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U.S. Cannabis Laws Projected to Cost Generic and Brand Pharmaceutical Firms Billions

Author

Listed:
  • Ziemowit Bednarek

    (Department of Finance California Polytechnic State University)

  • Jacqueline Doremus

    (Department of Economics, California Polytechnic State University)

  • Sarah Stith

    (Department of Economics, University of New Mexico)

Abstract

Legalization of cannabis by U.S. states is likely increasing the use of cannabis as an alternative to conventional pharmaceutical drugs. We examined how cannabis legalization between 1996 and 2019 affected stock market returns for listed generic and brand pharmaceutical companies and found that returns were 1.5-2% lower at 10 days after legalization. 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 $3B on average.

Suggested Citation

  • Ziemowit Bednarek & Jacqueline Doremus & Sarah Stith, 2021. "U.S. Cannabis Laws Projected to Cost Generic and Brand Pharmaceutical Firms Billions," Working Papers 2102, California Polytechnic State University, Department of Economics.
    • Handle: RePEc:cpl:wpaper:2102
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    Keywords

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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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