How weed affects pharmaceutical profits – and what that could mean for legalization

Individual states continue to open their doors to medical and recreational marijuana, opening up new treatment options for all residents of those states struggling with various medical conditions. From cancer to multiple sclerosis and many other conditions in between, cannabis is beginning to help those who, prior to the legalization of medical or recreational cannabis, only had access to pharmaceutical drugs.

While this is great news for those who previously had limited options for treating their condition and the pain it brings, it is creating shortages in drug supplies that are likely to widen as legalization efforts progress.

A recently to learn published in the journal PLOS ONE has data suggesting that when medical and recreational marijuana becomes legal in a state, there will be a rapid and noticeable drop in pharmaceutical stock earnings. While this decline may not seem significant when measuring the overall profits of one of the largest and most profitable industries, the losses this study suggests are certainly eye-opening and worth considering.

To put things into perspective, it’s important to understand the impact that just one legalization can have on overall pharmaceutical company profit margins. According to the study, “Returns for both generic and branded drug manufacturers declined in response to drug and recreational product legalization. Investors estimate that a single legalization event will reduce the drugmaker’s annual sales by an average of $3 billion.” No matter the size of an industry, $3 billion is not petty cash. Also, this loss occurs every year, and only from one legalization.

RELATED: Big Pharma Loses Billions With Every State That Legalizes Weed, So What’s Their Next Step?

What makes these losses even more dramatic is that they often take effect almost immediately. According to the study, average stock returns were 1.5-2% lower just 10 days after cannabis was legalized in a given state. This shows that not only is there a very real and tangible loss of earnings, but the losses start almost like clockwork after a state grants legal access to marijuana.

This financial downturn that drug companies are taking may make you wonder if and how these powerful companies are responding. As a new atlas reported “The study finds that there is evidence that pharmaceutical companies have recognized this threat posed by legalized cannabis and have begun targeted lobbying to prevent wider legalization.”

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It’s no secret that drug companies are doing everything they can to stop further legalization efforts. In fact, The Guardian first reported in a Article 2016, and these efforts currently show no sign of stopping. After all, why should they — until the last state legalized marijuana.

Still, one has to wonder if this is a futile struggle. Perhaps pharmaceutical companies can invest more in understanding the many possibilities and benefits of cannabis rather than shying away from cannabis. Finally, it is still a relatively untapped resource for potential new products.

RELATED: Why big pharma loves the power of synthetic cannabinoids

As we so far reported, a new study came out this summer and showed that cannabinoids may be safer and more effective than opioids for certain types of pain.

If the energy expended to stop the legalization of cannabis was directed towards finding more ways to use cannabis to treat diseases, who knows what great and profitable results could be achieved.