A recent scientific study revealed that, in the United States, the legalization of cannabis for medical and recreational use collapse the revenues of Big Pharma.
Lo study, published in the magazine Plos One and conducted by scientists from California Polytechnic State University and The University of New Mexico, evidence as with the legalization of cannabis the revenue of large pharmaceutical companies they fall to the ground.
Big Pharma loses billions with legalization
"The legalization of cannabis by the United States is increasing the use of cannabis as alternative to conventional drugs. We examined how cannabis legalization between 1996 and 2019 affected the returns of publicly traded generic and brand-name pharmaceutical companies and found that they were lower than 1.5-2% 10 days after legalization."
"For both generic and branded drug manufacturers, profits are significantly decreased. For investors, a single legalization event would reduce pharmaceutical companies' annual sales by approximately 3 billion of dollars."
Cannabis competes with conventional drugs
“Despite cannabis being classified as a Schedule I drug, with no medical use and high risk of abuse, in 2020 33 states they had legalized medical access for serious and debilitating conditions."
Whereas: "There is a growing awareness of its potential therapeutic benefits for a wide range of conditions. By expanding access and, therefore, use, legalization could allow cannabis to compete with conventional drugs."
And again, “For the most part not patentable, cannabis could act as a new generic drug, leading some individuals to substitute other medications for cannabis."
"However, - continues the study - unlike a new conventional generic drug, the use of cannabis it is not limited to a single or limited set of conditions. This means that cannabis simultaneously acts as a new entrant in several pharmaceutical sectors."
“Additionally, access to recreational cannabis is similar to conventional over-the-counter medications in terms of its use no longer requires supervision of a healthcare worker."
Conclusions of the study
“Investors expect access to legal cannabis will decrease significantly sales of conventional drugs and will be able to compete in both the generic and branded drug markets. Furthermore, cannabis, unlike any other conventional drug, can be purchased without a medical prescription and home grown."
"Considering the size of the effect we estimate, there will be important consequences for stakeholders, including pharmaceutical companies, patients and their suppliers, investors, regulators and the academic community, for both past and future legalization events. Below we analyze the repercussions for each of the interested parties"
Big Pharma, patients and investors
"For private and public pharmaceutical companies, we expect the response to legalization to include investments and marketing. Recently, Pfizer paid up 6.7 billion of dollars to acquire a biotech company dealing with cannabinoid therapies."
"For patients, our results suggest that cannabis is a therapeutic alternative, but there are likely to be limits to substitution. The difficulties of standardizing cannabis, the limits of patentability and the lack of knowledge on therapeutic mechanisms mean that the potential of cannabis to compete with FDA-approved drugs is currently limited for many patients and their providers, and for some it may never be fully competitive."
And again, "For this reason, cannabis could operate as drug off the market pharmaceutical in the near future. However, despite the likely increase in out-of-pocket costs, our work and that of others suggests that many patients are switching from medications to cannabis post-legalization.”
"For investors, the negative impact of cannabis legalization on the market price indicates the adaptation of expectations on the future cash flows of pharmaceutical companies. The magnitude of the effect implies that capital market participants should monitor the evolution of the legal cannabis landscape as they diversify their portfolios."
Discover the true therapeutic potential of cannabis
"Although current medical cannabis patients and their providers will not be surprised by the conclusions of this article, our findings may help inform regulatory authorities on the therapeutic potential of cannabis."
"Our findings suggest that recreational users may even experiment unexpected medical benefits. The consequences for population health will depend on the number of people switching from conventional medications to cannabis and the relative benefits, risks and side effects of the two treatments, as well as the costs and benefits of cannabis use for new cannabis users who did not previously consume conventional medications."
"Furthermore, our study suggests that cannabis could be a useful tool for increase competition in US drug markets. We predict that if the remaining 16 states without medical cannabis legalization were to legalize cannabis, spending on conventional drugs would decrease by almost 11%.
"The market's recognition of cannabis as an alternative to conventional medications highlights the need for further research on the medical potential of cannabis, including phytochemicals beyond tetrahydrocannabinol (THC) and cannabidiol (CBD).”
"The magnitude of the response we see suggests what investors expect a large replacement of conventional drugs. A broad shift towards the therapeutic use of cannabis makes it particularly urgent research need on cannabis policy. Key areas include policies that regulate cannabis use to maximize benefits and minimize costs."
