Mexican drug lord "El Chapo" made the Forbes list of billionaires earlier this year. No, you can't make this stuff up: He runs the Sinaloa cartel, a major supplier of cocaine to the United States. He's an assassin, another bin Laden ... and Forbes honors him right up there with the world billionaires.
But that got me thinking: In legitimizing "El Chapo" isn't Forbes edging us toward decriminalizing all illegal drugs? Farfetched? Or maybe signaling a fundamental shift in America's attitude toward illegal drugs?
Suppose I were back at Morgan Stanley, asked to write a securities report for America's health-care industry, on Big Pharma? Review competition, market share, new profit opportunities when decriminalization of marijuana expands to other illegal drugs like cocaine and heroin, a megabuck market.
Yes, I said "when." Eventually it could happen. Think of states like California. They're facing a $42 billion deficit. They see their $14 billion marijuana crop as a new source of tax revenue. Legalize it. Tax it.
Psychologist Anne Wilson Schaef saw the trend coming a couple decades ago: We're a "Nation of addicts ... our society is deteriorating at an alarming rate." Why? We refuse to face the real problem: Demand. Legalizing it will.
Till then we're losing the war. In a "nation of addicts" it doesn't matter if drugs are legal or not ... where the drugs come from ... who gets hurt ... nor if we have to waste hundreds of billions fighting ineffective wars to protect suppliers ... a corrupt Afghan government, the source of 95% of the world's heroin ... or Mexico, the main traffic route for wholesalers feeding America's addicts ... or Big Pharma the biggest pusher for prescription drug addicts. When a "nation of addicts" needs a fix, they always find it.
New, bigger profits if Big Pharma expands into illicit drugs?
There's so much money being made in illegal drugs that the legalization of pot really is a sign of what's ahead. More drugs will be legalized and controlled. Big Pharma will want in on the action. Why not? They're public companies: They must satisfy stockholders with new products, new markets, higher earnings and stock prices. Big Pharma's strategy is clear, they have more salesmen than scientists developing new drugs, and their efforts to kill health-care reform speaks volumes. So why not legalize all drugs, for new profits?
Seriously, drugs are a megabusiness. America spends about $2.5 trillion on health care annually -- including $315 billion in Big Pharma revenues last year. They must be secretly exploring the untapped market in illicit drug traffic that siphons off an estimated $400 billion annually -- plus keep in mind another $175 billion on alcohol addiction.
If Big Pharma can capture part of the market share that's now going to competing Mexican and Afghan drug warlords, then they can feed their shareholders addiction to earnings, feed their CEOs' addiction for megamillion paychecks, while capitalizing on the American addicts need for a fix. We just need to end our moralistic charade, decriminalize and control all illicit drugs.
Plus it'll generate new tax revenues.
You can bet this opportunity is being actively explored deep inside Big Pharma, purely for economic reasons, and secretly, of course, like the tobacco industry's studies of carcinogens in cigarettes. So if I were back at Morgan Stanley preparing a securities report on the implications of expanding Big Pharma's market share when more drugs are legitimized, there are three studies that must be highlighted:
1. Failed drug policies breed new terrorists and narco-states
Things are worse today than two years ago when Foreign Policy magazine used the work of 100 experts in their "Third Terrorist Index ...instead of treating the demand for illegal drugs as a market, and addicts as patients, governments continue to pursue policies that have boosted the profits of drug lords and fostered narco-states that threaten all of us."
Like Afghanistan: Narcotics is a cash crop. Unfortunately, Washington and the Pentagon fail to see that we're feeding our disease, matching our addiction to illegal drugs here in America (demand) with the entrepreneurial spirit of Afghan government bureaucrats, farmers, Mexican traffickers and the Taliban (suppliers), while misusing our military.
The Washington Post says "the drug war has become the Taliban's most effective recruiter," a source of financing making them "richer and stronger by the day."
2. America's 40-year 'War on Drugs' is a 'dismal failure'
About the same time Forbes rewarded "El Chapo" with the star status, the New York Times reported: "Three former Latin American leaders," ex-presidents of Mexico, Brazil and Columbia, "called on President Obama to rethink America's campaign against illegal drugs, which they blame for helping to foment crime, corruption and political instability in Latin America while failing to reduce the availability of drugs in America."
