Individual states continue to open their doors to medical and recreational marijuana, and as they do a new frontier of treatment options opens up to all that states citizens who struggle with various conditions. From cancer to Multiple Sclerosis and many other conditions in between, cannabis is starting to help those who, before medical or recreational cannabis legalization, only had access to pharmaceutical medications.
While this is great news for those who previously had limited tools to treat their medical conditions and the pains associated with them, this is causing shortfalls in pharmaceutical stocks that are likely to widen as legalization efforts progress further.
A recent study published in the journal PLOS ONE has data suggesting that when medical and recreational marijuana becomes legal in a state, there is a swift and noticeable dip in pharmaceutical stock profits. While this decrease might not look significant when measuring overall profits of one of the grandest and most profitable industries, the losses this study is suggesting are certainly eye opening and worth some contemplation.
To put things into perspective, you should understand how much of an impact just one legalization can affect overall drug company profits margins. According to the study, “Returns decreased in response to both medical and recreational legalization, for both generic and brand drugmakers. Investors anticipate a single legalization event to reduce drugmaker annual sales by $3 billion on average.” Regardless of how big of an industry it is, $3 billion is not petty cash. Further, this loss occurs each year, and just from one legalization.
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What makes these losses even more dramatic is that they often begin to take effect almost immediately. According to the study, the average stock returns were 1.5-2% lower just 10 days after legalization of cannabis in a given state. This shows that not only is there a very real and noticeable loss in profit, but the losses begin almost like clockwork after a state grants legal access to marijuana.
This financial downturn the drug companies are taking on might have you wondering if and how these powerful companies are responding to this. As the New Atlas reported “The study does note there is evidence that pharmaceutical companies have recognized this threat from legalized cannabis and begun targeted lobbying to prevent broader legalization.”
It is no secret that pharmaceutical companies are doing what they can to stop further legalization efforts. In fact, The Guardian first reported on pharmaceutical companies funneling money in an effort to block future marijuana legalization across the country in a 2016 article, and these efforts do not currently show signs of ending. After all, why would they — until the last state has legalized marijuana that is.
Still, one has to wonder if this is a futile battle. Perhaps, rather than fighting off cannabis, pharmaceutical companies can invest more into understanding the many possibilities and benefits of cannabis. It is, after all, still a relatively untapped resource for potential new products.
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As we previously reported, a new study came out this summer showing that cannabinoids can be safer and more effective than opioids for certain types of pain.
If the energy being placed to stop cannabis legalization was channeled into finding more ways to use cannabis to treat illnesses, who knows what great and profitable results could be achieved.