and international reports that contribute to the understanding of the illicit drug problem and activities related in Brazil.
- The DEA, created in 1973, is the federal agency in charge of the supervision of psychoactive substances in the United States, and is a specialist in the subject. Available at: https://www.dea.gov/who-we-are. Accessed on: 21 Nov. 2021.
- The Royal Canadian Mounted Police (RCMP) is Canada's national police service, which has been part of the country's structure since 1873. Available at: https://www.rcmp-grc.gc.ca/en/about-rcmp. Accessed on: 17 Nov. 2021.
- The EMCDDA, created in 1993, is one of the European Union's decentralized agencies. Its main objective is to provide the EU and its Member States with data and information on European problems related to illicit drugs that can support public managers, researchers and professionals who deal with the subject to formulate evidence-based laws and intervention strategies. Available at: https://www.emcdda.europa.eu/about-EN. Accessed on: 17 Nov. 2021.
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