A new study led by the California Polytechnic State University and the University of New Mexico (UNM) has found that stock market investors predict that cannabis legalization may reduce conventional pharmaceutical sales by billions of dollars.
By analyzing how the stock market returns of publicly traded pharmaceutical firms responded to medical and recreational cannabis legalization events, the experts discovered that stock market returns were 1.5 to two percent lower at ten days following a cannabis legalization event, and that the implication for the annual sales from this reduction were in the billions of dollars.
While previous studies have investigated how cannabis access reduces the consumption of various types of medications, such as opioids, or focused on its impact on certain groups, like Medicaid patients, this is the first study to comprehensively analyze the overall effect of cannabis legalization on pharmaceutical firms across all products and types of patients.
Since the cost of pharmaceutical products remains a critical barrier to healthcare for many Americans, cannabis could offer a more affordable solution. Moreover, unlike other drugs which are designed to target specific health conditions, cannabis is used to treat a wide variety of problems – ranging from headaches and muscle spasms to depression or anxiety. These factors could make cannabis a major competitor in drug markets, which – in a scenario of full federal legalization – could reduce conventional pharmaceutical sales by 11 percent, regardless of the fact that currently, there is no standardization, clear dosing instructions, or health insurance coverage related to cannabis use.
“Currently, cannabis patients and their providers have little information to guide them towards the most effective treatment for their condition,” said study co-author Sarah Stith, an expert in Applied Microeconomy at UNM.
“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.”
Thus, conventional pharmaceutical manufacturers may benefit from investing in cannabis markets rather than lobbying against them, while regulatory policies should facilitate further research to clarify the risks and benefits of using cannabis for both medical and recreational purposes.
The study is published in the journal PLoS ONE.