Cannabis Disruption in the Pharmaceutical & Chemical Industry
Authors: QProducts & Services Pharma & Chemical Team, Under the Direction of Jim O’Donnell
The recent and continuous growth of the cannabis industry has attracted many businesses to join in on this lucrative and evolving space. With the recreational use of cannabis now legal in 11 states, and medical marijuana legal in 33 states, cannabis is on its way to possibly becoming an $80 billion industry by 2030, according to estimates by Cowen, Inc. The explosive growth of this space in a short period of time has created a need for a new era of supply chain management to help adapt to new regulations, distribution models, and other challenges related to a highly regulated but thriving industry, according to Green Entrepreneur. In the pharmaceutical and chemical industries specifically, we’re experiencing the continuous rise of medicinal marijuana and new insights for Big Pharma and its supply chain.
What is Cannabis?
Cannabis, also referred to as marijuana, comes from a group of three plants with psychoactive properties: Cannabis sativa, Cannabis indica, and Cannabis ruderalis. When the flowers of these plants are harvested and dried, you’re left with cannabis, one of the most common drugs in the world. It is made up of more than 120 components, also known as cannabinoids, of which we can find cannabidiol (CBD) and tetrahydrocannabinol (THC). While THC is psychoactive, CBD is not, and you can find cannabis products that contain just CBD, THC, or a combination of both.
Where Did CBD Come From?
Cannabidiol (CBD) is a compound extracted from hemp or marijuana. The 2018 Farm Bill excluded hemp from the definition of marijuana and removed it from the Controlled Substances Act (CSA).
CBD was first discovered by Dr. Roger Adams and his team at the University of Illinois in 1940, however, its structure was not made clear until 1963. While it may lead some to assume that CBD is a newly discovered ingredient, cannabis and CBD have a history that dates back thousands of years. According to CBD Origin, the first documented use of cannabis-derived medicine dates back to 2737 B.C. It can be said that Chinese Emperor Sheng Nung used a cannabis-infused tea to aid with a variety of ailments including memory, malaria, rheumatism, and gout. Throughout history, cannabis and CBD have been used for therapeutic purposes, however, during the rise of modern medicine, it was not recognized due to a lack of scientific evidence.
More recently, and with the legalization of medical marijuana, researchers have been prompted to dive more into CBD and its potential medicinal uses. While the stigma towards CBD and cannabis has changed over the last few decades in the United States, we are still in the early stages of research, legalization, and recreational use. However, with the federal legalization of hemp and hemp-derived CBD, more and more CBD products are being sold online by major retailers including Sephora and Neiman Marcus.
The Legalization of Hemp
The Agriculture Improvement Act of 2018, also known as the 2018 Farm Bill, was signed on December 20th, 2018, and will remain in force through 2023. The passing of the 2018 Farm Bill allowed the legalization of hemp agriculture and products in all 50 U.S. states. In the United States, hemp plants are defined as any cannabis plant that has 0.3 percent or less THC. Any cannabis plant that has a THC content greater than 0.3 percent is classified as marijuana. From a chemical composition standpoint, hemp cannot get you high.
According to Analytical Cannabis, the increased legality of hemp is largely to thank for the rapid acceleration in diversity and availability of hemp-derived CBD oil. Unless you go to a marijuana dispensary to purchase CBD oil, the CBD oil that you find is made exclusively from the hemp plant, which is also referred to as hemp oil or CBD hemp oil. Since CBD can be extracted from hemp, CBD is legal. However, there is still work to be done when it comes to FDA regulation. According to a leader of the U.S. Food and Drug Administration’s new cannabinoid work group, there is more research to be done before federal authorities can allow CBD treatments into food and beverage products. Just like any other new ingredient going into food or drugs, the FDA is unlikely to approve over-the-counter use without further research on the ingredient and its health benefits. With that being said, certain companies with a loyal customer base are likely to wait until CBD is FDA approved prior to marketing CBD products to consumers. While FDA approval is in the works, fortune 500 companies are educating themselves on the evolving market, investing heavily, and laying the groundwork within their networks.
The History of Medicinal Cannabis
Medicinal cannabis, also referred to as medicinal marijuana, has been widely known for its use in medical treatments and therapy, which has garnered national attention in recent years. While evidence suggests cannabis use more than 5,000 years ago in what is now Romania, there is only one direct source of evidence that cannabis was first used medicinally around 400 A.D. In the U.S., cannabis was widely utilized as a patent medicine during the 19th and early 20th centuries. According to Medical Daily, in the late 1700s, some American medical journals were suggesting using hemp seeds and roots to treat various health problems, including skin inflammation and incontinence. William O’Shaughnessy was an Irish doctor in the British East India Company who touted medical marijuana’s benefits for rheumatism and nausea in England and America.
