Munich Personal RePEc Archive

The Effect of Medical Marijuana Legalization on Pharmaceutical Payments to Physicians

Lebesmuehlbacher, Thomas and Smith, Rhet A. (2020): The Effect of Medical Marijuana Legalization on Pharmaceutical Payments to Physicians.

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Although cannabis is federally prohibited, a majority of U.S. states have implemented medical cannabis laws (MCLs). As more individuals consider the drug for medical treatment, they potentially substitute away from prescription drugs. Therefore, an MCL signals competitor entry. This paper exploits geographic and temporal variation in MCLs to examine the strategic response in direct-to-physician marketing by pharmaceutical firms as cannabis enters the market. We use office detailing records from 2014-2018 aggregated to the county level and find detailing increases by 7% in the quarter an MCL is proposed. The increase is temporary, however, and attenuates after MCL approval. We then incorporate physician-level cannabis recommendation data from Florida and find opioid detailing to cannabis-friendly doctors declines following MCL enactment. Although we find weak evidence of a similar decline in our primary analysis, the effects are muted at the aggregate level by the small percent of doctors that recommend cannabis.

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