Big pharma loses billions with every state that legalizes weed, so what’s their next step?

Want to know why Big Pharma has historically opposed cannabis legalization? Well, if the results of the latest study published in the journal PLOS ONE, their revenue losses per legalization event could be a good indicator.

Per Marijuana Moment: “The peer-reviewed research article, published Wednesday in PLOS ONE journal, looked at prescription drug stock returns and sales data for 556 pharmaceutical companies from 1996 through 2019, and analyzed market trends before and after the passage of medical and medical legislation.” to legalize adult-use cannabis at the state level.

“Equity returns were 1.5% to 2% lower 10 days after legalization,” the study authors note. “Yields declined in response to the legalization of drug and recreational products for both generic and branded drug manufacturers. Investors estimate that a single legalization event will reduce the drugmaker’s annual sales by an average of $3 billion.”

While there have been several reports of cannabis patients choosing cannabis over prescription drugs, this study definitely shows the negative impact on pharma’s ROI after legalization. However, it’s not just brand-name drugs that are taking a hit. It appears that cannabis is crowding out many other generic brands as well.

Photo by James Yarema via Unsplash

Researchers from California Polytechnic State University and the University of New Mexico commented:

“By expanding access and therefore use, legalization could allow cannabis to compete with traditional medicines. Cannabis is largely unpatentable and once medically legalized it can behave like a generic new entrant, prompting some individuals to switch to cannabis from other drugs. However, unlike a traditional new generic drug, cannabis use is not limited to a single or limited set of conditions. This means that cannabis is simultaneously a new entrant to many different drug markets.”

Well, for some the notion of 1.5-2% may not seem like much, but in terms of profits at the pharma scale, it is quite significant, as the study authors reported: “We find that the average change in market value of a company per legalization event is $63 million with a total impact on the market value of all companies per event of $9.8 billion.”

With cannabis costing so much money, it’s no wonder drug companies have been reluctant to legalize weed. While some pharmaceutical companies are investing in the development of cannabis-based drugs, opioid manufacturers are losing the most.

Not true losses

If you look at pharma’s profits after legalization, they continued to make money despite legalization. What researchers have found, however, is that the “forecasts” made by Pharma have not been met. That’s one of the main differences they found, but that doesn’t mean there’s actually a loss of revenue.

According to Marijuana Moment:

“The study also considered shifts in drug sales after legalization. “Using the drugmakers’ historical price-to-sales ratio for the year associated with each legalization event, this implies a change in annual sales of all drugmakers of $3 billion per event,” it says.

However, it is also important not to be too hasty in citing everything as fact, as the study authors themselves admitted.

RELATED: How Many Billions Will Big Pharma Lose If Cannabis Is Legalized?

“The economic impact of an estimated $9.8 billion in lost corporate market value per cannabis legalization event is extremely significant, however, our results should be interpreted with caution. A key limitation is that we model investors as rational, which may overstate the economic significance of our results. Second, we limit ourselves to listed companies and past legalization events. Third, we note that estimates can be sensitive to our choice of use from 150 to 50 days before the legalization event. Finally, we expect measurement errors due to heterogeneity in legalization and subsequent regulatory processes.

“For private and public drugmakers, we expect the response to legalization will include investment and marketing,” the study concludes, noting that Pfizer spent billions to acquire a “cannabinoid-focused biotech company.” -like therapies.

“‘Pharmaceutical companies have invested significant lobbying and dollars in the fight against cannabis legalization,’ it said. ‘These are indications that the pharmaceutical industry is still far away from cannabis from a marketing perspective [Food and Drug Administration]-approved therapeutic equivalent, and this may explain why pharmaceutical companies have put less effort into detailing doctor visits.’

“‘If we look beyond the impact on various stakeholders, our study suggests that cannabis could be a useful tool to increase competition in the US drug markets,’ the authors said.”

Photo by Christina Victoria Craft via Unsplash

It’s important to note that these drug companies are reluctant mainly because they can’t patent cannabinoids. Since cannabis is a very easy plant to grow at home, they don’t want it to be legal at the federal level. Imagine if someone could grow their own mild pain relievers, appetite stimulants, mood enhancers with a little bit of sun and earth?

