The legalization of cannabis could lower the market value of pharmaceutical companies

Legalizing cannabis could reduce sales of conventional medicines by billions of dollars, according to a US study published on Wednesday.

In their study, “US Cannabis Laws Set to Cost Pharma Companies Billions,” a team from the University of New Mexico’s Department of Economics examined how stock returns of publicly traded pharmaceutical companies responded to medical and recreational cannabis legalization events.

They found that stock market returns were 1.5-2% lower 10 days after cannabis legalization, and that the annual revenue impact of this reduction was in the billions.

Other studies have found that access to cannabis reduces opioid use, but this is the first study to analyze the overall impact of cannabis on pharmaceutical companies across all products and patient types.

Unlike other medications that target and are approved for specific medical conditions, cannabis is used to treat a staggering range of medical conditions, including physical symptoms such as headaches and muscle spasms, as well as mental illnesses such as depression and anxiety or menstrual cramps.

The cost of pharmaceutical drugs remains a major barrier to accessing health care for many Americans and a significant financial burden on state and federal governments. So cannabis could be part of the solution.

The study concludes that cannabis is emerging as a new competitor in the medical markets.

If the results are extrapolated to full federal legalization, the authors estimate a drop in sales of almost 11% for conventional drugs. The substitution of cannabis for conventional medicines also appears to be occurring without standardization, clear dosing instructions, or health insurance coverage.

In addition to depressing the value of publicly traded pharmaceutical companies, the authors found that legalizing recreational users had more than twice the impact of legalizing drugs, likely due to the much larger affected population due to reduced access to medicinal cannabis is generally limited to people with serious illnesses.

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