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Medical Marijuana Could Take $4 Billion in Sales from Big Pharma, Report Finds

If medical marijuana were legal in all 50 U.S. states, it could cut into the pharmaceutical industry by $4 billion annually.

A new market research report from New Frontier Data suggests that nationwide legalized medical marijuana could siphon more than $4 billion from the pharmaceutical industry. In their study, From Prescription to Recommendation: How Cannabis Could Disrupt the Pharmaceutical Industry, New Frontier data analysts estimate that money spent on prescriptions for the top nine conditions treated by cannabis would fall $18.5 billion between 2016 and 2019 if medical cannabis were legal in all 50 U.S. states.

“The United States constitutes 35% of the global pharmaceutical market, the largest market in the world, and a major driver of the U.S. economy. It is one of the many industries that will be impacted by the growth of the legal cannabis market and we are already starting to see that trend in legal medical states where use of key prescription drugs is down by 11%. If cannabis were to be adopted nationally, we would begin to see a trend of patients turning to medical cannabis as a substitute or complement to pharmaceuticals,” said Giadha Aguirre De Carcer, New Frontier Data CEO and Founder.

The top nine conditions used in the analysis by New Frontier were designated by the extensive 2017 study by the National Academies of Science. These conditions — chronic pain, post-traumatic stress disorder (PTSD), sleep disorders, anxiety, nerve pain, chemotherapy induced nausea and vomiting (CINV), Tourette syndrome, glaucoma, and seizures/epilepsy – demonstrated in the study as being the most effectively treated by cannabis.

Among the identified nine conditions, chronic pain and PTSD represented about 60 percent of the total amount spent on prescription drug use. Patients spent an estimated $14.3 billion and $10.6 billion, respectively, for chronic pain and PTSD treatments. The remaining seven conditions accounted for the other 40 percent spent on treatments.

Medical Marijuana Research

In its analysis, the New Frontier report used data provided by a 2016 Health Affairs study from investigators at the University of Georgia, which found an 11 percent reduction in pharmaceutical prescriptions in states with legalized medical marijuana. That same research team conducted a similar study this year and found a significant drop in Medicaid prescriptions in medical cannabis states.

The New Frontier analysts applied that average 11 percent decrease to total amount of money spent nationally for the nine identified conditions and found that cannabis could replace $4.4 billion to $4.9 billion per year of current spending on prescription drugs.

“By applying that decrease to the total amount spent in the U.S. on treatments for such conditions, it is estimated that cannabis and related products can replace prescriptions overall for savings of approximately 17% to 19% by 2019,” writes J.J. McCoy, Senior Managing Editor for New Frontier.

While those figures are substantial, they account for just a sliver of the U.S. pharmaceutical market. In 2015, prescription drug spending in the U.S. was approximately $425 billion.

“Looking at these numbers, it would appear that medical cannabis would be a drop in the bucket when it comes to impacting the total pharmaceutical industry. However, when you start to break down the numbers by specific sectors of the industry, like chronic pain or symptoms associated with chemotherapy, which are very lucrative markets for pharmaceutical companies, you will certainly see cannabis have a major impact,” said Aguirre De Carcer.

As of now, 29 U.S. states have passed laws allowing for medical marijuana. The nation’s cannabis market is currently growing faster than the dot-com boom of 2000, and a recent research report from GreenWave Advisors suggests that legalization could expand to all 50 U.S. states by 2021.

Keep up with the booming legal cannabis industry and Medical Marijuana, Inc.’s portfolio of companies by regularly visiting our news feed.

Post by Eve Ripley

Eve is a writer specializing in cannabis education and editorials related to cannabis industry news.

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  • Sherrie Slaboda

    I’ve never used Marijuana but it is a natural plant that can help many. I am 100% for legalization for health benefits. It can’t be worse the PHARMA drugs or heroin and the other street drugs or alcohol so make it legal and the governments can collect taxes and stop the illegal trade.