Researchers find cannabis legalization will reduce conventional pharmaceutical sales by billions of dollars. Credit: UNM
Key Points:
- A new study shows stock market returns of publicly traded pharmaceutical firms lower following a cannabis legalization event.
- If cannabis becomes legal at the national level, researchers estimate a reduction in conventional pharmaceutical sales of almost 11%.
- In the meantime, there is a need for cannabis standardization, as applied to ingredients, dosing, insurance, etc.
A study by finance and economic experts at the University of New Mexico has found that cannabis legalization will reduce conventional pharmaceutical sales by billions of dollars.
Previous studies have determined that cannabis access reduces the consumption of specific types of medications, such as opioids, or in certain patient populations like Medicaid patients, but this is the first study to analyze the overall effect of cannabis on pharmaceutical firms across all products and types of patients.
According to the study, published in PLOS One, the researchers found that stock market returns were 1.5 to 2% lower at 10 days following a cannabis legalization event and that the implications of the annual sale from this reduction were in the billions. Extrapolating the results to full federal legalization, the authors estimate a reduction in conventional pharmaceutical sales of almost 11%.
Additionally, the researchers found that branded drug manufacturers were more affected than generic manufacturers, perhaps due to a greater competitive impact from cannabis entry on drugs without any existing competitors.
This move away from prescribed pharmaceuticals to cannabis is already occurring, even though standardization, dosing and other elements are severely understudied and reported when it comes to cannabis.
“Currently, cannabis patients and their providers have little information to guide them towards the most effective treatment for their condition,” said co-author Sarah Stith from the University of New Mexico’s Economics department. “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 study concludes that conventional pharmaceutical manufacturers may benefit from investing in cannabis markets rather than lobbying against them and that regulatory policy should facilitate further research into the risks and benefits of using cannabis for both medical and recreational reasons.
Information courtesy of University of New Mexico.