Griffin Dugan, 1629137

LSJ 376, Section AF

Midterm Paper

There is a temptation when looking at the illegal drug market to assume that it runs on a

completely different set of standards and rules compared to the pharmaceutical industry.

However, with the increasingly problematic upsurge in addiction on both sides of the market, the

reality is that the two have more in common than they do differences. It is true that the illegal

drug market is unique in its underground, decentralized organization and increased amount of

violence. At the same time, both the illegal and legal drug markets are highly profitable and

competitive industries that use dishonesty and marketing techniques to widen their scopes, and

government attempts to address the supply side of the markets have resulted in numerous

unintended consequences.

Even though both of these markets are persistently hierarchical in nature, the organization

of these hierarchies represents a striking difference between the two. The illegal drug industry’s

hierarchy is much more decentralized compared to the pharmaceutical industry’s hierarchy in

order to maintain its underground identity and prevent law enforcement from capturing the drug

lords. This difference in structure makes it so that people within the industry are only loosely

connected to each other, usually through intermediaries (Lecture 4/23). This decentralization

means that lower-level workers are often unware of who is giving them orders, so in the event

that they are captured by law enforcement their employers’ identities are protected (Brzezinski

2002). However, when looking at illegal drug distribution it is evident that the organization is

still hierarchical, as those at the bottom of the chain are at the most risk for being caught and
punished, while the bosses at the top of the pyramid are able to largely avoid trouble (Lecture

4/23). In comparison, the pharmaceutical industry’s hierarchy is clear and well-established, and

the legal nature of the market means risk is a minimal factor in the business. In fact, even when

drug companies are sued for lying about their products, the fines they incur are miniscule in

comparison to their profits (Sarpatwari 2017). The fact that the illegal drug market is forced to

operate underground means that the whole business involves much more risk than its legal

counterpart, and drug cartels attempt to minimize this risk by decentralizing the industry.

While both markets experience some amount of conflict in their businesses, the

differences in organization along with regulation contribute to a greater amount of violence in

the illegal drug market. Without proper law enforcement or resolution systems in place, drug

disputes are usually settled with violence, and this violence creates a protective reputation for

those deemed aggressive (Bourgois 1995). In fact, studies have shown that up to 80% of drug-

related homicides happen due to systemic violence which cannot be controlled in the absence of

formal dispute resolution measures (Goldstein 1985). Additionally, due to a constant turnover of

sellers coming in and out of custody, there is an increased amount of violence involved in

maintaining/reclaiming selling territories (Lecture 4/25). In contrast, the pharmaceutical

industry’s actions occur in a legal setting, meaning that instances of conflict are able to be

resolved in courts rather than through violence.

However, the illegal and pharmaceutical drug industries are very comparable, particularly

in regards to their highly competitive and profitable nature. The illegal drug market’s profits can

be difficult to ascertain because all business is done covertly, but estimates show that it is a $400

billion market, with a quarter of that being just inside the US (Lecture 4/9). Attempts at border

interdiction which force smugglers to use more expensive means are primarily responsible for
the profitable nature of this market (Grillo 2017). In comparison, within the pharmaceutical

industry the number of prescriptions written and their overall profit has tripled in the last three

decades (Lecture 4/9). One reason the pharmaceutical industry is so profitable is due to the

existence of patent laws, which allow companies to claim market exclusivity and determine

prices on their drugs in order to beat out their competition (Sarpatwari 2017). In addition, the

lack of universal healthcare in the US means that insurance companies are the ones buying drugs

as opposed to the government, giving them much less bargaining power (Lecture 4/30). The

highly competitive nature of both markets accounts for their astronomical profit margins.

