Is Cannabis Legalization The End For Pharma Stocks? New Study Predicts Billions In Losses

Federal cannabis legalization might reduce conventional pharmaceutical sales by billions of dollars according to a new study conducted by researchers from California Polytechnic State University and the University of New Mexico.

The study, titled “U.S. Cannabis Laws Projected to Cost Generic and Brand Pharmaceutical Firms Billion,” examined the performance of publicly traded pharmaceutical companies after medical or recreational legalization actions.

Ziemowit Bednarek from the Finance department at California Polytechnic State University, Sarah Stith from the University of New Mexico’s Economics department, and a co-author confirmed that pharma stocks had 1.5-2% lower returns in just 10 days upon marijuana legalization, writes UNM Newsroom. 

What’s more, the results revealed these reductions caused billions of losses in annual sales. 

While other studies have revealed how marijuana access lowers the use of certain drugs such as opioids or has reduced its use among certain patient populations, such as Medicaid patients, this is said to be the first study of its kind to examine the comprehensive impact of marijuana on pharmaceutical companies across all products and types of patients. 

Why is the impact of one plant so overwhelming?

Cannabis Versus Standard Drugs – Incomparable

It is because cannabis is an amazing plant comprised of many compounds that differently impact our bodies and minds. As such, it is often used to address a variety of conditions, from anxiety and sleep troubles, to headaches and muscle spasms, not to mention more serious illnesses such as specific types of epilepsy. Compared to all the other drugs created to target certain conditions or symptoms, it’s easy to understand why marijuana’s impact is so powerful.

On top of that is the price of pharmaceutical drugs, which often poses a struggle for many Americans and creates a financial strain on the federal government. That is why many see marijuana as a great way to boost the economy and deal with the opioid epidemic, among other benefits.

According to the authors of the study, full federal cannabis legalization could result in an 11% reduction in sales of conventional pharmaceutical drugs. 

“Currently, cannabis patients and their providers have little information to guide them towards the most effective treatment for their condition,” co-author Sarah Stith said. “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. Mimicking conventional pharmaceuticals through standardization may not be the optimal endpoint for cannabis, as the variability inherent in the cannabis plant is likely driving its ability to treat so many conditions.”

The authors also noted that adult-use legalization had more than twice the impact of medical legalization, and that branded drug producers were more affected than generic producers. They concluded that pharmaceutical companies could benefit more from investing in the marijuana market, instead of advocating against it.

Pharma Giant Advocating Against Cannabis 

While it is nothing new to say that the pharma industry wouldn’t like to see cannabis legal for its gains, it is quite shocking to see the figures from the study that reveals how huge an impact legalization would have.

Pharma companies are known to lobby against marijuana. Just recently, the Community Anti-Drug Coalitions of America (CADCA), which is fighting against federal cannabis legalization, removed a page from its website disclosing its partners, among which was pharma giant Pfizer Inc. PFE. 

To make things worst, or just hypocritical, last December, Pfizer announced its entry into the cannabis space via a $6.7 billion acquisition of San Diego-based Arena Pharmaceuticals, Inc., a biotech company with one segment of its drug pipeline dedicated to cannabinoid-type therapeutics. The core of its cannabis biotech operations is R&D of its investigational drug candidate Olorinab (APD371). This is an oral full agonist of the cannabinoid receptor 2 being researched for the treatment of various symptoms, mainly concentrated on visceral pain connected with gastrointestinal illnesses.

While one might argue that Pfizer is not involved in the plant-touching aspect of marijuana but rather searching for drugs that target cannabinoid receptors, the argument actually supports the suggestion that the pharmaceutical giant would like to dominate this field as well, in that cannabis has many compounds that affect our cannabinoid receptors.

Photo: Berk Ozel and IRA_EVVA and Anneleven Stock by Shutterstock