Cannabis legalization drives down the stock market value of big pharma (UNM Newsroom)


Researchers from California Polytechnic State University and the University of New Mexico found that stock market investors predict cannabis legalization will cut sales of conventional pharmaceuticals by billions of dollars.

In their recent study, “U.S. Cannabis Laws Set to Cost Generic and Brand-Name Pharma Companies Billions,” published in PLOS A, Ziemowit Bednarek of the Department of Finance at California Polytechnic State University, Sarah Stith of the Department of Economics at the University of New Mexico, and a co-author studied how the stock returns of publicly traded pharmaceutical companies responded to events legalization of medical and recreational cannabis. They found that stock market returns were 1.5-2% lower 10 days after a cannabis legalization event, and that the annual sales implications of this reduction were in the billions.

Other studies have determined that access to cannabis reduces use of specific types of drugs, 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 companies for all products and types. of sick. Unlike other drugs, which are designed to target and 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 conditions mental illnesses such as depression and anxiety.

The cost of pharmaceutical drugs remains a major barrier to health care for many Americans and a significant financial burden for state and federal governments – cannabis can be part of the solution. This study concludes that cannabis is acting as a new competitor in drug markets. Extrapolating the results to full federal legalization, the authors estimate a reduction in sales of conventional pharmaceuticals of almost 11%. The substitution of conventional drugs for 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 toward the most effective treatment for their condition. The future of cannabis medicine lies in understanding the prevalence and effects of plant components beyond THC and CBD and in identifying ways to categorize cannabis according to measurable characteristics known to produce effects. specific. Mimicking conventional pharmaceuticals through standardization may not be the optimal outcome for cannabis, as the inherent variability of the cannabis plant is likely the source of its ability to treat so many conditions.

In addition to their general findings that cannabis legalization lowers the market value of publicly traded pharmaceutical companies, the authors found that recreational legalization had more than twice the impact of medical legalization, likely due to population much greater impact, as access to medical cannabis is generally restricted to those with serious and debilitating illnesses. Brand-name drug makers have been hit harder than generic drug makers, perhaps due to a greater competitive impact of cannabis entering drugs without any existing competitors.

The study concludes that conventional pharmaceutical manufacturers could benefit from investing in cannabis markets rather than lobbying against them and that regulatory policy should facilitate further research into the risks and benefits of cannabis use. for medical and recreational purposes. The magnitude of the negative effect of cannabis legalization on stock market returns from investments in conventional pharmaceutical companies suggests that cannabis is likely to be a permanent and growing player in pharmaceutical markets around the world.


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