There’s speculation going around, as more and more states jump on the recreational-use bandwagon, that the budding recreational market could cause a major slowdown for the medical market, if not kill it entirely. Adult recreational use is currently legal in nine states and Washington, D.C., while 30 states and D.C. permit medical use. Recent research into revenues earned by both markets gives these suspicions some backing. For 2018, the latest revenue projection for the medical market is $4.3 billion, while that of the recreational market is $6.7 billion, according to BDS Analytics. However, last year, the medical market pulled in a whopping $5.9 billion, while adult-use only accrued $2.6 billion.
Tom Adams, the managing director of industry intelligence at BDS Analytics, said the cause for the major drop in the medical market is the wider access to cannabis users now enjoy. He also puts some of the blame on the state of California for notoriously doing a poor job regulating their medical marijuana industry, which was legalized back in 1996. Even though the state had a $3 billion medical market last year, this year sales are estimated to plummet to $293 million due to the legalization of adult use. Consumers can now avoid all the red tape and hassle involved with medical marijuana and conveniently pick it up as a recreational customer.
This doesn’t necessarily mean the end of the medical marijuana market, however. Experts on the marijuana industry are divided on the issue. The CEO of New Frontier Data, Giadha Aguirre de Carcer stated that “the idea that the legalization of recreational cannabis will kill the medical market is misguided and not fact-based.”
While the New Frontier Data predicts sales from adult-use will surpass those of medical by 2025, the firm based in D.C. predicts a double-digit compound annual growth rate for both markets, 11% for medical and 18% for recreational.
Carcer said: “The reality is that adult-use in the US is enjoying its ‘honeymoon’ stage. Over time, many of the same variables driving global growth of medical, which include rising quality standards, growth of CBD, and increased research on efficacy, will likely create a resurgence in medical growth alongside a stabilizing adult-use market.”
The founding partner of Canna Advisors, Diane Czarkowski, disagrees. She believes both markets will eventually merge into one.
“It is too burdensome for businesses – whether cultivation, processing or dispensary – to maintain two separate business structures. Also, as long as medical programs specify which conditions are recognized, there will always be patients who are excluded from access,” Czarkowski said.
A cannabis lawyer/consultant in Sacramento, Ryan Kocot, sees lucrative potential in the medical market due to the increased popularity of CBD and the approval of Epidolex, a non-synthetic cannabis drug intended for the treatment of epilepsy. However, he also says there’s a catch involved.
“Even if we hypothetically put aside the countless legal hurdles companies face due to cannabis’s classification as a Schedule 1 drug, it’s much more expensive to bring a medicinal product to market when it comes to clinical testing and dealing with the FDA – not to mention patents,” said Kocot.
Kocot also suggests that increased interest in cannabis by larger companies is generating investment opportunities or creating targets for takeover that could usher in the death of the medical market. For example, Corona brewer just invested $4 billion in the Canadian marijuana growing company, Canopy Growth.
He said: “Bigger companies getting involved translates into more lobbying dollars being spent on federal legalization. When federal legalization inevitably occurs, the question becomes: will larger companies be interested in targeting the medicinal market?
“One may also argue that the medical market could be the next frontier for Big Pharma, particularly since federal law changing will open the intellectual property floodgates, with patents, for example. Reasonable minds could certainly disagree, but my guess is that the recreational market will be the main target of big business.”