The Economics of Hemp

Hemp-based products have become increasingly popular over the past few years as inroads have been made to further legalize subsidiaries of the plant such as the psychoactive THC to the more benign, legal extract CBD. With this increased attention and the potential for the explosion of a brand-new industry able to grab hold of the American attention, hemp-based products have come under fire from Big Pharma due to its potential to disrupt an industry.

While CBD is legal, it exists in a kind of legal grey area and as such it is keen to be taken advantage of by economic fat cats like Big Pharma. Back in June 25, 2018, The Federal Drug Administration approved the usage of CBD, hemp-based oral solution Epidiolex as a treatment for sever forms of childhood-onset epilepsy.

Epidiolex is the first FDA-approved, hemp-based pharmaceutical on the market and Big Pharma largely wants to further monopolize on this growing industry by restricting the use and availability of hemp-based, CBD products to pharmaceutical companies.

Corporate bodies, especially ones that form lobbying groups like Big Pharma, often like to suppress competition at the expense of the general population because it increases profit margins while allowing said body to, effectively, control the market from cultivation down to distribution, which is compounded by the fact that CBD lives in a legal grey area.

According to a 2018 Biopharmaceutical Research Industry Profile, member companies of PhRMA (Pharmaceutical Research and Manufacturers of America), a United States lobbying group, invested upwards of $71.4 billion in the development and research of drugs. The highest recorded level of investment in history illustrating the growing power and, by proxy, influence of Big Pharma on the drug market.

So, what are the important economics of hemp that places it within the crosshairs of lobbying groups and monopolizing bodies like Big Pharma? It’s simple: money makes the world go ‘round from the small farmer and business owner to the laws that govern the way hemp can be used, distributed and sold.

What is CBD: A Summary

First off, it’s important to understand what CBD oil is on both a scientific and material level. On a scientific level, CBD is short for cannabidiol, which is the most prevalent compound found within the flowering buds of a cannabis, better known as hemp, plant. It has active effects that are known to relieve stress and serve as a soothing agent for consumers who utilize CBD-enriched products.

These products range from CBD-infused bath bombs and candies to CBD tinctures, CBD lotions and even CBD seltzer waters, which can all be purchased from online boutiques, wellness stores and headshops.

Often associated with THC due to its connection to cannabis, CBD should not be conflated with its cannabinoid cousin. Unlike THC, which is most evidently found in marijuana, CBD is non-psychoactive and enjoys a legal designation that THC-rich consumables do not.

Farmers Cultivation

Good news came last year for hemp-based products when the Hemp Farming Act of 2018 became law after months of a hard battle. Signed on Dec. 20, 2018, this act was proposed with the expressed purpose of removing hemp from the Schedule 1 drug designation and making it a harvestable crop that could be freely farmed by interested agriculturalists.

Of course, to be in line with the current legal standing of marijuana, hemp cannot contain more than .3 percent of the psychoactive compound THC. While this is a good departure from hemp’s previous standing, it does still place serious restrictions on hemp farmers and cultivators. For example, while it can be sold and produced for commercial purposes it is still at the mercy of state-federal regulatory power making hemp a fully legalized, but highly regulated crop.

This new law offers farmers the possibility to increase their profit margins by integrating hemp into their productivity. Unlike other crops, hemp is not picky about soil and can be grown with little need for water making it a power player for any farmer. Combined with the fact that the production and commercial usage of hemp is now legalized across the nation, the novelty of its newness will be sure to bring in diehard consumers and early adopters alike.

Small Business & Hemp

The ever-present influence of Big Pharma restricts the potential of small business owners who utilize CBD and otherwise benign hemp-based products in the oeuvre. For example, in February the Maine Department of Health and Human Services sent letters to small business owners across that state informing them that selling CBD-infused edibles to people without a medical marijuana license was illegal despite CBD not, in fact, synonymous with marijuana. This was another example of the pharmaceutical industries influence on government and bottlenecking consumers to get an advantage, however small, in the marketplace.

One glaring example of this practice is Insys Therapeutics. This is a pharmaceutical company based out of Arizona that spent upwards of $500,000 dollars to combat legislation back in 2016 that sought to legalize marijuana in the state. Despite combating these efforts, just a year later the pharmaceutical company got approval from the DEA (Drug Enforcement Administration) for a brand-new synthetic marijuana drug.  

While it was combating small businesses and consumers fighting for legalization, it was vying for the chance to take advantage of the market. Similarly, Insys Therapeutics was among developing pharmaceuticals to petition the DEA to loosen CBD restrictions the same year it began development on synthetic CBD hemp oil pharmaceuticals. Big Pharma plays hard and loose with restrictions at the cost of consumers and with the singular hope of increasing their bottom line as opposed to providing affordable alternatives to consumers and those who suffer from illness and ailments.

Big Pharma remains one of if not the largest lobbying body in the United States with an estimated $3.9 billion spent over the past two decades to influences laws, regulations, enforcement and restrictions on drugs and plant-based compounds such as CBD. One of their largest oppositions have been to cannabis-based products, because of their nature as a pharmaceutical industry disruptor.

Disrupting Pharmaceutical Dominance

Knowing the history and production value of cannabis-based products, it is no secret why pharmaceutical companies want to regulate the business and restrict businesses from offering potential alternatives to their traditional pharmaceuticals or even their synthetic hemp products. The popularity of hemp-based, cannabis products has been a disrupting effect on the efficacy and prevalence of pharmaceutical products in states that have moved toward the legalization of medical or recreational marijuana.

In fact, according to data from the leading health policy journal Health Affairs, between 2010 and 2013 national overall reductions in Medicare Part D were an estimated $165.2 million per year. Meaning, the availability of cannabis-based products had a significant negative impact on the profitability of the pharmaceutical industry by reducing prescription medication usage in Medicare Part D.

Considering these numbers are just the combination of the 17 states at the time that had legal medical marijuana laws, full federal legalization, as opposed to a legal grey area for CBD-based products for example, could cost these pharmaceutical companies billions annually.

In 2017, to better understand the impact and disruptive power of CBD, Brightfield Group conducted the largest CBD usage study that examined the behavior of about 2,400 CBD users. The results were staggering.

According to the findings, upwards of 80 percent of CBD users found it to be very or extremely effective for their ailments which most commonly included insomnia, depression and anxiety. Perhaps the most surprising, 42 percent of those surveyed said that CBD was so effective that they stopped using “traditional medications” all together preferring hemp-based alternatives.

Conclusion

While Big Pharma may be upset about the possibility of a hemp-based economy, the wide availability of these products would result in a booming national economy and a populace that can freely enjoy CBD benefits and the positive effects associated with cannabinoids.

While states like Maine, New York and Ohio may be influenced by Big Pharma and other corporatist lobbying bodies to ban CBD-infused edibles such as CBD waters or enriched foods, consumers can still get topical items like CBD tinctures, CBD lotions and even CBD vapor oils for pens. And, of course, consumers with a medical marijuana card can still attain CBD edibles so long as they produce their card to the hemp-based product retailers upon purchase.

As the national conversation continues to move forward and turn toward a more forward-thinking, progressive idea of wellness and holistic remedies, hemp and its subsidiaries like CBD will continue to grow and revitalize markets to the point where not even Big Pharma can lobby hard enough to counteract simple supply-and-demand.

 

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