On December 7, marijuana became legal in the state of Washington, adding to the list of states that have moved toward legalizing or decriminalizing the drug. Will this be a national trend or a state by state adoption? No one knows for sure, and the verdict will be out for some time. In a country desperate for tax revenue, and an aging population that grew up with marijuana as part of the landscape, the concept of national marijuana legalization is certainly not out of the question. If that is the case, does any sector have something to lose?
The beer and spirit industry has always cast a wary eye at legalized marijuana. The last thing Diageo PLC (NYSE: DEO), maker of popular liquor brands like Smirnoff, Johnny Walker and Captain Morgan, wants to see is marijuana cannibalizing their sales. Based on current industry sales numbers, the wide availability of marijuana already, and the probability of extremely restricted and regulated access for anyone under 21, the liquor industry probably has little to fear.
To many, it seems that Altria Group Inc. (NYSE: MO) or Reynolds American Inc. (NYSE: RAI) would have a big interest in legal marijuana. After all, the principal products of both companies are cigarettes. They have distribution, manufacturing and retailing down to a science. Sales of cigarettes by case volume have declined for years. A new product line could be just what they need to resume margin growth. When national prohibition of pot ends, expect both companies to quickly ramp up for business. Altria seems well prepared, by having already secured the domain Altriamarijuana.com.
One other big and powerful industry might have something to lose: Big Pharma. It is estimated that the global pharmaceutical market will be worth more than $1 trillion by 2014. Industry giants Merck & Co. (NYSE: MRK), Johnson & Johnson (NYSE: JNJ), Pfizer Inc. (NYSE: PFE) and Abbott Laboratories (NYSE: ABT) have warded off patent cliffs for years using their large cash reserves to acquire smaller companies with robust product pipelines. The last thing these companies want see is current product lines that are producing dependable revenue flow to be dented by legal marijuana. The big pharmaceutical firms have a lot of money to spread around, so when it comes to lobbying efforts, very few have this group’s clout. One thing it wants is for marijuana to remain illegal.
There are countless maladies where the ingestion of marijuana has been believed to help alleviate or control the symptoms. These include glaucoma, multiple sclerosis, AIDS-related complications, Crohn’s disease, fibromyalgia, chemotherapy complications and others. Big pharma has tried to come up with their own pot pill. There are more than 400 chemicals in marijuana, 80 of which are called “cannabinoids.” Drug companies have tried reducing it to one chemical and results have been poor. Researchers find that when you reduce cannabis to just tetrahydrocannabinol (THC), you lose efficacy and gain side effects.
In a book critical of the pharmaceutical industry called “Our Daily Meds,” author Melody Petersen offers a statistic showing more than 100,000 people die each year from prescription drugs. This includes death from abuse and overdose, side effects, misdiagnosis and interaction error. Many physicians may currently be reluctant to prescribe legalized marijuana. A national mandate would provide many physicians with the moral and ethical cover they need to be more aggressive if they feel medical marijuana may help their patients. Then it is very possible that medical marijuana prescriptions will put a dent in many currently prescribed drugs. This is not an outcome that big pharma is likely to tolerate well, unless they get in on the action themselves.
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