The new opium wars

Australia’s newest opium factory is located, unsignposted as such, in a bland industrial estate on the fringes of Melbourne. Its security controls are like those of an embattled embassy.

Inside, one large aromatic shed is heaped with dried poppy, the latest truckload in from Swan Hill on the Murray River, and large sacks of black poppy seeds, shaken from the dried pods, ready to be shipped out to bakeries. Another shed contains large grinding machines and tanks, while in a sterile area a gleaming centrifuge turns out bags of off-white powder, and in a laboratory chemists huddle over testing machines and computer screens.

TPI Enterprises is the disruptive new player in the business of growing and processing opium poppies in Australia. For decades, the industry had been based in Tasmania, run by the pharmaceutical giants Johnson & Johnson and Glaxo (later GlaxoSmithKline, or GSK), who have come to supply just over half the world’s legal opiates from the island. The location was perfect, not only for the strict controls demanded of licensed growers but also for the transfer of material in and out of their processing works in the state’s north.

In 2003, Jarrod Ritchie, a young chemist, left his role as head of GSK’s local research and development. He started TPI the following year with the help of ten investors, including former Australian Secret Intelligence Service chief Rex Stevenson and former Australian Federal Police deputy commissioner Jim Allen. (The two have run a Canberra security consultancy since retiring.)

Ritchie was hoping to source poppy from the mainland (if state governments could be persuaded to allow production), which would reduce the risk of losing an entire crop to unusual weather or plant disease. But otherwise he thought he would set up a smaller, slightly lower-cost replica of the two Tasmanian operations, using the same industrial method to extract the analgesic alkaloids from the dried pods. Unlike the familiar image of Afghan or Burmese cultivators scoring the ripe poppy pod and scraping off the resin that oozes out, Australian growers follow the far less labour-intensive method of allowing the poppies to wither and then stripping the field to deliver the dried plant to the factories.

GSK sued Ritchie, alleging he was taking inside knowledge of processes and customers, and court proceedings ran for five years. “They tried to deep-pocket me, so I ran out of funds,” Ritchie says. An extraction process using highly flammable solvents, requiring elaborate ventilation and electrical precautions to avoid explosions, became unaffordable. “Necessity being the mother of invention, we had to develop something else.”

The result was a new process, whereby the pods are ground up, soaked in water, and the alkaloids extracted from the resulting brew largely by mechanical methods. “So I have to thank them [GSK],” Ritchie says. “It costs us approximately $100 to extract a kilo of narcotics out of poppy capsules, and we think our competitors are around $300.”

Meanwhile, TPI worked at getting the federal and state permits necessary to handle, process and export narcotics. Victoria enacted legislation in 2014 to license poppy growers, under conditions that (as in Tasmania) crops are protected from unauthorised access and any stray growth is prevented. TPI moved its processing operations from Tasmania to Melbourne.

New South Wales, South Australia and the Northern Territory have followed with legislation allowing poppy growing. Tipperary Station, the famous NT cattle property, harvested a trial crop of opium poppies in October 2015, and Ritchie says growing will start in the wheatbelts of New South Wales and South Australia this year. TPI also has clearance to import poppy straw from Portugal, Hungary and Turkey.

TPI lost $25.9 million in 2015 when its factory moved to Melbourne. It was expecting to hit a “break-even” output of 30 tonnes of narcotic raw material in 2016, and 50 to 60 tonnes this year. “Our ambition is to get to 100 tonnes of raw material by 2019,” Ritchie says. That’s out of a global supply of 950 tonnes.

The company’s established rivals in Tasmania, no longer an opioid duopoly, have both changed hands over the past two years. GSK sold its opiates business to the Indian firm Sun Pharmaceutical Industries, and Johnson & Johnson sold its offshoot Tasmanian Alkaloids to New York–based private equity firm SK Capital for a rumoured $800 million.

The two Tasmanian operators have also been affected by a crisis long building in America.

The US government’s Centers for Disease Control and Prevention records that nearly 200,000 Americans have died of opioid overdoses since 2000. That number has contributed to a recent fall in life expectancy for white Americans, the main abusers of both prescription and illegal opioids. In 2015, opioid overdoses killed 33,000 Americans, and while fentanyl and heroin are the fastest-growing categories of drugs involved, prescription drugs have often been the pathways to their use.

In response, the US Drug Enforcement Administration in October announced cuts of at least 25% to the 2017 production quotas for opioids, including those based on thebaine compounds oxycodone (like OxyContin) and hydrocodone, as well as those based on codeine and morphine. Tasmania produces some 95% of the global thebaine output, and the effect on the two operations will be marked.

In the 1960s British scientist KW Bentley discovered that the thebaine alkaloid found in opium pods could be used to make a new line of semi-synthetic painkillers. Two decades later US drug-makers such as Purdue Pharma, looking for new product lines, signalled the need for supply of thebaine. The two Tasmanian producers undertook intensive plant breeding to find thebaine-rich varieties, and by the late 1990s they had put them into commercial production.

It was a lucrative arrangement that propelled Purdue’s owners, the Sackler family, into the ranks of America’s richest. Powerful thebaine-based painkillers, the best known of them OxyContin, earned some US$2 billion a year in sales, heavily weighted to the US market.

OxyContin was initially marketed for relatively shortterm conditions, such as end-stage cancer and AIDS, or post-operative relief for accident victims, though Purdue and some competitors also promoted their drugs for roundthe-clock relief of “chronic pain”. Many patients recovering from non-fatal illnesses or injuries soon found themselves addicted to OxyContin or similar painkillers.

