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Pharmaceutical firms holding up legalization MJ

Cannabis legalization decreases the stock market value of major pharmaceutical firms

September 01, 2022

Researchers from California Polytechnic State University and The University of New Mexico find that stock market investors predict cannabis legalization will reduce conventional pharmaceutical sales by billions of dollars.

In 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 New 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 in the billions.

Other studies have determined that cannabis access reduces the consumption of specific types of medications, such as opioids, or in certain patient populations like Medicaid patients, but this is the first study to analyze the overall effect of cannabis on pharmaceutical firms across all products and types of patients. Unlike other drugs, which are designed to target and are approved for specific conditions, cannabis is used to treat an astonishing range of conditions including physical symptoms such as headaches and muscle spasms as well as mental conditions such as depression and anxiety.

The cost of pharmaceutical drugs remains a major barrier to healthcare for many Americans and a significant financial burden to state and federal governments – cannabis may be part of the solution. The current study concludes that cannabis acts as a new competitor in drug markets. Extrapolating the results to full federal legalization, the authors estimate a reduction in conventional pharmaceutical sales of almost 11%. Substitution away from conventional drugs towards cannabis appears to be occurring even without standardization, clear dosing instructions, or health insurance coverage.

http://news.unm.edu/news/cannabis-legalization-decreases-the-stock-market-value-of-major-pharmaceutical-firms