According to a recent study conducted by the University of New Mexico (UNM) and California Polytechnic State University, stock market investors believe that the legalization of cannabis could cause traditional pharmaceutical sales to decline by billions of dollars.
The experts found that stock market returns were 1.5 to two percent lower ten days after a state legalizes medical cannabis. The implications for the annual sales from this reduction were in the billions of dollars. They analyzed how publicly traded pharmaceutical firms responded to medical and recreational cannabis legalization events.
This is the first study to thoroughly examine the overall impact of cannabis legalization on pharmaceutical firms across all products and patient types. Previous studies have looked at how cannabis access reduces the consumption of different medications, such as opioids, or focused on specific groups, like Medicaid patients.
Cannabis may be a more cost-effective healthcare option since the price of pharmaceuticals continues to be a significant barrier for many Americans. Cannabis is also used to treat a wide range of issues, from headaches and muscle spasms to depression or anxiety, in contrast to other medications that target certain health disorders.
Although there is currently no standardization, precise dosing guidelines, or health insurance coverage related to cannabis use, these factors could make cannabis a significant competitor in the drug markets, which – in a scenario of full federal legalization – could reduce conventional pharmaceutical sales by 11%.
According to research co-author Sarah Stith, a specialist in Applied Microeconomy at UNM, “Cannabis patients and their providers currently have insufficient information to steer them towards the most effective treatment for their ailment.”
Understanding the prevalence and effects of plant constituents other than THC and CBD, as well as strategies to classify cannabis by quantitative features known to produce particular effects, are crucial for the development of cannabis medicine. The variety present in the cannabis plant is probably what underlies its potential to treat such a wide range of ailments, therefore, mimicking conventional medications through standardization may not be the best goal for cannabis.
Therefore, rather than advocating against cannabis markets, traditional pharmaceutical manufacturers may benefit from investing in them.
Regulatory policies should encourage additional research to better understand the risks and advantages of using cannabis for medical and recreational purposes.