That’s what Pharma had imagined – and they didn’t like it.

The reason for the federal stall?

While Democrats and Republicans argue over whether inclusivity clauses should be added to the legalization of cannabis, I can’t help but think that the “politicians’ sponsors” may not have an impact on how people vote. After all, nearly 70% of the US population supports legalizing cannabis, yet despite this vast majority, cannabis remains illegal at the federal level.

Now if we look at the people who are taking money from pharma or holding stock in pharma who are currently in office, maybe we can paint a picture.

Of course, there is little direct paper evidence showing Big Pharma’s opposition — other than donations to anti-cannabis organizations. However, we don’t need evidence to understand the nature of pharma.

RELATED: Does Cannabis Legalization Effort Suggest Joe Biden Is a Farmer for Big Pharma?

You see, Pharma plays the market like a chess game and the pieces are your representatives.

See how pharma spends their money when it comes to voting on key regulatory issues that would affect their bottom line.

According to KHN.ORG:

“Pharmaceutical companies and their lobby groups gave approximately $1.6 million to lawmakers in the first six months of 2021, with Republicans accepting $785,000 and Democrats accepting $776,200, the Pharma Cash to Congress database shows. Since the 2008 cycle, the industry has generally favored Republicans. The exception was 2009-10, the last time Democrats controlled both houses of Congress and the White House.

“Democrats again narrowly hold both the House and Senate, and political scientists and other money-in-politics pundits said the posts likely reflect who’s in power, which lawmakers face tougher reelection bids next year, and who one.” has outsized influence on legislation that affects the bottom line of the industry.

“Several drug companies have suspended donations to Republican lawmakers who voted against confirming the results of the 2020 election, which has depressed total GOP fundraising and total industry giving compared to other years.”

Photo by FatCamera/Getty Images

As you can see, their money influences politics. This is nothing new, and if they’re so blatantly doing this with Medicare regulations, what makes you think they don’t have leverage when it comes to legalizing cannabis?

Of course, it’s just “hearsay” at this point, but given the nature of Big Pharma, I wouldn’t be surprised if we find actual evidence over the next 5 years that they’re rigging the legalization of cannabis, especially if people are more likely to are reluctant to use medicines when cannabis is an alternative to treating the symptoms of their condition.

To think that pharma doesn’t have a strategy against an investment that’s costing them up to $10 billion in lost potential sales is to not know pharma’s ways.

KHN.ORG further reports:

The drug industry’s campaign contributions are highly strategic, said Steven Billet, an associate professor in George Washington University’s Graduate School of Political Management.

“This is a really well organized trade sector,” Billet said. “If I’m one of those PACs, early in the process I’ve surveyed the environment, set our agenda and budget, and figured out who I might be able to reach and who I might not be able to reach.”

Does that sound like bribery to you? It sure sounds like it to me, but when politicians accept money from private companies that those same politicians are supposed to regulate, we call it lobbying.

bottom line

The legalization of cannabis has a direct impact on pharma’s bottom line. Pharma pays politicians to “vote” the way they want to vote. In other words, they’re using money to buy a agency that’s supposed to represent you, but instead primarily represents the needs of their donors. In this case pharmaceuticals.

Although the US has a supermajority in favor of ending the war on cannabis, we still have the federal government stalling at every opportunity. Some might say it’s “the Republicans,” but as we’ve seen, both sides take roughly equal amounts of money. The politicians who run the show are more likely to be bribed by Pharma.

And although Democrats are “complaining” that the only reason weed is illegal is because of Republican opposition, we see that after two years of Democrats holding the majority in power, it’s still not legal!

In fact, Biden and his administrator had taken some pretty crazy actions against the cannabis community, such as: Examples include firing employees for past cannabis use, labeling cannabis users as “untrustworthy and unethical and dangerous” and dodging any question of “keeping their promises”.

Could it be because their pharma masters are telling them to behave this way? Who knows, but it definitely smells like it.

This article originally appeared on Cannabis.net and has been republished with permission.