In states where recreational cannabis consumption is legalized, medical marijuana sales tend to fall. This trend has been seen in various markets, with data from MJ Freeway that covers four states-- Oregon, Washington, Colorado and Nevada -- demonstrating that medical marijuana sales declined once adult use was legalized.
Ah, but the story does not end there.
Let's look closer at the data, which came from 321 cannabis dispensaries and was featured in a report called "The Economics of Adult Use Marijuana on Medical Marijuana Markets."
The data showed that medical sales were 39% of the market during the first month of legal recreational sales. In the third month following legalization, those sales had dropped to 33% and then slid to 32% by the fourth month.
It is this type of sales trend that has caused some investors to suggest that it is game over for medical marijuana products and the companies that focus on them. They argue that medical patients really were recreational users who were hiding behind a medical condition in order to get legal marijuana. And no doubt there are many people who did just that.
The data from MJ Freeway, a cannabis software company that provides seed-to-sale tracking in many legalized states, confirmed that medical marijuana sales on average do decline at dispensaries for four months following adult legalization. Indeed, five months before adult legalization, daily medical sales on average were $4,732. They slid to $4,176 in the month prior to legalization.
But in the fifth month following adult use legalization, things began to turn. Sales rose to $4,653 after bottoming at $4,046.
One year later, daily medical sales were approaching $6,001 -- higher than even before recreational sales were legalized. So, it could be surmised that instead of hurting medical marijuana sales, adult use legalization actually might improve sales.
Recreational daily sales continued to increase, but at a slower pace. Recreational sales grew at a rate of 35% during the first 12 months. The data also showed that in some months adult-use sales of cannabis declined slightly.
It is getting easier to find medical providers for medical cannabis patients as technology companies such as Namaste Technologies (NXTTF) or Hello MD create platforms that allow for online medical consultations. Plus, medical marijuana products are considerably different from adult use cannabis products.
Some cannabis providers are concerned about the limitations that retail regulations place on all medical cannabis products. They have said that seriously ill patients with conditions such as chronic pain need cannabis that is stronger than what is available on the shelf, not dissimilar to the difference between a prescription pain killer and an over-the-counter pain reliever such as aspirin. They hope as the market matures that stronger prescription types of cannabis such as products from GW Pharmaceuticals (GWPH) will be separate from weaker retail-level cannabis.
Another factor that bodes well for the strength of medical cannabis markets is that many states are uncomfortable with legalizing adult use cannabis. If as an investor you are only focused on producers of cannabis products for the adult use market, you could be missing out on opportunities in companies that are only focused on the medical market at this time.