Whatās Going On Here?The US government popped down to Walmart for a few essentials on Tuesday ā like, say, suing the worldās biggest retailer for helping fuel Americaās opioid crisis. What Does This Mean?As if a pandemic wasnāt enough to deal with, the US has had to keep a drug epidemic in check too. And now, as part of that ongoing struggle, the US governmentās accused Walmartās 5,000 in-store pharmacies of filling invalid prescriptions and failing to report suspicious orders. The retailer has been pushing against this narrative for a while: it filed its own lawsuit against the US back in October, arguing it was being used as a scapegoat for government failures.
That may be, but Walmart faces penalties of up to $68,000 for every unlawful prescription and $16,000 for every suspicious unreported order if itās found liable. And while the total potential cost isnāt clear yet, thatās almost beside the point: investors think itās going to be serious, which might be why the companyās stock dropped after the news broke. Why Should I Care?The bigger picture: Opioid economics 101.
Over 100 Americans die from opioids every day, and the costs for the healthcare and criminal justice systems add up to almost $80 billion a year. Some economists have also pinned low labor participation on the crisis: only 62% of Americans count themselves as among the workforce, compared to the UK and eurozoneās roughly 80%. It wouldnāt just save money if the crisis were solved, then: it might boost economic growth by getting people working again.
For markets: The good, the bad, and the both.
Investors targeting a socially responsible strategy need to be careful around drug companies in sheepās clothing. Indivior, for example, specializes in opioid addiction treatments but was sued for making misleading claims. Johnson & Johnson, meanwhile, features in plenty of socially responsible investing screens, while being responsible for many of the problematic opioids in the first place. | 