Panel Paper: The Effect of the Medical Marijuana Legalization on Pharmaceutical Payments to Physicians

Friday, November 8, 2019
I.M Pei Tower: Majestic Level, Majestic Ballroom (Sheraton Denver Downtown)

*Names in bold indicate Presenter

Rhet Smith, University of Arkansas and Thomas Lebesmuehlbacher, Xavier University

Although prohibited at the federal level, acceptance of marijuana use for medicinal purposes is growing. As more states pass medical marijuana laws, more individuals and physicians are presented with an alternative form of medical treatment that was unavailable prior to law passage. It is not clear, however, the effect marijuana legalization will have on the behavior of pharmaceutical companies. In this paper, we explore the response of pharmaceutical companies and their gifts to physicians in the periods leading up to and following medical marijuana law enactment. We exploit the temporal and geographic variation in medical marijuana laws and dispensary openings to examine the effect of marijuana legalization on payments from pharmaceutical companies to physicians from 2014-2017. Marijuana is effective in treating numerous ailments, and legalization signals the entry of a new competitor. Moreover, because marijuana is most commonly used to treat pain, we examine changes in opioid-related payments as a potential channel contributing to the negative relationship between opioid abuse and marijuana liberalization found elsewhere in the literature. We find opioid-related payments to physicians decrease following the opening of a dispensary within a state. These results offer a potential channel through which increased marijuana access can slow the growing opioid epidemic in the United States.