9/30/2009

Demand for Alternative Pharmaceuticals on the Rise

The latest Fortune magazine to hit the stands contains an article dealing with the legalization of marijuana for medicinal purposes. Among many of the pros and cons discussed in this article, one common topic is the demand increase for medical marijuana, specifically in the state of California. "There are an estimated 300,000 to 400,000 medical marijuana patients in the state now, and the figure is rapidly growing." Being that this is currently an illegal drug, it is hard to rid ourselves of the notion that this is a heavily sought after drug solely to relish the legal aspect of "smoking weed." Other than legal issues, marijuana has always been frowned upon because of the method of intake; the form of smoke. But with safer ways of consumption, such as foods, capsules, lozenges, butters, and even drinks, the demand will continue to rise. A key factor in determining demand is acceptance and tolerance for marijuana. The acceptance rate nation-wide has substantially grown.

A poll taken shows the percent opposed to marijuana drop from approximately 82% in the 90's to nearly 50% today. Many factors for this include health risks (or the lack thereof), pain relief, and economic recovery (much like the effects of the 21st Amendment). The article states, "It's even possible that legalization would reduce national health-care costs, by easing demand for costly pharmaceuticals." As the substance is tolerated more at a federal level, the 'non-pothead' demographic will be more willing to seek out this alternative, making marijuana a clear substitute for many forms of drugs prescribed today. One doctor reported "...that his cannabis patients had either stopped or cut back their use of...Tylenol, aspirin,.., anti-depressants, anti-panic, [and] obsessive compulsive [medications]..." The positive cross price elasticity of demand for marijuana will force high-priced drug products to reduce prices. The determining factor is just a matter of whether or not the alternative gets legal on the open market.

For further information, see:
Parloff, Roger. "How Pot Became Legal." Fortune 28 September 2009: 140-62. Print.

7 comments:

Rebecca said...

Hey duuuuuude....like I don't understand a word of what you are talking about but I'm am so down with the legalization of pot. It is totally radical and its about time, man.

Do you know how hard it can be to score around here? This place is freaken dry, dude. You can buy H in middle school but can't find the chronic for nothin'. Even the rangers are in on it and I'm not being paranoid.

See how California got together and decided to just party? I knew Schwartzenegar was a burner. You could just tell and his eyes were totally red in Terminator I and II but they had that skinny liquid terminator guy in T-III, ya' know?

So I totally concur that the big whigs in Washington should just hand it over to Walgreens so every one can just chill, man. They are so uptight since Clinton and that Mayor Berry dude left D.C. They totally put the par-tay in political party. I know, right?

Everybody will just get along better without all the hassles and it'll be awesome. The price would probably go down to like a quarter too. That would be crazy and so chill. Well, later dude.

***Sesame Street has been brought to you today by the letter A and the number 9, scarcity, and normal and inferior goods***

Jeremy said...
This comment has been removed by the author.
Anonymous said...

Hey Brendan, pretty creative post. I don't now much about the medical affects of marijuana, but as both a law and business student, it's always nice to hear both sides of the argument on these controversial issues. Given the intense debate and the potential impact on sick and dying people, it's great you decided to explore the topic.

Dr. Tufte said...

-1 on Brendan for lack of a viable link.

Positive cross-price elasticity between marijuana and prescription drugs ... hmmm ... seems sensible ... not sure if it's large enough to be important ... but a very provocative idea. I am not trying in any way to be insulting to students here, but it is very rare for an idea to come up that I've never, ever, heard of or thought about - but this certainly is one.

To clarify, a positive cross-price elasticity would mean that an increase in the price of marijuana would lead to an increase in the quantity/consumption of prescription drugs (and upward price pressure on them). Since pseudo-legalization - as in "medicinal marijuana" is a way to reduce prices the effect will go in the opposite direction.

Now I'm sitting here all serious about a new economics idea, and along come Rebecca with the comic relief. I'm not sure how worthy that comment is of class credit, but it made me laugh, so I think I can let it pass. ;)

RFWoodstock said...

Valid medicinal value, it’s a victimless crime, the War on Drugs WAY too costly, too many arrests for simple possession, tax it and use the money to pay for health insurance and to reduce the deficit…Need I say more?

Woodstock Universe supports legalization of Marijuana for a number of reasons.

Check them out and vote in our poll "Should marijuana be legalized?" at http://woodstockuniverse.com

Peace, love, music, one world,
RFWoodstock

Daniel said...

Though the positive effect of legalizing marijuana for medical purposes on the general economy may be questioned, the personal economic relief, not to mention physical relief, that this medical option would give to those seriously ill or even dying should be explored. Healthcare costs borne by those suffering serious medical challenges is considerable and to provide the patient an affordable alternative to costly prescriptions and evasive procedures is compelling.

This divisive issue is based both on ethics and economics. Regarding the economic issue, the following question should be asked: is medical marijuana that much less expensive than traditional treatments and is it as effective? If the answer is “yes,” the use and enhancement of medical marijuana should be continue being explored.

Daniel said...

Though the positive effect of legalizing marijuana for medical purposes on the general economy may be questioned, the personal economic relief, not to mention physical relief, that this medical option would give to those seriously ill or even dying should be explored. Healthcare costs borne by those suffering serious medical challenges is considerable and to provide the patient an affordable alternative to costly prescriptions and evasive procedures is compelling.

This divisive issue is based both on ethics and economics. Regarding the economic issue, the following question should be asked: is medical marijuana that much less expensive than traditional treatments and is it as effective? If the answer is “yes,” the use and enhancement of medical marijuana should be continue being explored.