America's been in a misguided war on drugs since the Nixon era, and it just gets worse. Still we hang onto a failed policy that costs hundreds of billions, drives drug traffic underground, raising the price of a commodity that costs pennies. We're creating the opposite result, increasing demand.
Maybe that's exactly what Big Pharma wants, more addicts to feed its business model. And exactly what our "nation of addicts" wants, a steady fix ... maybe it's time to accept reality, stop fighting it, work with it.
3. Mexican drug cartels using Harvard B-School corporate models
In a confidential report to Big Pharma you'd also find a summary of Guy Lawson's brilliant assessment, "How the Cartels Work" in Rolling Stone. The subtitle suggests tacit market-sharing and territory-splitting deals involving Big Pharma, domestic health-care firms, and foreign drug cartels: "Mexican drug lords have transformed the narcotics trade in America -- and the DEA appears powerless to stop them." America powerless?
"One of the strangest things about the drug war that is tearing Mexico apart is how little of the bloodshed has spilled over the border," says Lawson. "On one side of the Rio Grande is Ciudad Ju�rez, one of the most violent cities on the planet, with 1,600 drug-related murders last year. On the other side is El Paso, Texas, the third-safest city in America, with only 18 killings. The 100-to-1 disparity in murders underscores a little-understood reality in the War on Drugs: The current crop of Mexican drug lords is not a bunch of Scarface-style lunatics high on coke and hell-bent on violence. Instead, they are highly sophisticated executives, pursuing profit by the cheapest and most efficient means possible."
Yes, they're using Harvard-style business-school models: "Rather than resort to violence in U.S. cities, the Mexican cartels have outsourced street-level grunt work to an army of illegal immigrants."
Forbes' light satire paints "El Chapo" as a B-movie bandito with a price on his head. By comparison, Lawson's chilling piece reads like a first-class press release about a Wall Street CEO: Mexican cartels are run by "highly sophisticated executives, pursuing profit by the cheapest and most efficient means possible. Torturing rivals and beheading victims serves a purpose in Mexico, where drug-related violence has killed 12,000 people in the past three years; narco-traficantes routinely use brutality to subdue competitors, eliminate witnesses and frighten off police recruits."
Meanwhile, "north of the border, the drug lords are as corporate and hyperorganized as Wal-Mart, replacing the top-down approach of their Colombian predecessors with a new business model, a business model that works so well they don't want to upset it: "With business booming -- prices are steady and demand remains high -- unleashing a Mexican-style rampage in this country would only risk riling up U.S. law enforcement."
In that way, the Mexican cartels resemble Big Pharma's efforts to kill healthcare reform in America, neither wants to upset a very profitable business model.
War on drugs is dead, wastes billions, time to shift policy
The truth is, there's no war on drugs to win, nor to lose, just millions of addicts who need help. I've been in recovery 36 years. Back in the '80s I worked professionally with hundreds who went through places like Betty Ford Center. Statistics show that over 10% of Americans are physiologically predisposed to addictive behavior. That will never change. It's in our DNA.
"El Chapo" sure sees the profit potential. The military only sees an enemy. So we keep wasting money fighting ineffective "supply-side" drug wars in places like Mexico, Afghanistan and Columbia. Instead of helping addicts. We've learned so little since Prohibition. The real problem is demand, not supply. So we'll keep losing our war on drugs till we fundamentally shift our policies.
Mexican MBA types get it: "Mexican cartels aren't fighting the war on drugs in the United States for a very simple reason: They've already won," concludes Lawson.
Given that painful reality, Big Pharma should wise up and get ahead of the legalization trend. Lead it. If Big Pharma capitalizes on their unique experience, they can capture new products and new markets driven by the relentless demand for a fix. Lead in the development of a new national policy shifting away from military action to treatment, decriminalization and regulation, generate new sources of tax revenues, and help millions of addicted Americans.
Paul B. Farrell
October 13, 2009