As Legalization Looms, AbbVie And Other Major Pharma Players Set Sights On Cannabis Market

A recent report from the U.S. Federal Trade Commission (FTC) has brought attention to the substantial influence of pharmacy benefit managers (PBMs) on drug pricing due to market consolidation. This situation raises important questions about the future of the cannabis industry, particularly in the context of potential federal legalization.

PBMs such as UnitedHealth Group's Optum, CVS Health's CVS Caremark, and Cigna's Express Scripts play a crucial role in negotiating discounts, determining medication lists covered by insurance, and reimbursing pharmacies. According to the FTC's interim report, these three PBMs manage nearly 79% of U.S. prescription drug claims, which gives them considerable power over drug prices and availability.

Potential Impacts on the Cannabis Industry

The consolidation trend observed in the pharmaceutical sector could offer a glimpse into the future of the cannabis industry. Roy Bingham, CEO of BDSA, forecasts the U.S. cannabis market to grow to $46 billion by 2028, driven by the expansion of adult-use markets and the emergence of new regulated markets. If cannabis gains federal legalization, it could attract significant interest from pharmaceutical companies.

Companies like Jazz Pharmaceuticals and AbbVie have already ventured into the cannabis space with products such as Epidiolex and Marinol. Federal legalization could prompt these companies to further invest in cannabinoid research, leveraging their extensive resources and infrastructure. This could lead to a similar consolidation trend seen in the pharmaceutical industry, where a few major players dominate the market.

Economic and Regulatory Changes

Rescheduling cannabis to Schedule III could alleviate tax burdens on cannabis businesses, injecting more capital into the industry. This financial boost could expedite research and development efforts, attracting both healthcare and pharmaceutical companies. However, this shift would also introduce stricter regulations, necessitating controlled distribution by licensed pharmacists, potentially mirroring the current PBM model.

Trends and Challenges Facing the Cannabis Market

The cannabis industry is already experiencing consolidation. Analysts, including Pablo Zuanic, have observed declining cannabis sales across several states, which is accelerating industry consolidation. Larger, well-funded multi-state operators are likely to benefit, creating an environment where a few dominant players control substantial market share. For instance, in California, the cannabis market is consolidating amid falling sales, with early 2024 figures indicating a continuing decline.

Despite challenges such as reduced profitability and tighter margins for retailers, leading brands have established strong market positions and expanded into other states through licensing and direct investments.

Looking Ahead: Benzinga’s Cannabis Capital Conference

These industry trends will be a focal point at Benzinga’s Cannabis Capital Conference, scheduled for October 8-9 in Chicago. The event will gather C-Suite executives, political figures, and capital market decision-makers to discuss the future of cannabis and investment opportunities. One of the featured speakers, Anthony Scaramucci, will offer insights on how federal legalization might shape the industry’s future.

This conference promises to provide valuable networking opportunities and in-depth discussions on the evolving cannabis market, making it a must-attend event for those interested in the future of digital assets and cannabis investments.

Now Read:

• Trump Media, Other Trump-Linked Stocks Rally After Assassination Attempt On Former President

Image: Courtesy of Anan Kaewkhammul via Shutterstock