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Legal Weed Likely To Cost Drug Companies Billions

According to new research by scientists from California Polytechnic State University (Cal Polytechnic State University) and The University of New Mexico, legalizing cannabis could result in lower drug sales and lower stock market values for conventional pharmaceutical companies.

Over a period of 25 years between 1996 and 2019, the researchers examined how stock market returns for publicly traded pharmaceutical corporations reacted to legalizing recreational and medical cannabis. Their findings showed that stock market returns dropped by between 1.5% and 2% within 10 days of a legalization. The implications for the economy were estimated to be in the millions. The effects of both recreational and medicinal legalization for name-brand and generic drug makers led to a decrease in returns. According to the authors, investors can expect a single legalization event that will reduce annual drugmaker sales by $3 billion on average.

“Using a data set and estimation approach novel to health policy, we find evidence that investors predict legal cannabis access will significantly decrease sales of conventional pharmaceutical drugs. Legal cannabis applies competitive pressure to both generic and brand drug markets, across both classes of drugmakers,” the authors of the study wrote. “This makes legal cannabis distinct from typical brand drug patent expiration and generic drug entry where typically only one drug, the drug coming off patent, and its substitutes are affected. Furthermore, cannabis can be purchased without a prescription and home cultivated, unlike any other conventional medication.”

Cannabis can be used as a substitute for pharmaceuticals

Researchers note in their report that past studies show that cannabis legalization reduces certain drugs such as highly addictive opioids. Research has also shown that cannabis legalization can reduce the use of certain drugs in specific populations like Medicaid recipients.

Due to the wide range of ailments that marijuana can treat, legalization of cannabis will likely have an impact on pharmaceutical companies. Unlike traditional medications that are approved to treat specific diseases, cannabis can be used by patients to relieve pain or muscle spasms. It also has the potential to treat mental and emotional conditions like anxiety and depression.

In addition to the economic impact that cannabis legalization has on existing pharmaceutical companies, the authors also point out the high cost of prescription drugs. Cannabis legalization could reduce barriers to accessing healthcare and lower the financial burden on federal and state governments.

According to the researchers, cannabis has become a major competitor on drug markets. They estimate that federal legalization would result in an almost 11% reduction in traditional pharmaceutical sales. Study co-author Sarah Stith of the University of New Mexico’s Economics department adds that consumers’ migration away from pharmaceutical drugs toward cannabis continues to grow despite standardization, health insurance coverage or clear dosing instructions.

“Currently, cannabis patients and their providers have little information to guide them towards the most effective treatment for their condition,” said Stith. “The future of cannabis medicine lies in understanding the prevalence and effects of the plants’ components beyond THC and CBD and identifying ways to categorize cannabis by measurable characteristics that are known to yield specific effects. Mimicking conventional pharmaceuticals through standardization may not be the optimal endpoint for cannabis, as the variability inherent in the cannabis plant is likely driving its ability to treat so many conditions.”

The authors discovered that recreational cannabis legalization had a greater impact than legalizing medical marijuana. This is likely due to the fact that they have a wider market and affect more people. Generic drugmakers were less affected than manufacturers of brand-name medicines.

The authors conclude that traditional pharmaceutical companies can benefit more from investing in legal cannabis markets than by lobbying for marijuana legalization. The authors also suggest that marijuana regulatory policies should be based on research about the benefits and risks of recreational and medical cannabis.

The study, “U.S. Cannabis Laws Projected to Cost Generic and Brand Pharmaceutical Firms Billions,” was published on Wednesday in the journal PLOS One.