How Medical Marijuana Will Disrupt The Pharmaceutical Industry (VHT)

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June 10, 2017 7:22am NYSE:VHT

NYSE:VHT | News, Ratings, and Charts

From Bill Hall: In my last two Money and Markets articles, I’ve put you on the inside track when I revealed that “family offices” — the preferred investment platforms for many of the world’s mega-millionaires and billionaires — are quietly funding the rapidly growing legal marijuana business.

They are increasingly attracted to the industry’s potential eye-popping returns. And it’s easy to see why.

Last week, we talked about how Peter Thiel’s $2 billion San Francisco venture capital firm Founders Fund recently made a multimillion-dollar investment in Privateer Holdings. Privateer is a private marijuana company that holds the Marley Natural brand. (Named after late reggae singer Bob Marley.)

Thiel is well-known in Silicon Valley as the co-founder and former CEO of PayPal (PYPL). His Founders Fund was an early backer of Facebook (FB). So when Thiel places a bet, many investors know that it could pay off nicely to follow his lead.

We also talked about how Joe Kennedy Sr. turned Prohibition repeal into a goldmine for his family. And how marijuana could right now be where alcohol was just before Prohibition was repealed.

I also reported that, according to reputable market research, legal marijuana was a $3.4 billion business in 2015 in the United States. In 2016, the U.S. legal marijuana market doubled to $7.1 billion. And two major studies show that the legal marijuana industry will top $40 billion in the U.S. over the next five years.

So now you know who is supporting the legal pot business with their own money and why. It’s also just as important to understand who is against it … and why they are protecting their turf in what could turn out to be a battle over billions of dollars of revenues.

I think you’ll be shocked to learn who one of the biggest opponents to medical marijuana is. I know I was.

No, the marijuana industry’s biggest enemy is not the Trump administration or U.S. Attorney General Jeff Sessions. It’s the Big Pharmaceutical companies like Teva Pharmaceuticals (TEVA), Pfizer (PFE), Johnson & Johnson (JNJ) and Allergan (AGN)!

That’s because if the federal government finally allows medical marijuana to become a legitimate part of the healthcare industry, Big Pharma could lose billions of dollars, a new report finds.

Their findings are summarized in the chart below:The report, released in the Health Affairs journal, was compiled using a study conducted by researchers at the University of Georgia. It showed a dramatic decrease in Medicare prescriptions in states where medical marijuana is legal.

Click image for larger view

The study, which was first outlined by the Washington Post, helped stir up the debate over how a legitimate cannabis market might be able to reduce the national opioid problem.

That’s because the University of Georgia data shows when medical marijuana is available, pain patients are increasingly choosing pot over powerful — and potentially deadly — prescription narcotics.

Specifically, the researchers found that — in the 17 states with a medical-marijuana law in place by 2013 — prescriptions for painkillers and other classes of drugs fell sharply, compared with states that did not have a medical-marijuana law.

In fact, the drops were quite significant …

In medical-marijuana states, the average doctor prescribed:

  • 265 fewer doses of antidepressants each year
  • 486 fewer doses of seizure medication
  • 541 fewer anti-nausea doses, and
  • 562 fewer doses of anti-anxiety medication.

Get this: In the U.S., we currently consume more than 84% of the entire worldwide supply of oxycodone … and almost 100% of hydrocodone opioids.

Prescription-drug manufacturers like privately held Purdue Pharma made more than $27 billion in revenues from OxyContin alone since 1996.

In fact, in 2007, Purdue paid one of the largest fines ever levied against a pharmaceutical firm for mislabeling its product OxyContin. Three executives there were found guilty of criminal charges.

Considering all of this, it seems the pharmaceutical trade has more than enough reasons to fear the legalization of marijuana.

An analysis conducted by the folks at New Frontier Data makes a surprising prediction. That is …

The legal use of cannabis products for ailments ranging from chronic pain to seizures could cost marketers of modern medicine somewhere around $4 billion per year.

Look, I am NOT on a crusade for legalized pot. Personally, it’s not my thing.

But as a professional investor with more than 30 years of Wall Street experience, I’ve been trained to set my personal biases aside. When I take a dispassionate view, I can best evaluate money-making opportunities for my clients.

Big Pharma has not taken the challenge to its bottom line from the weed industry lightly …

And the fact that it has openly lobbied against the medical-marijuana business — and in some instances donated large sums to fight legalization — has caught my eye.

What’s more, CBS News reported that a whopping 76% of doctors favor legalized marijuana. So, it’s only a matter of time before patients choose pot instead of morphine. And this represents a potential treasure trove of revenues for medical-marijuana companies.

With more than 200 marijuana stocks currently available on the publicly traded markets, you have a chance to participate, too. But do your homework, be selective and — here’s this week’s big tip — look for companies that have a leg up in the medical-marijuana business.

The Vanguard Health Care ETF (NYSE:VHT) closed at $143.82 on Friday, up $0.63 (+0.44%). Year-to-date, VHT has gained 13.45%, versus a 8.89% rise in the benchmark S&P 500 index during the same period.

VHT currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 36 ETFs in the Health & Biotech ETFs category.

This article is brought to you courtesy of Money And Markets.

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