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

Ziemowit Bednarek (), Jacqueline Doremus and Sarah Stith
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Ziemowit Bednarek: Department of Finance California Polytechnic State University

No 2102, Working Papers from California Polytechnic State University, Department of Economics

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.

Keywords: cannabis; marijuana; prescription drugs; stock market (search for similar items in EconPapers)
JEL-codes: I11 I13 L10 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2021
New Economics Papers: this item is included in nep-hea
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