Researchers affiliated with California Polytechnic State University assessed whether the passage of statewide legalization laws influences pharmaceutical firms’ stock market returns.
Authors reported that legalization is correlated with lower returns. “Returns decreased in response to both medical and recreational legalization, for both generic and brand drug-makers,” they reported. “Investors anticipate a single legalization event to reduce drug-maker annual sales by $3 billion on average.”
They concluded: “Legal cannabis applies competitive pressure to both generic and brand drug markets, across both classes of drug-makers. … We predict that if the remaining … states without medical cannabis legalization were to legalize cannabis, spending on conventional pharmaceutical drugs would decrease by almost 11 percent. … The size of the response we see suggests that investors expect a large substitution away from conventional pharmaceuticals. … The market’s recognition of cannabis as an alternative to conventional medications documented here underscores the need for additional research into the medical potential of cannabis [and] … suggests [that] cannabis might be a useful tool for increasing competition in U.S. drug markets.”
Prior studies have consistently shown that those with access to cannabis products typically reduce or eliminate their consumption of pharmaceutical drugs over time, particularly with respect to the use of opioids, benzodiazepines, anxiolytics, and sleep aids.
Specifically, data published earlier this year in the journal Health Economics identified “significant reductions in the volume of prescriptions within the drug classes that align with the medical indications for pain, depression, anxiety, sleep, psychosis, and seizures” in states that had enacted adult-use cannabis legalization. Prior ecological studies have similarly identified an association between the adoption of medical cannabis access laws and reduced Medicaid prescription drug spending.
Full text of the study, “US cannabis laws projected to cost generic and brand pharmaceutical firms billions,” appears in PLOS One. Additional information on cannabis/prescription drug substitution is available from NORML.