SEP 23, 2022 7:05 AM PDT

Cannabis Legalization's Impact on Pharmaceutical Stock Market Values

WRITTEN BY: Kerry Charron

In states with legal medical cannabis, people are curious about using cannabinoid treatment as an alternative to pharmaceuticals that commonly have undesirable side effects. Industry reports show a steady increase in medical cannabis card applications. A team of researchers examined the impact of cannabis on the stock market projections and predicted cannabis legalization will reduce conventional pharmaceutical sales by billions of dollars. The findings published in PLOS One highlight that stock market returns were 1.5-2% lower following a cannabis legalization event. 

Researchers estimate an 11% reduction in pharmaceutical profits when predicting the potential financial impact of full federal legalization. They also observed that recreational legalization can have an even greater impact than medical legalization for several reasons. For example, recreational or adult use cannabis is an option to those who use cannabis for therapeutic reasons but may not qualify in states that only approve cards for those patients with severe, debilitating conditions. The study also found that branded drug manufacturers are more negatively impacted than generic manufacturers. 

The study concludes that conventional pharmaceutical manufacturers may benefit from investing in cannabis markets. Pharmaceutical firms have traditionally lobbied against the cannabis industry, but the report indicates opportunities to partner with medical cannabis organizations for research activities. Analysis of the cannabis industry and conventional pharmaceutical trends show an increase in interest and concern from the pharmaceutical perspective. 

The study also highlights key implications for health policy. Study author Sarah Stith explains: “Currently, cannabis patients and their providers have little information to guide them towards the most effective treatment for their condition. 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.” This extensive study is the first to analyze the impact of medical cannabis sales on pharmaceutical firms across all cannabinoid products and types of patients, and the findings provide valuable insights into understanding factors driving patient choice and consumer behavior. 

Sources: PLOS One, University of New Mexico Newsroom

 

About the Author
BA and MA in English, MPS in Human Relations, and Ed.D. in Higher Education Administration
Kerry Charron writes about medical cannabis research. She has experience working in a Florida cultivation center and has participated in advocacy efforts for medical cannabis.
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