Legal Cannabis Could Siphon Over $4 Billion from Big Pharma Every Year

Legal Cannabis Could Siphon Over $4 Billion from Big Pharma Every Year

As more and more people turn to medical marijuana in states where the plant has been legalized, questions have been swirling about how the pharmaceutical industry plans to respond. In the case of GW Pharmaceuticals, the UK-based firm behind recently FDA and DEA - approved cannabinoid medication Epidiolex, it's become an “if you can't beat 'em, join 'em” type of play.

This may be a smart move, considering recent numbers put forth from cannabis industry experts New Frontier Data – and first made public by The Cannabist - who state that if medical marijuana were fully legalized nationwide that Big Pharma would see a decrease of around $4 billion in sales annually – a significant amount of cash that would not go unnoticed.

The estimation was based off of findings from a 2016 study out of the University of Georgia, which tracked Medicare Part D spending in states that had approved medical cannabis. In that study, researchers discovered sales of Medicare prescription medications were down for drugs in which marijuana could be an alternative treatment, resulting in annual savings of $165.2 million in 2013. The same research team concluded in a follow-up study that taxpayers could save $1.1 billion every year on Medicaid prescriptions if the US legalized medical marijuana.

Analysts at New Frontier Data extrapolated the data from the University of Georgia study and then analyzed spending on traditional medications for the nine most common medical marijuana qualifying conditions – epilepsy, anxiety, chronic pain, glaucoma, post-traumatic stress disorder (PTSD), Tourette syndrome, sleep problems, nerve pain, and chemotherapy-induced nausea and vomiting. They found an overall 11% decrease in pharmaceutical spending for those conditions in states where medical cannabis is approved. If trends continued, this would result in $4.86 billion of the $425 billion spent on prescription drugs every year going to medical marijuana.

While the loss is a small fraction of Big Pharma's profits, individual companies are more concerned than others, according to John Kaiga of New Frontier Data, specifically those who make popular drugs for the qualifying conditions listed above, such as Pfizer Inc. He believes that a nationwide effort to combat opioid abuse may make for a strong argument for legal medical marijuana, a direct hit at Big Pharma, who sell billions worth of narcotic painkillers every year.

“Any opportunity for alternatives that could result in reduced pharmaceutical drug use might present a compelling point of discussion from a public policy standpoint,” Kaiga told The Cannabist.

Dr. David Bradford, one of the lead authors of the University of Georgia study, echoed Kaiga's sentiment, telling NPR that while reducing Medicare spending would be a great result of legal medical cannabis, it is not the most important.

"We wouldn't say that saving money is the reason to adopt (medical marijuana), but it should be part of the discussion," he said. "We think it's pretty good indirect evidence that people are using (cannabis) as medication” and should be explored further.

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David Kani

David Kani is a Newport Beach, California based business lawyer with a focus on cannabis companies, their investors, employees and cannabis-related litigation.
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