Drug Stocks Drop When Recreational Cannabis Legalized

PainRelief.com: What are the main findings?

Response: Prior studies have determined that cannabis access reduces consumption of specific types of medications, such as opioids, often using data on specific patient populations like Medicare patients, but this is the first study to analyze the overall effect of cannabis on pharmaceutical firms across all products and types of patients. Unlike other drugs, which are designed to target and are approved for specific conditions, cannabis is used to treat an astonishing range of conditions including physical symptoms such as headaches and muscle spasms as well mental conditions like depression and anxiety.  

In addition to our overall findings that cannabis legalization decreases the stock market value of publicly traded pharmaceutical firms, we found that recreational legalization had more than twice the impact of medical legalization, presumably because of the much larger affected population as medical cannabis access is typically restricted to those with severe, debilitating conditions. Branded drug manufacturers were more affected than generic manufacturers, perhaps due to a greater competitive impact from cannabis entry on patented drugs that have no competitors. 

The cost of pharmaceutical drugs remains a major barrier to healthcare for many Americans and a significant fiscal burden to state and federal governments – cannabis may be part of the solution. Extrapolating our results to full federal legalization, we estimate a reduction in conventional pharmaceutical sales of almost 11%. Substitution away from conventional drugs towards cannabis appears to be occurring even without standardization, clear dosing instructions, or health insurance coverage.

PainRelief.com: What should readers take away from your report?

Response: The magnitude of the negative effect of cannabis legalizations on the stock market returns from investing in conventional pharmaceutical firms suggests that cannabis is likely to be a permanent and growing player in pharmaceutical markets worldwide.

PainRelief.com: What recommendations do you have for future research as a result of this study?

Response: The current results combined with the many prior studies on specific medications, conditions, and patient populations point toward the need for better understanding of 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 may be driving its ability to treat so many conditions.

PainRelief.com: Is there anything else you would like to add? Any disclosures?

Response: Our study concludes that conventional pharmaceutical manufacturers may benefit from investing in cannabis markets rather than lobbying against them and that regulatory policy should facilitate further research into the risks and benefits of using cannabis for both medical and recreational reasons.

We have no conflicts of interest to disclose.


Bednarek Z, Doremus JM, Stith SS (2022) U.S. cannabis laws projected to cost generic and brand pharmaceutical firms billions. PLoS ONE 17(8): e0272492. https://doi.org/10.1371/journal.pone.0272492

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Last Updated on September 6, 2022 by PainRelief.com