Another similarity between the two markets is their use of almost deceitful targeted

advertising and marketing techniques, which help to expand their customer bases and increase

profits further. In the illegal market, intentional efforts are made to target certain products to

certain demographics. For example, different colored tops of heroin vials can be used to market

the product to different socioeconomic classes based on the product’s price and potency

(Brzezinski 2002). This demonstrates a clear effort to increase the number of customers that

sellers are reaching by offering a wider variety of products. Additionally, the Xalisco Boys, a

network of Mexican drug smugglers who were very customer-service oriented, were able to

target smaller communities with no prior exposure to drugs by advertising heroin as a cheaper

alternative to painkillers (Quinones 2015). In the legal drug industry, pharmaceutical companies

employ a variety of strategies to promote their products, including funding educational resources,

medical conferences, and algorithms (Waters 2005). These pharmaceutical companies will go so

far as to give free samples of their drugs for doctors to give their patients, and they have now

even secured the rights to advertise their products on public television (Lecture, 4/30). These ads

serve to target the everyday consumer watching TV at home. Although the two industries go
about it different ways, it is clear that both the illegal and pharmaceutical drug markets practice

targeted advertising and marketing techniques to grow their consumer base.

Both markets rely on some degree of dishonesty in order to allow for their large profits.

In the illegal drug market, this dishonesty takes the form of corruption, especially within anti-

drug law enforcement. Underpaid drug officials can be bribed to look the other way when

confronted with drug smuggling, and the price the smugglers pay for this bribery is a mere

fraction of the revenue they will end up making (Andreas 1993). However, the dishonesty in the

pharmaceutical industry comes from more covert actions such as false advertising, market

exclusivity, and medicalization. For example, many pharmaceutical companies will pay for

doctors to appear as speakers at medical conferences, and the doctors that accept such payments

are much more likely to prescribe expensive brand-name medications (Aleccia 2016). In

addition, pharmaceutical companies have been shown to finance educational resources and

algorithms for doctors to use which exaggerate under what conditions their drugs should be

prescribed (Waters 2005). These companies have even gone so far as to define certain

conditions as being medical disorders needing treatment in order to sell their products (Waters

2005). Finally, the government gives very minimal fees for pharmaceutical companies to pay in

instances of false advertising and monopolization through patenting, which essentially

encourages the companies to continue this practice in the future (Sarpatwari 2017). The

dishonesty of the two markets take different forms, but their deceit is essential in boosting profits

for those at the top of the industries.

Lastly, attempts to regulate the supplying of both illegal and pharmaceutical drugs have

resulted in unfortunate unintended consequences. For example, US efforts to crack down on the

large Mexican drug cartels have resulted in smaller drug trafficking organizations filling in the
gaps (Bagley 2012). In the same vein, government efforts to suppress drug manufacturing and

smuggling operations in Central American countries like Columbia have simply resulted in the

industry popping up elsewhere, such as in Peru or Bolivia (Bagley 2012). In addition, many

critics believe that the criminalization of drugs like marijuana have pushed smugglers to follow

the Iron Law of Prohibition by transporting harder and more profitable drugs such as heroin

(Grillo 2017). In the legal industry, by making prescription painkillers increasingly unavailable

to the public through bureaucratic obstacles and increased prices, addicts have been forced to

satisfy their withdrawal symptoms with cheaper and unregulated illicit drugs like heroin (Lecture

5/2). Although well-intended, the efforts to declare “war” on both the illegal and pharmaceutical

drug markets have resulted in a dangerous increase in use of unregulated hard drugs.

The presence of laws banning the distribution and purchasing of illegal drugs contribute

to the stigmatic idea that this market is inherently barbaric and backwards. Furthermore, the lack

of such labeling being put on the pharmaceutical industry contributes to this stigma further by

indicating the pharmaceutical market is somehow morally above the illegal one. The reality is

that this binary way of thinking results in a fundamental lack of understanding regarding the two

markets and how they compare and contrast. The illegal drug market does differ in its overall

organization, regulation and presence of violence. However, the competitive and profitable

nature of both the illegal and pharmaceutical markets, along with their use of dishonesty and

marketing techniques, have contributed to a lack of effective regulation. In further efforts to

address the epidemics of addiction associated with both markets, these similarities must be taken

into greater consideration.

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