The opioid crisis in the US and the role of the pharmaceutical industry was brilliantly documented in the much acclaimed docuseries ‘The Crime of the Century’. Only now, it has been eclipsed by the far bigger fentanyl crisis. Fentanyl, a drug responsible over 70,000 deaths in the US last year alone is driving the world’s most dangerous drug crisis yet.
“The drug was initially designed as a painkiller for surgery and is now used widely to treat severe cancer pain. But it is also sought out by some of the more than 2mn people in the US addicted to opioids, partly due to overprescription of prescription painkillers. Increasingly, it is also being cut into illegal street drugs, from cocaine to counterfeit Xanax pills
…Unlike plant-based alternatives such as cocaine, heroin and marijuana, synthetic drugs require very little manpower or resources to produce at enormous scale.
“Fentanyl is synthetic, relatively easy and cheap to make. It’s also available in prescription form and used in our hospitals so stopping the supply coming across the border isn’t going to stop it,” says Mary Sylla, policy director at the National Harm Reduction Coalition.
Big profits can be made from very small amounts. A kilogram of precursor can be purchased from Chinese manufacturers for about $800, which is enough to manufacture 415,000 fentanyl pills. Each pill can be sold wholesale for as low as 50 cents in the US. Street dealers can make as much as $3 per pill in New York City, say US prosecutors.”
This long read in the FT highlights the global supply chain underpinning the fentanyl industry.
The first stage of the supply chain lies in China where the precursor chemicals to Fentanyl are manufactured in bulk and transported often masked by altering their chemical signatures.
“The chemicals used to create the drugs are legal and widely available inside China, the same used to manufacture pesticides or paint, and the money that fuels the trade often changes hands as cryptocurrency, making it difficult to track.
…The US accuses the Chinese companies of selling precursor chemicals not only to the US but to Mexican drug cartels. The court documents detail how hundreds of companies openly advertise their products on social media platforms to Mexican drug syndicates by offering precursors as part of a “Mexico hot sale” and guaranteeing “100 per cent stealth shipping”, according to the indictments.
…One manufacturer based in Wuhan called Amarvel Biotech boasted of its use of deceptive packaging, which described its chemicals as “dog food, nuts or motor oil” to ensure safe delivery to the US and Mexico.
…These Chinese companies use a range of tactics to evade prosecution, US prosecutors say.
Some manufacturers make illicit chemicals alongside legal raw materials and can change their names or conduct “clean up” operations at particular factories to avoid detection by law enforcement. Some have become skilled at converting other unscheduled chemicals commonly used in the pharmaceutical or agricultural sectors into fentanyl precursors.
They have also fashioned a workaround that involves changing the chemical signature of the underlying precursors using “masking molecules”. These can be easily removed later on to return the substance to its original form as a fentanyl precursor, according to court documents.”
America’s souring diplomatic relationship with China isn’t helping either in terms of garnering Chinese law enforcement agencies’ support to crack down on the illicit trade.
The second leg of the supply chain is in Mexico:
“The primary destination for fentanyl precursors made in China is Mexico — and the biggest customer is the Sinaloa cartel, one of the world’s largest drug-trafficking organisations.
…The cartel employs hired gunmen and uses military-grade weapons, including armoured trucks and bazookas, to expand a business empire now present in more than 45 countries. It bribes government officials and uses extreme violence, torture, kidnapping and murder to exert control over drug trafficking in Mexico and beyond.
Multiple cartel cooks have died from testing fentanyl. Prosecutors allege that last year two lieutenants, Perez Salas and Figueroa Benitez, experimented on a woman by repeatedly injecting her with lower potency fentanyl until she overdosed and died.
The cartel deliberately mixes fentanyl into other narcotics and sells the synthetic opioid disguised as legitimate prescription pills, with the knowledge the drug can be lethal to users if the mixture is a little “off”. In one instance cited by prosecutors, a cartel lieutenant sent a batch of fentanyl to the US, even though an addict had overdosed and died when testing the batch.”
And the final leg is smuggling fentanyl into the US:
“The Sinaloa cartel has decades of experience getting illicit drugs into the US, and continues to use some of the techniques and routes it deployed to traffic cocaine and marijuana.
Boats, private planes, drones and tunnels are often used to get fentanyl across the US-Mexico border. Corrupt border guards and police are often paid off to turn a blind eye to smuggling activity.
…US efforts to disrupt the fentanyl supply chain are resulting in increased seizures. Analysis by the Wilson Center in August showed that fentanyl seizures at the US-Mexico border increased 164 per cent from 2020 to 2022. By the end of August, there had already been seizures of nearly 10,000kg in 2023 — far surpassing last year’s total of 6,400kg.
But most experts believe fentanyl seizures are up because the overall volume of smuggling is increasing rather than any sustained success in the battle against the cartels.”
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
MORE FROM Dec WEEK 5
MORE FROM Dec WEEK 5
