A new report estimates that medical marijuana could cut into the pharmaceutical industry to the tune of $4 billion annually.
The report released by New Frontier Data suggests that if patients exchanged conventional prescription drugs for medical marijuana in 9 specific conditions, pharmaceutical companies could be affected accordingly.
“Any opportunity for alternatives that could result in reduced pharmaceutical drug use might present a compelling point of discussion from a public policy standpoint,”
said John Kagia, executive vice president of industry analytics for New Frontier.
The report takes into consideration the prescription opioid painkillers that have caused a nationwide epidemic and a resurgence in heroin use. By swapping addictive opioids with medical marijuana, it could have an effect on mortality and addiction rates associated with opioid use.
The research uses data from a 2016 study that tracked prescription spending of Medicare patients in states with legalized medical marijuana. A secondary study estimated that by legalizing medical marijuana nationwide, it could amount to $1.1 billion in taxpayer savings.
New Frontier used this data by using the average reduction of 11 percent to yearly spending on prescriptions, specifically to nine conditions that are most commonly used when qualifying for medical marijuana programs. They include chronic pain, PTSD, sleep disorders, anxiety, epilepsy, nerve pain, nausea and vomiting caused by chemotherapy, Tourette syndrome and glaucoma.
By using market research data for these conditions and calculating annual spending on prescription drugs through 2019, they estimated that annual spending on prescription drugs for these conditions would go from $40 billion in 2016 to $44 billion in 2019. Applying the 11 percent reduction to prescription spending between 2016 and 2019 could add up to $18.5 billion.
But given the size of the pharmaceutical industry, these numbers are pocket change.
“The impact of medical cannabis legalization is not going to be enormously disruptive to the pharmaceutical industry,” Kagia said. About $425 billion is spent on prescription drugs in the United States alone, and opioid painkillers are a $25 billion market.
While the potential presented in the study is significant, the numbers rest upon several factors, including legalization of medical marijuana at the federal level. “Even if you had legalization overnight, it typically takes a while to get physicians who are comfortable recommending the drug,” said Robert Mikos, law professor at the Vanderbilt University Law School who specializes in drug policy.
Pharmaceutical companies appear to be taking preemptive action against medical marijuana, either through blocking legalization efforts or by using their vast resources to patent cannabis treatments, bypassing a significant amount of regulation. A report by the Washington Post showed that former DEA employees are being poached by the pharmaceutical industry, many of which have a background in regulation. In Arizona, Insys Therapeutics spent $500,000 fighting a grassroots effort to legalize recreational marijuana, while developing their own synthetic THC product.
“I think there are pharmaceutical companies that are worried about the impact that this could have on their sales,”
Mikos said. “Some, rightly or wrongly, complain they’re held to a much higher standard for their products. Their complaint is that you’ve got a movement afoot that is making grandiose and unsubstantiated claims about health benefits, and it’s hard for them to push back against that.”
New Frontier’s data may rest on many variables, but it does suggest a pattern that Mikos believes is worth observing. “If the data are accurate, it does suggest that there’s a significant portion of the population that might benefit from the legalization of medical marijuana,” he said.
This post was originally published on May 26, 2017, it was updated on October 5, 2017.