The Marijuana Tax Act was the very first federal restriction of cannabis use and cannabis sale, taking effect in 1937. Subsequent to the act of 1937, legal penalties for possession of the drug began to increase in 1951 and 1956 with the enactment of the Boggs and Narcotic Control Acts. In 1970, prohibition under Federal Law occurred with the Controlled Substances Act and marijuana was classified as a Schedule 1 drug. Then, in 1996, California became the first state to allow legal access to and use of cannabis for medicinal purposes under physician supervision with the enactment of the Compassionate Use Act. According to Business Insider, medical marijuana is legal in 33 states in 2019. Medical Daily also states that only people with certain qualifications can obtain the drug. That will usually entail children with epileptic conditions, or sometimes cancer patients who use cannabis to ease the side effects of chemotherapy or radiation. Some states allow patients with HIV/AIDS, Parkinson’s disease, multiple sclerosis, or even Chron’s disease to obtain medical cannabis.
The Rise of Medicinal Cannabis
As restrictions are lifted and research into medical cannabis continues, more recent research has started to explore more of its therapeutic benefits. For instance, a 2015 study found that cannabis could be effective in treating schizophrenia. In addition, research has shown that the drug can help stop severe seizures and even cure migraines.
According to Harvard Health, the most common use for medical marijuana in the United States is for pain control. While marijuana isn’t strong enough for severe pain (for example, post-surgical pain or a broken bone), it is quite effective for the chronic pain that plagues millions of Americans, especially as they age. In 2014, a survey conducted in California found that medical marijuana patients agree that the drug works as 92 percent of them said that medical marijuana alleviated symptoms of their serious medical conditions including chronic pain, arthritis, migraines, and cancer. According to WebMD, the number of registered U.S. medical marijuana patients rose from more than 641,000 in 2016 to nearly 814,000 in 2017. In states where medical marijuana is legal, there seems to be somewhat of a general consensus that it is helpful in treating a variety of ailments. However, for more serious conditions, pharmaceuticals remain a necessity for patients.
Disruption Within the Pharmaceutical Industry
Marijuana’s growing availability, both recreationally and medically, is impacting the pharmaceutical industry in various ways. First, the cost of healthcare could decrease for people who use marijuana as a treatment. This could reduce healthcare costs for the rest of the U.S., as well. However, lower costs also means less profits for doctors, hospitals, and the pharmaceutical companies. The reduced need for pain medications or even mental health medications is a great example of the current disruption occurring within these industries. According to Health Care in America, on average, in states where medical cannabis is legal, doctors prescribe upwards of 260 fewer doses of antidepressants and 560 fewer doses of anxiety medication than in other states, per doctor. A survey of more than 1,300 U.S. cannabis consumers, conducted by JAMA Internal Medicine, found that about 80% had used marijuana as a substitute for pharmaceuticals, primarily opioids. As Green Thumb Industries stated, “Every day, more and more patients are opting to use it as a replacement to traditional prescription medications that may cause unwanted side effects.” This presents the opportunity for pharmaceutical companies to invest in the medical marijuana market to develop products or participate in research.
Second, it’s important to note that other drug companies are starting to invest more time and money in cannabis research now that 33 states and the District of Columbia allow medical marijuana. For example, the pharmaceutical industry has sponsored more than 120 federal clinical trials involving cannabinoids, or chemicals that are unique to the marijuana plant. Additionally, GW Pharmaceuticals recently received federal approval for the epilepsy treatment Epidiolex, the first prescription drug derived from cannabis. Also, the Canadian marijuana company, Tilray, announced in December 2018 that they have signed an agreement to partner with Novartis subsidiary, Sandoz, to sell medical marijuana in countries where it is legal.
According to Investor’s Business Daily, companies ranging from small biotech stocks to giant pharma companies such as AbbVie are exploring cannabis medicine and what products can be derived from it. Many companies are in the startup phase, but hundreds of studies are underway on possible uses for cannabis. Additional companies working in cannabis medicine that are studying laboratory-created cannabinoids include Cara Therapeutics, Corbus Pharmaceuticals, Insys Therapeutics, and Zynerba Pharmaceuticals.
Challenges in the Supply Chain
In the U.S., California’s market is by far the largest in both geography and in the number of users regarding the cannabis industry. California distributors believe that they can develop reliable logistics to support the current cannabis market that would solve challenges across other regions, should cannabis become legal at the federal level. Currently, the nation faces the challenge of cannabis distribution as federal laws currently prohibit the transportation of cannabis across state lines. Because cannabis is illegal at the federal level, freight trucks that are regulated by the Department of Transportation are unable to carry cannabis. In addition to logistics operations, the cannabis industry still faces the stigma against the trade and the challenges that come with financial transactions as well.
As for medical marijuana, the same restrictions apply as medical marijuana is not yet legal in all 50 U.S. states. Changing national laws will make it easier to work with the cannabis industry in states where it is legalized, but the real breakthrough will be full, nationwide legalization that allows for interstate commerce.
The legalization of medicinal marijuana presents both opportunities and challenges for the pharmaceutical and chemical industry. For many pharmaceutical companies, the chance to service a market with predictable high margins is definitely a growth factor. If and when cannabis is removed from its Schedule 1 status, the flood-gates are expected to open even further.
As cannabis continues to have an impact on the pharmaceutical and chemical industry, I hope this information was helpful in answering some of your questions regarding the rise of medicinal marijuana and how it is expected to impact these industries.