Sex, Drugs, and the Rocky Economy: Drugs

Asked to name the most recession-resistant commodities, most people would place "drugs" in the top spot.

Indeed, demand for certain prescription drugs -- especially those that treat seemingly recession-related maladies, like insomnia -- has spiked over the last two years. According to data published by IMS Health (RX), a market research firm that specializes in health care, prescriptions for sleeping pills -- such as Ambien from Sanofi-Aventis (SNY), Sepracor’s (SEPR) Lunesta, Sonata from King Pharmaceuticals (KG), and others -- rose 7% last year, while the number of antidepressant prescriptions written -- GlaxoSmithKline’s (GSK) Paxil, Forest Labs’ (FRX) Celexa, et al -- increased 15%.

When it comes to measuring consumption of substances sold by so-called “non-licensed pharmacists,” however, official numbers are nearly impossible to pin down. Street drug statistics can be sliced and diced an endless number of ways and collected according to a myriad of methodologies -- by the number of arrests, amounts seized, or abuse-related hospitalizations, to name a few. So far there's no official consensus regarding the recession's impact on illicit drug sales.

But there is some evidence to suggest that the use of certain street drugs is tapering off, at least according to anecdotal reports.

New York magazine recently spotlighted the plight of Gotham’s cocaine purveyors, and found that many are having a tough time of it lately.

“[Before the recession], I was making deliveries every night of the week," said coke retailer “Eddie”, who claimed he once had the luxury to “pick and choose” his customers. “If I didn't know the address -- forget it. If I didn't like their accent -- forget it. On most nights, there were more people wanting than I could get to,” he told the magazine.

Then his clientele began losing their jobs -- and the disposable income that used to finance their powdered recreation -- and dealers like Eddie found their phones had stopped ringing. Many had to start cold-calling former users who had dropped off their radars.

“Tim C.”, a longtime Greenwich Village street dealer, told New York that the “problem has trickled down.” He claims to now compete with former delivery-only dealers. “It sucks,” he said. “You’re gonna find me at the post office if this goes on for much longer.”

However, unlike cocaine, the demand for marijuana continues unabated, say some reports.

"I've never seen any decline in demand for marijuana in bad economic times," said Ed Shemelya, head of marijuana eradication for the Office of Drug Control Policy’s Appalachian High Intensity Drug Trafficking Area, interviewed for a recent Associated Press story. "If anything, it's the opposite. People always seem to find money somewhere to buy drugs."

Not true for medical marijuana, says The San Francisco Examiner. According to an Examiner report, the economic crisis has hit legal medical marijuana dispensaries where it hurts, causing them to “cut staff, business hours, and donations to charities.” Charlie Alazraie, manager of Bay Area Safe Alternatives, told the Examiner that business has dropped more than 50%, as tighter budgets force patients to buy smaller quantities.

Prices haven’t risen, but at $300 an ounce for something insurance doesn’t cover, unemployed people -- as well as those unable to work -- are cutting back. “The only busy day we’ve had in the past 40 days is when we offered a one-third off discount for veterans,” one vendor said. “It seemed like half the veterans in the state signed up.”

(Something to keep in mind for all those interested in owning shares of Medical Marijuana, Inc. (MJNA.PK), a company that provides technology that "satisfies various governmental and the medical marijuana dispensaries’ needs for tax collection in the medical marijuana industry.”)

But as long as human beings exist as we know them, drug use will, too -- regardless of economic circumstances.

Eliminating drug abuse is not a realistic goal, says Gil Kerlikowske, the former Seattle Police Chief who, as Obama's Drug Czar, now heads up the Office of National Drug Control Policy. "But,” he notes, “we can reduce the harm, the dangers, the drain on our economy."

Hoofy and Boo have covered some of the baddest vice stocks before. See their report below.