person using tweezer like tool to remove cannabis from a glass jar
Julie Hambleton
Julie Hambleton
September 7, 2022 ·  4 min read

Legal Weed Likely To Cost Drug Companies Billions

There are several countries, for example Canada and the Netherlands, that have already legalized marijuana. There are several states, as well, that have long since legalized it. What would happen, however, if the government were to legalize it federally? A new study shows that legal weed would likely cost drug companies, aka big pharma, billions. Here’s why.

Legal Weed Would Cost Big Pharma Big Bucks

Researchers affiliated with California Polytechnic State University and The University of New Mexico recently studied what effect legal weed would have on drug companies’ profits. The answer, in short, is that it would cost them big time. Billions of dollars, to be exact. Not only would legal weed reduce drug sales, but it would also negatively affect drug companies’ stock market value. They determined this by studying how the stock market returns of publicly traded pharmaceutical firms responded to laws legalizing medical and recreational cannabis over a 25-year period between 1996 and 2019. The returns within the first 10 days post-legalization are 1.5% to 2% lower, which translates to billions of dollars for those companies. A single legalization event could reduce annual drug maker sales by approximately $3 billion. (1)

“Using a data set and estimation approach novel to health policy, we find evidence that investors predict legal cannabis access will significantly decrease sales of conventional pharmaceutical drugs. Legal cannabis applies competitive pressure to both generic and brand drug markets, across both classes of drugmakers,” the authors of the study wrote. “This makes legal cannabis distinct from typical brand drug patent expiration and generic drug entry where typically only one drug, the drug coming off patent, and its substitutes are affected. Furthermore, cannabis can be purchased without a prescription and home cultivated, unlike any other conventional medication.”

Why Does Legal Weed Have Such A Big Impact?

One of the biggest reasons why legal weed impacts big pharma so much is because it reduces people’s need for other drugs. Legal weed is much more affordable than most pharmaceuticals and also can be used to treat a wide range of symptoms and issues. For example, marijuana can be highly effective for pain management. It can also help people with mental health problems, such as anxiety. Traditional medications are created and tested only for specific ailments. So someone who has chronic pain would need to take one drug for the pain and a separate one for the anxiety that often comes along with it.

There are more benefits. When talking about pain, often the prescribed drugs are highly addictive opioids. Weed, which is far less addictive and much safer than opioids, is a better option. Legal weed also removes a barrier to affordable healthcare for many. Most drugs are extortionately priced by big pharma and are a big blockade to people accessing the health care that they need. It will also reduce the fiscal burden on the state and government.

Read: Bees Absolutely Love Cannabis and It Could Help Restore Their Populations

A Significant Competitor 

Nationwide marijuana legalization would present a massive competitor to big pharma. This would force them to offer better prices on many drugs. This is because, as already mentioned, marijuana can be used to treat a large variety of conditions and health problems. In fact, it could result in a reduction of pharmaceutical sales of almost 11%. That is a lot of money for those companies. What we currently lack, however, is proper education and information on how to use marijuana properly for medical purposes.

“Currently, cannabis patients and their providers have little information to guide them towards the most effective treatment for their condition,” said study co-author Sarah Stith. “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.”

Medical vs. Recreational

The researchers found that, while medical marijuana impacted the pharmaceutical market, it is actually recreational marijuana that has the biggest impact. They believe that this is probably because recreational weed affects more people and creates a new, larger market. The researchers also discovered that brand-name manufacturers were more affected than generic ones.

“The implied sales decrease from recreational legalization is about 129% greater than that of medical legalization,” the researchers noted in the study. “Comparing effects on generic and brand drugmakers, we find the effect on brand drugmakers is 224% larger than the effect on generic drug maker sales.” (2)

Of course, legalization can’t just happen overnight. There has to be a plan in place of how it will be done and how it will be distributed. Education and promotion need to happen so that it is done in an organized way. While it may not be immediate, it doesn’t look like legal weed for all of the United States is too far-fetched of a dream as it may seem.

Keep Reading: Scientist: Cannabis-Based Antibiotics Could Be Available Within Five Years

Sources:

  1. “Legal Weed Likely To Cost Drug Companies Billions” High Times. September 2, 2022.
  2. “Cannabis legalization in US projected to cost big pharma billions” NewAtlas. September 5, 2022.
  3. “U.S. cannabis laws projected to cost generic and brand pharmaceutical firms billions” PLOS One. August 31, 2022.