Legal weed will likely cost pharmaceutical companies billions

According to a new study by researchers affiliated with California Polytechnic State University and the University of New Mexico, legalizing cannabis will cost conventional pharmaceutical companies billions of dollars in reduced drug sales and stock market values.

Researchers examined how stock market returns of public pharmaceutical companies responded to legislation legalizing medical and recreational cannabis over a 25-year period from 1996 to 2019. They found that stock market returns were 1.5% to 2% lower 10 days after a cannabis legalization event and that the impact of the reduction was in the billions. Returns fell in response to the legalization of drug and recreational products for both generic and branded drug makers. The authors estimate that investors expect a single legalization event to reduce the drugmaker’s annual sales by an average of $3 billion.

“Using a data set and estimation approach novel for public health policy, we find evidence that investors are predicting that legal access to cannabis will significantly reduce sales of conventional pharmaceutical drugs. Legal cannabis exerts competitive pressures in both the generic and branded markets, across both classes of drugmakers,” the study authors wrote. “This distinguishes legal cannabis from the patent expiration of typical branded drugs and the entry of generic drugs, which typically only affects one drug, the off-patent drug, and its substitutes. In addition, unlike other traditional medicines, cannabis can be purchased over the counter and grown at home.”

Cannabis as a substitute for medicines

In their report, the researchers note that previous studies have shown that access to legal cannabis reduces the use of certain drugs, including highly addictive opioids. In addition, other research has shown that legalizing marijuana will reduce the use of other drugs in certain patient groups, such as B. Medicaid recipients.

The legalization of marijuana will likely impact pharmaceutical companies as well, as it can be used to treat a variety of conditions. Unlike traditional medications that are designed and approved to treat specific conditions, patients use cannabis to treat a range of physical symptoms, such as pain and muscle spasms, as well as mental illnesses, such as anxiety, depression, and PTSD.

High drug costs are also cited by the authors as a factor in the financial impact of cannabis legalization efforts on conventional pharmaceutical companies. If legalization measures take hold, cannabis can potentially help reduce the barrier that high drug costs pose to accessing healthcare and reduce the tax burden on state and federal governments.

The researchers determined from the study that cannabis is becoming a significant new competitor in the drug markets, and estimate that full federal legalization will result in a nearly 11% drop in conventional drug sales. Study co-author Sarah Stith of the University of New Mexico’s Department of Economics adds that despite standardization, health insurance coverage, or clear dosing instructions, consumer migration away from pharmaceutical drugs to cannabis continues to increase.

“Currently, cannabis patients and their providers have little information that could guide them to the most effective treatment for their condition,” Stith said. “The future of cannabis medicine lies in understanding the prevalence and effects of plant components beyond THC and CBD, and identifying ways to categorize cannabis according to measurable traits that are known to produce specific effects. Mimicking traditional medicines through standardization may not be the optimal endpoint for cannabis, as the inherent variability of the cannabis plant likely drives its ability to treat so many conditions.”

In addition to their general findings that legalization of cannabis lowers the market value of public pharmaceutical companies, the authors found that legalization of recreational marijuana had more than twice the impact of legalization of medical cannabis, likely because it affects more people and creates a larger new market . Branded drug manufacturers were more affected than generic drug manufacturers.

In their conclusion, the authors note that traditional pharmaceutical companies are likely to gain more from investing in regulated cannabis markets than opposed to efforts to expand marijuana legalization. They also recommend that cannabis regulatory policy should support research into the risks and benefits of both medical and recreational cannabis.

The US Cannabis Laws Projected to Cost Generic and Brand Pharmaceutical Firms Billions study was published Wednesday in the journal PLOS One.