Researchers from California Polytechnic State University and The University of Latest Mexico find that stock market investors predict cannabis legalization will reduce conventional pharmaceutical sales by billions of dollars.
Of their recent study, “U.S. Cannabis Laws Projected to Cost Generic and Brand Pharmaceutical Firms Billions,” published in PLOS One, Ziemowit Bednarek from the Finance department at California Polytechnic State University, Sarah Stith from the University of Latest Mexico’s Economics department, and a co-author studied how the stock market returns of publicly traded pharmaceutical firms responded to medical and recreational cannabis legalization events. They found that stock market returns were 1.5-2% lower at 10 days following a cannabis legalization event and that the implications of the annual sale from this reduction were within the billions.
Other studies have determined that cannabis access reduces the consumption of specific sorts of medications, akin to opioids, or in certain patient populations like Medicaid patients, but that is the primary study to research the general effect of cannabis on pharmaceutical firms across all products and sorts of patients. Unlike other drugs, that are designed to focus on and are approved for specific conditions, cannabis is used to treat an astonishing range of conditions including physical symptoms akin to headaches and muscle spasms in addition to mental conditions akin to depression and anxiety.
The associated fee of pharmaceutical drugs stays a significant barrier to healthcare for a lot of Americans and a big financial burden to state and federal governments – cannabis could also be a part of the answer. The present study concludes that cannabis acts as a latest competitor in drug markets. Extrapolating the outcomes to full federal legalization, the authors estimate a discount in conventional pharmaceutical sales of just about 11%. Substitution away from conventional drugs towards cannabis appears to be occurring even without standardization, clear dosing instructions, or health insurance coverage.
Co-author Sarah Stith continues, “Currently, cannabis patients and their providers have little information to guide them towards probably the most effective treatment for his or her condition. The longer term 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 which might be known to yield specific effects. Mimicking conventional pharmaceuticals through standardization might not be the optimal endpoint for cannabis, because the variability inherent within the cannabis plant is probably going driving its ability to treat so many conditions.”
Along with their overall findings that cannabis legalization decreases the stock market value of publicly traded pharmaceutical firms, the authors found that recreational legalization had greater than twice the impact of medical legalization, presumably due to much larger affected population as medical cannabis access is usually restricted to those with severe, debilitating conditions. Branded drug manufacturers were more affected than generic manufacturers, perhaps as a result of a greater competitive impact from cannabis entry on drugs with none existing competitors.
The study concludes that conventional pharmaceutical manufacturers may profit from investing in cannabis markets somewhat than lobbying against them and that regulatory policy should facilitate further research into the risks and advantages of using cannabis for each medical and recreational reasons. The magnitude of the negative effect of cannabis legalization on the stock market returns from investing in conventional pharmaceutical firms suggests that cannabis is prone to be a everlasting and growing player in pharmaceutical markets worldwide.