Private equity fueled the opioid epidemic in the United States, pushing highly addictive drugs as safe painkillers, knowing full well patients would become addicted to their prescriptions, leading to a government-financed (Medicare/Medicaid) bonanza for investors who aren’t concerned about the origins of their profits.

When the over-prescription of painkillers came to a screeching halt, patients turned to the streets where fentanyl — an opioid 100 times more powerful than morphine — is cheap, plentiful and deadly. Fentanyl is manufactured in a lab, not extracted from flowers, and can be made anywhere and easily transported due to the compact size of very valuable quantities.

Today, fentanyl is being blended with a variety of conventional drugs, such as cocaine, methamphetamine, and heroin, and a variety of synthetic opioids, fueling a “third wave” of overdose deaths. More than 111,000 Americans died from drug overdose in 2022, that’s more than 300 people every day, on average. Understandably, this has fostered very expensive efforts by the federal government, state governments, local governments, religious organizations, and nonprofit organizations to deal with the epidemic.

Now private equity firms are swooping in to cash in on government money (Medicaid/Medicare) to fix a crisis they helped to nurture. Sam Blum, a senior writer for Inc., recently took a deep dive into venture capital in the addiction treatment business. What he found is not exactly comforting:

• Funding in the medtech sector, which includes addiction treatment and mental health services, is greater even than the money going to artificial intelligence (AI).

• Fourteen startups in the addiction-tech space have raised a total of $810 million in venture capital just since 2022.

• Part of the business model is to acquire patients who will need prescriptions and treatment for much of the rest of their lives.

Venture capital brings with it expectations for exponential growth that clashes with the mostly public service background of addiction treatment professionals. Blum interviewed the founders of several promising startups including Sonora Health founder Michael Giles, who said, “It’s pretty hard to find something truly impact-focused that’s going to be a billion-dollar company.”

In a report earlier this year for StatNews, the ever-fearless Lev Facher wrote that “private equity firms have acquired stakes in nearly one-third of all methadone clinics in recent years.” Now they are lobbying Congress to prevent pharmacists from prescribing methadone to preserve a near-exclusive monopoly. Once again, private equity’s private interest is at odds with the public interest.

Access to methadone cuts the opioid overdose rate by 50%, says Facher, which is why many public interest groups are pushing to liberalize access to methadone. Being able to prescribe the drug is part of the business models of the telehealth addiction treatment companies we’ve been profiling here on AddictionNews. 

The COVID-19 pandemic ushered in the acceptance of virtual doctor visits leading to virtual prescriptions. It should be difficult for private equity firms that own methadone clinics to overcome competition from the private equity firms funding telehealth recovery services. We’ll see.

Written by Steve O’Keefe. First published June 17, 2024.

Sources:

“Addiction-Treatment Startups Are Raking in VC Money — and Amassing Millions in Fines,” Inc. Venture Capital, June 8, 2024.

“The methadone clinic monopoly: Opioid treatment chains backed by private equity are fighting calls for reform,” StatNews, March 19, 2024.

“Private equity-backed methadone clinics fight efforts to expand access to the lifesaving drug,” MindSightNews, March 25, 2024.

Image Copyright: grispb.