Big Pharma is reportedly losing billions every time a state legalizes weed

A recent study found that legalizing cannabis can cost pharmaceutical companies billions in revenue and market share. Here’s why.

New data shows pharmaceutical companies operating in this state will take a significant hit in the stock market if a new state legalizes medicinal or adult-use cannabis.

For the study, researchers compared stock return data from 45 major “legalization events” in California, Oklahoma, Michigan, Mississippi, and Virginia between 1996 and 2018, and defined a “legalization event” as “the day the state governor signed off on cannabis (legalization) or voters approved a ballot initiative to legalize access to medical or recreational cannabis.”

The results show that the legalization of cannabis in these states coincided with a 1.5% to 2% drop in stock prices for giants like Purdue Pharma and Pfizer, resulting in about $3 billion in lost sales and nearly $10 billion -dollars in lost market share for the entire industry.

After analyzing stock market data recorded immediately after the legalization of cannabis in legal states, the researchers observed a statistically significant decline in the returns of large pharmaceutical companies. The study’s authors said the trend continues “during the 20 business days after” legalization, resulting in billions of dollars in market share losses and a drop in post-legalization sales for big pharma.

Here’s what the new data tells us

When faced with the choice between opioids and cannabis, many medical patients turn green. That doesn’t seem to bode well for drug companies. (Sheet)

The study’s authors estimate that full federal legalization of cannabis could result in an 11% drop in sales of conventional drugs.

The University of New Mexico Economics Department conducted the study with help from the Finance Department at California Polytechnic State University. Ziemowit Bednarek and Sarah Stith are the authors of the report entitled US Cannabis Laws Projected to Cost Generic and Brand Pharmaceutical Firms Billion.

Bednarek and Stith also find that the legalization of cannabis for adult use had more than twice the impact on big pharma than medical marijuana over the period 1996-2018.

The study also suggests that pharmaceutical companies are investing in the legal cannabis market rather than campaigning against federal legalization. Still, most major companies have taken a different approach that deviates entirely from legal cannabis

Some companies are opposed to legalization

Purdue Pharma and Pfizer are two of many pharmaceutical giants actively fighting the federal legalization of cannabis. In March, Purdue paid $6 billion to settle lawsuits over its role in fueling the opioid epidemic.

Purdue Pharma and Pfizer are both members of the Community Anti-Drug Coalitions of America (CADCA), which also includes newspaper conglomerate Gannett, the NFL, which has the world’s most valuable sports team, and a handful of healthcare and drug companies opposed to legalization.

Companies campaigning against cannabis legalization via CADCA pic.twitter.com/phiYUErT8w

— Graham Farrar (@grahamfarrar) August 6, 2022

Black Cannabis Magazine visualized the list of partners in a graphic that went viral this summer, urging CADCA to remove the partners’ names from their website. Though Pfizer opposes legalization, the company is also investing in the cannabis industry — and its support for state prohibition may align with its business interests.

In December 2021, Pfizer announced the acquisition of San Diego-based Arena Pharmaceuticals for $6.7 billion. The biotech, which already has a drug pipeline focused on cannabinoid-related therapeutics, could give Pfizer a smooth entry into the legal space.

Opposition to state legalization could also be Pfizer’s attempt to limit licensing and keep competition low as it frees up more resources for Arena and other cannabis-related companies. Many state cannabis companies continue to campaign against federal and state legalization measures that threaten their current dominance in limited-license markets.

Here’s what Big Pharma will lose from legalization

When faced with a choice between weed or pills, many patients choose the latter. (AdobeStock)

The Big Pharma stock study concluded, “The average change in a company’s market value per legalization event is $63 million, with a total impact on the market value of all companies per event of $9.8 billion… year commencing with associated with each legalization event, this implies a $3 billion change in annual sales for all drugmakers per event.”

With the opioid epidemic increasing in recent years, the reality of patients paying for high-priced weed before taking free painkillers cannot be ignored.

Consider Chris Goldstein, a NORML advocate who tweeted despite suffering a serious leg injury. Chris’ tweets illustrate exactly why Big Pharma fears expanded access to medical or recreational cannabis. “They tried to give me free Oxycontin,” Goldstein wrote online in August. “Instead, I pay out of my own pocket to treat my pain with cannabis.”

Putting it that way, Big Pharma’s fears about the end of cannabis prohibition could become a reality, and Americans, who want to see widespread opioid abuse end and Big Pharma’s role in the crisis, are strongly in favor of legalization in all state and federal courts.