In a country where unemployment benefits generally cut out after six months, and the jobless need a disability to get continuing welfare, there is a motive to play up pain and weakness. American doctors, some getting incentives from drug companies, were all too happy to offer prescriptions, with clinics in Florida known as “pill mills” leading the surge. As of September 2016, 11.4% of American males between 25 and 54, about seven million men, were not in the labour force, as against 4% in the 1950s. A recent study by Princeton economist Alan Krueger found that 44% of them took painkillers daily, two-thirds on prescription. And with a month’s supply of OxyContin costing towards US$300, many addicts also turned to cheaper alternatives, including heroin, now largely supplied by drug cartels in Mexico and South America, and the entirely synthetic opioid fentanyl, originally developed as an anaesthetic and up to 100 times more powerful than morphine.

US authorities have been trying to clamp down on prescription painkillers for nearly a decade. In 2007, Purdue and three executives pleaded guilty to charges relating to “aggressive, excessive and inappropriate” marketing, and were fined US$635 million. The Florida pill mills have been raided. State legislatures have seen fierce lobbying battles over laws seeking to limit prescriptions. Recently, drug companies have been trying to market “abuse deterrent” pills that are harder to crush into snortable or injectable form, though critics say oral ingestion still leads to addiction.

For Tasmania – and Australia − it means a subdued market. “The industry currently has more than enough capacity to meet global demand and meet the demand in any new geographies that may require products,” says Sun Pharma’s Geoff Zippel, predicting negative growth for a year or two. Having trialled growing in Victoria, Sun is still relying on supply from Tasmania.

It may be that reduced quotas for US painkillers are just a blip in global demand. With sales of OxyContin falling for some years under regulatory pressure, Purdue has launched a worldwide promotion of its drugs under a network called Mundipharma, with local subsidiaries active across Latin America, Asia, the Middle East and Africa. The target markets are the new middle classes: they live longer, succumb more to diseases such as cancer, and have the money to pay for painkillers.

But are pharmaceutical companies based in advanced economies the right ones to soothe the developing world’s pains? The International Narcotics Control Board (INCB), a UN-established independent body supervising global access to opioids, often points out that millions of people with end-stage cancer and AIDS in developing countries die in avoidable agony each year. One of its officials, Stefano Berterame, recently told the Los Angeles Times this could be solved with “very cheap morphine” – but that this held little prospect of profit for multinational drug firms. “Companies prefer to market expensive preparations.”

Just over ten years ago, a London-based advocacy group, now known as the International Council on Security and Development (ICOS), proposed a pilot scheme for licensed opium-growing in Afghanistan with a view to pharmaceutical production. It received some support from Europe and Canada, and from some Western military officers trying to win over hearts and minds among rural Afghans, but soon ran up against opposition from US government officials warning of diversion to illicit markets.

“This may have been a valid argument, but it is not used against similar schemes in India and Turkey,” Jorrit Kamminga, who worked on ICOS’s Poppy for Medicine proposal, tells me by email. “It completely ignored the fact that 100% of opium is currently leaking towards illicit channels.”

In March 2007, the INCB’s then president, Philip Emafo, praised the Afghan government for ignoring “the bait of those pushing for legalization of illicit cultivation of opium”, and proclaimed there was no shortage of opiate supplies for medical purposes.

Kamminga says this argument is flawed. “It only looks at the supply and demand of the planned economy that is controlled by the INCB. [It] leaves out about 80% of the world in need of pain-killing medicines, as confirmed by the World Health Organization.”

Both within advanced economies and globally, access to painkillers is fraught with questions of opportunity and justice. Perceptions of chronic pain come wrapped up in depression and anxiety, in unemployment. People who rely on prescription opioids often don’t have access to alternative measures such as physiotherapy, health and nutrition advice, or mental health care. “They don’t have the money and they don’t live in a central location that has these services,” says Briony Larance, a senior researcher with the National Drug and Alcohol Research Centre at the University of NSW.

In Australia, addiction levels are higher in the regions, and, ironically, particularly bad in Tasmania. The number of opioid overdose deaths nationally has risen to about

800 a year, according to Larance. Of these about 30% involve heroin, the rest pharmaceutical opioids. Our doctors prescribe some three million courses of opioids each year, about a quarter of them for three months or longer. Around 50,000 Australians are undergoing treatment for opioid addiction, mostly using methadone or buprenorphine (opioids to fight opioids). The majority of them reportedly started using opioids in oral form for a pain condition.

Australian doctors are far more restricted than US counterparts, needing to obtain authority or a permit to prescribe strong opioids for longer than eight weeks. But controls to avoid addicts collecting multiple prescriptions are patchy. “We have some prescription drug monitoring here, but it’s not across the board, it’s not real time in most states, and it’s not mandatory,” says Larance. In December, the federal government announced that painkillers containing codeine, an opium poppy derivative that, though mild, can be addictive, will no longer be sold without prescription from February next year.

TPI’s output so far is weighted towards codeine and morphine derived from traditional poppy variants, and Jarrod Ritchie believes his company is serving a real and legitimate need. “It’s unfair that one country that has an abuse issue then taints the whole industry around the globe,” he says, adding, “I can give you pain relief for less than one cent a day and I’d make commercial profits.”