Cannabidiol (CBD) is a non-psychotropic extract found in cannabis plants. One of more than a hundred cannabinoids in cannabis plants, it has burst into the US marketplace over the past few years. Cannabinoids (of which CBD is one) are active with cannabinoid receptors in our brains. For decades, our understanding of cannabinoids has been somewhat limited in mainstream medical and pharmaceutical research and practice circles owed to the presence of tetrahydrocannabinol (THC), the psychoactive chemical that has played an outsized roll in the “War on Drugs”. Since cannabis remains a Schedule 1 substance at the federal level, CBD has found itself in a complicated, and protracted public educational and regulatory quagmire.
What it Isn’t
Based on all available evidence, CBD cannot get a human “high” and it can be produced legally a number of countries around the world. Yet it isn’t completely legal in most countries either. Interestingly, some nations like China are starting to cash in on production of the extracts yet maintain some of the strictest laws against the use of the product(s) extracted from farming the cannabis or hemp plants. Europe, Canada, and other industrialized countries all have conflicting, confusing and ambiguous postures on CBD (and sometimes its cannabinoid cousins that are psychoactive (THC)).
Importantly, while we are (finally) beginning to apply credible and more conventional scientific research to cannabinoids, we still have only guesses about CBDs mechanism of action.1 The World Health Organization published an excellent resource for better understanding what CBD is and what it is not and where the world is heading with it.2 See link here [insert for online version] Hint: don’t expect it to be a fad.
A Rapidly Emerging Market
Forbes reported earlier this year that CBD represents a $20 Billion industry in the US alone by 2024, as CBD’s wide array of delivery systems (oil, cream, gummies… really anything) starts to hit mainstream retail shelves.3 Expect your local grocer to get involved owed to CBD’s significant margins and continued growth in social acceptability. Ironically, you should expect them throughout the store but not necessarily in the pharmacy. Note: the same report projects THC-based products to add $25 Billion to the cannabinoids market in states where it is legal (though still federally illegal). Those sales will likely continue in dispensaries as mainstream investors don’t want to look over their shoulders for the DEA at quarterly earnings calls.
Mainstream vs. “Alternative” Medicine
While CBD produces have been an interesting to follow over the last few years, the more significant trend may be increasing acceptance of alternative types, sources and outlets for alternative medicine – both pharmaceutical and otherwise. It seems that traditional western medical models are becoming more open to eastern models of healthcare delivery, much like restaurants are headlong into popular fusion themes – American, with Japanese, with Korean, with Tex Mex, you name it – east and west come together. Significantly, CBD oil’s rise to acceptance (along with THC’s) began with special needs children and patients with difficult to treat epilepsy. When mainstream medical didn’t work, they turned to “alternatives”. Kids finding relief was apparently too much for regulators to hold the line.
CBD Isn’t Alone
Roughly one in four adults received massage therapy last year and that industry has more than doubled in a decade to $18 billion. In the world of compounding pharmacy, hormone therapies for perimenopausal and post-menopausal women are wildly popular – if you have access to a good women’s health clinic and compounding pharmacy. Physical therapy has grown substantially the number of procedures and approaches to ailments over the past decade as well and now represents a $34.5 billion industry, expected to grow faster (greater than 6% annually) than medications, hospitalizations and physicians services.5 Dry needling, myofascial cupping, and rolfing among others have emerged as mainstream only now even though the techniques have existed for decades, if not centuries in some form or another. Much like the craft beer industry that existed for many decades before its recent market explosion, it took a change in consumer expectations and access to reach an inflection point.
The Role of HSAs and a Growing “Cash” Marketplace
Hundreds of thousands if not millions of prescriptions (or are then orders or suggestions?) now get written by physicians every year so that patients can get their OTCs paid for using their Health Savings Account (HSA) or equivalent tax protected account. That also includes all of these “alternatives” to what we think of as traditional western medicine. These “orders”, written to mollify the Internal Revenue Service are also contributing to the mainstreaming of previously “alternative” medicines and procedures. As more and more Americans get priced out of expensive medications and procedures, expect them to seek out alternatives.
Pharmacies Stuck between Poor Margins and Regulatory Safe Harbor
Perhaps the most significant legislation affecting CBD (and potentially the housing and household goods) marketplace was the 2018 Farm Bill. Yes, you read that correctly – this bill restores (federally) the legality of growing hemp (which has low (>0.3%) to no levels of THC). Expect millions of acres of help production over the next decade as CBD makes up only 23% of the hemp marketplace.6
Everyone seems to be getting relief from regulatory control of alternative therapies except pharmacies. The profit margins on physical therapy are 14.5% and CBD up to 60% or more. For farmers trying to weather soybean tariff who are happy to make $30-40 per acre, then can switch to hemp production and expect $300-350 an acre.
Yet pharmacies are generally stuck with FDA approved means of market entry. Though many pharmacies do sell CBD products, most Boards of Pharmacy remain skittish about endorsing as much. In 2018 the FDA approved Epidiolex, a pure form of CBD that costs tens of thousands of dollars per year. This makes it inaccessible without insurance coverage and thus the rebate games and thus subjects the pharmacies to low or no or negative margins, if the pharmacies have access to it at all as it will likely remain a specialty product.
What’s Next?
Pharmacies would do well to take a hard look at the emerging alternative medicine marketplace, including services instead of just products. There are examples of complementary and alternative medicine-friendly pharmacies in every state in the union now and it may be part of the solution to sustainability in and increasingly difficult third party payer environment.
Callout: “CBD consumers are an average age of 40, have higher education, and are more likely than non-consumers to be employed full time. – Forbes report out of BDS Analytics findings”
Troy Trygstad, PharmD, PhD, MBA, is vice president of Pharmacy Programs for Community Care of North Carolina, which works collaboratively with more than 1800 medical practices to serve more than 1.6 million Medicaid, Medicare, commercially insured, and uninsured patients. He received his PharmD and MBA degrees from Drake University and a PhD in pharmaceutical outcomes and policy from the University of North Carolina. He also serves on the board of directors for the American Pharmacists Association Foundation and the Pharmacy Quality Alliance.
References
- Campos AC, Moreira FA, Gomes FV, Del Bel EA, Guimarães FS (December 2012). “Multiple mechanisms involved in the large-spectrum therapeutic potential of cannabidiol in psychiatric disorders”. Philosophical Transactions of the Royal Society of London. Series B, Biological Sciences (Review). 367 (1607): 3364–78.
- https://www.who.int/medicines/access/controlled-substances/5.2_CBD.pdf
- https://www.forbes.com/sites/irisdorbian/2019/05/20/cbd-market-could-reach-20-billion-by-2024-says-new-study/#17d7752c49d0
- https://www.amtamassage.org/infocenter/economic_industry-fact-sheet.html
- https://blog.marketresearch.com/u.s.-physical-therapy-clinics-constitute-a-growing-34-billion-industry
- https://www.fb.org/market-intel/2018-farm-bill-provides-a-path-forward-for-industrial-hemp
- https://newfrontierdata.com/hemp/american-farmers-forget-soy-check-hemps-price-per-acre-help-us-win-china-trade-war/
