A new report estimates that if cannabis was to be legalized across the United States, it could cut into pharmaceutical sales by billions of dollars.
Cannabis-based medications could have a significant impact on the sale of traditionally developed pharmaceuticals, including brand-named drugs and generics, a new report suggests.
Researchers from the University of New Mexico and California Polytechnic State University forecasted the impact that approved cannabis-based and cannabis-related medications would have on the stock market returns of publicly traded pharmaceutical companies. The report also looked at the effects of the legalization of recreational cannabis.
Paper co-author Sara Stith, an economics professor from UNM, explains that the use of cannabis to treat certain conditions can be considered a new competitor in the marketplace. If cannabis was to be legalized across the United States, she and Ziemowit Bednarek of Cal Poly estimate it could cut into pharmaceutical sales by about 11%, which accounts for billions of dollars in revenue for drug companies.
Stith and Bednarek found that stock market returns were lower by 1.5% to 2% 10 days after legalization or regulatory authorization. That dip accounts for significant losses across the industry, the researchers said.
“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,” Stith said in a statement.
BioSpace reached out to the study authors for additional insight into their research.
The study, U.S. Cannabis Laws Projected to Cost Generic and Brand Pharmaceutical Firms Billions, was published in PLOS One.
Because cannabis could become a competitor to conventional pharmaceuticals, the authors suggest that companies could benefit from investing in cannabis research rather than opposing its regulation. And, to be sure, there are multiple companies making such investments. In 2020, data released by Transparency Market Research showed significant investments were being made by companies into cannabidiol development.
Two areas of focus in the cannabis pharmaceuticals market are in reducing the opioid epidemic and the management of some cancers, the market researchers wrote. “Stakeholders also appreciate the potential of medical cannabis for aesthetic and medical dermatology,” they said.
The FDA has approved four medications that are either cannabis-derived or cannabis-related. The first is Epidiolex, now owned by Jazz Pharmaceuticals, which in 2018 became the first cannabis-based drug approved by the FDA. This drug required a reclassification by the U.S. Drug Enforcement Agency prior to commercialization.
Epidiolex, which is derived from cannabidiol, was approved by the FDA for the treatment of seizures associated with two rare forms of epilepsy, Lennox-Gastaut syndrome (LGS) and Dravet syndrome.
The FDA has also approved three medications that are related to cannabis. Those drugs are Marinol and Syndros, both of which include dronabinol and synthetic delta-9- tetrahydrocannabinol (THC), which is considered the psychoactive component of cannabis. The other is Cesamet, which contains nabilone, an active ingredient that has a chemical structure similar to THC, according to the FDA.
